NOTE 5 —Borrowings

Senior Credit Agreement

The Company has a loan and security agreement (“the EWB Loan Agreement”) with East West Bank (the “Senior Lender”). The maximum borrowings available under the line of credit is $8,000 and will bear interest at 1% plus the Prime Rate with a maturity date of November 2019.

As of both June 30, 2019 and December 31, 2018, the Company had remaining borrowing capacity of $8,000 against the line of credit.

Long-Term Debt

Riley Loan— On October 26, 2017 (the “Effective Date”), the Company entered into a Subordinated Term Loan and Security agreement (the “Riley Loan Agreement”) with B. Riley Principal Investments, LLC (“BRPI”), an affiliate of B. Riley Financial, Inc., a shareholder of the Company. Under the original Riley Loan Agreement, the Company could borrow principal up to $10,000 via a subordinated secured convertible promissory note (the “Convertible Note”), with an optional conversion feature as described below.

During the year ended December 31, 2018, the Company amended the Riley Loan Agreement to increase the available aggregate principal borrowings to $12,000. The 2018 amendments did not change the terms of the original Riley Loan Agreement other than to provide a waiver of the defined prepayment penalties if any repayment does not reduce the principal amount outstanding below $10,000. The Riley Loan Agreement, as amended, matures on September 1, 2022 (the “Maturity Date”) and carries a stated interest rate of 10% and provided that the first year of interest be compounded into the principal on October 26, 2018, with interest-only payments beginning thereafter.

As of both June 30, 2019 and December 31, 2018, the total outstanding borrowings under the Riley Loan Agreement, as amended, was $12,000 and total accrued interest as of June 30, 2019 and December 31, 2018 were $1,109, and $1,001.

Optional Conversion— On November 2, 2018, in conjunction with the Company’s conversion of all of its outstanding shares of preferred stock into shares of common stock (See Note 6) and the 15-to-1 reverse stock split, the Company amended the optional conversion terms of its existing Convertible Note. As amended, the Convertible Note provides that at any time, on or prior to the Maturity Date, BRPI may elect to convert principal amounts outstanding, including accrued interest, as limited below, into shares of common stock at $8.87 per share. The number of shares of common stock to be issued upon conversion is limited to the sum of (A) the lesser of (i) the principal outstanding and (ii) the aggregate principal amount borrowed under the Riley Loan Agreement to date multiplied by the Designated Percentage as described below, and (B) accrued interest. The “Designated Percentage” is one hundred percent (100%) if the conversion date is prior to the first anniversary of the Effective Date, seventy-five percent (75%) in Year 2 of the Riley Loan Agreement, fifty percent (50%) in Year 3, twenty-five percent (25%) in Year 4, and twelve and a half of percent (12.5%) in the final year of the Riley Loan Agreement on or prior to the Maturity Date.

Promissory Notes Payable—In 2014 and 2017, the Company entered into agreements with one of its suppliers, whereby certain of its trade payables for royalties and royalty up-front payments were converted to payment plans. In December 2018, the Company amended its accounts payable financing agreements, effective January 1, 2019, which provides for the $736 outstanding balance to be paid in twenty equal quarterly installments. The amounts due under these agreements would be paid in quarterly installments over periods from two to four years, with interest ranging up to 8%. Remaining balances are $582 and $718 at June 30, 2019 and December 31, 2018, respectively.

Other Financing Arrangements—In 2017, the Company entered into three financing arrangements totaling approximately $472 with remaining maturity dates of June 2020 and August 2020. As of June 30, 2019, and December 31, 2018, the remaining balances were $99 and $238, respectively.

Future aggregate annual principal payment on all long-term debt, excluding the discount of $388, are as follows for the next 5 years as of June 30, 2019: