Debt

Debt consisted of the following (in thousands):



	March 31, 2017			December 31, 2016
Main Street Term Loan, net of unamortized debt discount based on an imputed interest rate of 12%; $106 at March 31, 2017 and $123 at December 31, 2016, respectively.	$	8,894		$	8,877
SRS Note, net of unamortized debt discount based on an imputed interest rate of 15%; $1 at March 31, 2017 and $2 at December 31, 2016, respectively.	1,784			1,783
Total	10,678			10,660
Less current maturities	(10,678		)	(10,660		)
Long-term debt, net of current portion	$	—		$	—

The Main Street Loan Agreement provides for an $11,000,000 senior secured term loan facility (“Main Street Term Loan”). As of March 31, 2017, the Company had outstanding borrowings of $9,000,000 under the Main Street Term Loan. While an event of default exists under the Main Street Loan Agreement (see below), we cannot access the $2,000,000 of remaining availability under the Main Street Term Loan. Borrowings under the Main Street Term Loan mature on October 17, 2018 unless sooner terminated as provided in the Main Street Loan Agreement. The Main Street Loan Agreement provides that the Main Street Term Loan borrowings bear interest at 12% per annum. Interest payments on the outstanding borrowings under the Main Street Term Loan are due monthly. The Company must make quarterly principal payments on the Main Street Term Loan through the maturity date in an amount equal to 50% of Excess Cash Flow generated by the Company during the trailing fiscal quarter (Excess Cash Flow is defined in the Main Street Loan Agreement and is effectively equal to cash flow from operations less capital expenditures less principal payments on capital leases). During the three months ended March 31, 2017, the Company made no principal payments on the Main Street Term Loan.

The Company may prepay borrowings under the Main Street Loan Agreement at any time without premium or penalty, subject to certain notice and minimum prepayment requirements. The obligations of the Company under the Main Street Loan Agreement are secured by substantially all of the assets of the Company, including all intellectual property, equity interests in subsidiaries, equipment and other personal property. The Main Street Loan Agreement contains standard representations, warranties and covenants for a transaction of its nature, including, among other things, covenants relating to (i) financial reporting and notification, (ii) payment of obligations, (iii) compliance with applicable laws and (iv) notification of certain events and covenants and restrictive provisions which may, among other things, limit the Company’s ability to sell assets, incur additional indebtedness, make investments or loans and create liens. The Main Street Loan Agreement contains events of default customary for similar financings with corresponding grace periods, including failure to pay any principal or interest when due, failure to perform or observe covenants, breaches of representations and warranties, certain cross defaults, certain bankruptcy related events, monetary judgments defaults and a change in control.

The Main Street Loan Agreement contains certain financial covenants that are measured on a quarterly basis. The Company breached its debt to Adjusted EBITDA ratio covenant as of the end of the second, third and fourth quarters of 2016 and March 31, 2017 and breached the fixed charge coverage ratio covenant as of the end of the third and fourth quarters of 2016 and March 31, 2017, each of which constitutes an event of default under the Main Street Loan Agreement. Main Street has not provided a waiver of the existing defaults, and thus Main Street may seek several remedies under the loan documents including, without limitation, acceleration of the indebtedness owing under the Main Street Loan Agreement. Based on the Company’s current financial projections, we believe that the Company will likely breach both financial covenants in the Main Street Loan Agreement throughout 2017 and 2018. We are exploring various alternatives to renegotiate our financial covenants and address our liquidity issues, including, without limitation, a potential restructuring of the Main Street and SRS indebtedness (see below), which may involve a conversion of a portion or all of our debt to equity or a debt refinancing, coupled with a capital raise. Although the maturity date of the Main Street Term Loan is October 17, 2018, the Company has classified this debt as current given the existing defaults and potential acceleration of such indebtedness.

As of March 31, 2017, the Company had outstanding borrowings of $1,785,000 on a promissory note (the “SRS Note”) to Shareholder Representative Services LLC (“SRS”) the Company issued in connection with the 2012 acquisition of Affinity Videonet, Inc. (“Affinity”) and amended in February 2015 (see Note 7 for further discussion). The maturity date of the SRS Note is July 6, 2017 and the interest rate on the SRS Note is 15% per annum. Payment of all interest earned after March 1, 2015 is due on July 6, 2017, unless certain trailing Adjusted EBITDA targets are met as defined in the SRS Note. The SRS Note is subordinate to borrowings under the Main Street Loan Agreement, and is only permitted to be repaid if permitted by the terms of the Main Street Loan Agreement. Therefore, if the indebtedness under the Main Street Loan Agreement remains outstanding on July 6, 2017 and unless Main Street permits the Company to repay the SRS Note and the Company has the financial resources to make such payment, the Company will be in default under the SRS Note, which will remain outstanding. We do not expect Main Street will permit the Company to repay the SRS Note while the Main Street indebtedness remains outstanding. In addition, under the terms of the Subordination Agreement among the Company, SRS and Main Street, repayment of the principal and accrued interest on the SRS Note may occur only if the Company’s cash balance is 200% greater than the balance of the SRS Note. The Company is required to make monthly principal payments in the amount of $50,000 in the event the Company’s trailing three month AEBITDA exceeds $1,500,000. The Company is required to make additional payments on the principal amount over the remaining term of the SRS Note in an amount equal to 40% of the Company’s trailing six month Adjusted EBITDA less $3,000,000. During the three months ended March 31, 2017, the Company was not required to make any principal payments on the SRS Note. As of March 31, 2017, accrued interest expense on the SRS Note was $653,000.

Deferred financing costs related to our debt agreements of $107,000 and $125,000 are included as a direct deduction of the carrying amount of our debt as of March 31, 2017 and December 31, 2016, respectively. The financing costs are amortized using the effective interest method over the term of each loan through each maturity date. During the three months ended March 31, 2017 and 2016, amortization of deferred financing costs was $18,000, respectively, which is recorded in “Interest and Other Expense, Net” on our Condensed Consolidated Statement of Operations.