Debt

Long-term debt consisted of the following (in thousands):



	December 31,
	2015			2014
SRS Note	$	1,785		$	1,785
Main Street Term Loan	9,000			9,000
Main Street Revolver	400			400
	11,185			11,185
Less current maturities	(400		)	(400		)
Long-term debt, net of current portion	$	10,785		$	10,785

The Main Street Loan Agreement provides for the $11,000,000 Main Street Term Loan and the $2,000,000 Main Street Revolver. The Company had outstanding borrowings of $9,000,000 under the Main Street Term Loan and $400,000 on the Main Street Revolver as of December 31, 2015 and 2014, respectively. As of December 31, 2015, we have availability of $1,370,000 under the Main Street Revolver and $2,000,000 under the Main Street Term Loan (subject to approval by Main Street under the terms of the Main Street Loan Agreement).

Borrowings under the Main Street Term Loan and Main Street Revolver mature on October 17, 2018 and October 17, 2016, respectively, 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 and the Main Street Revolver borrowings bear interest at 8% per annum. Interest payments on the outstanding borrowings under both the Main Street Term Loan and Main Street Revolver are due monthly.

The Company is required to 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 effectively equal to cash flow from operations less capital expenditures less principal payments on capital leases). In the event there are outstanding borrowings on the Main Street Revolver, any quarterly principal payments are first applied to the Main Street Revolver and then to the Main Street Term Loan. During 2015 and 2014, the Company made principal payments of $613,000 and $249,000 respectively on the Main Street Revolver and no principal payments on the Main Street Term Loan. During 2015 and 2014, the Company received advances on the Main Street Revolver of $613,000 and $249,000, respectively.

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. The Main Street Loan Agreement also contains various 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 also contains financial covenants, including a fixed charge coverage ratio covenant and a debt to Adjusted EBITDA (“AEBITDA”) ratio covenant as defined in the Main Street Loan Agreement. 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. Upon the occurrence of an event of default, the outstanding obligations under the Main Street Loan Agreement may be accelerated and become immediately due and payable.

Based on the Company’s current financial projections for 2016, we believe that it is likely that the Company will violate both the existing fixed charge coverage ratio and the debt to Adjusted EBITDA ratio covenants beginning in mid-2016. We are currently exploring various alternatives to address our forecasted violations of our financial covenants during 2016, which may include renegotiation of our loan agreement with our senior lender, a capital raise, conversion of a portion of our debt to equity or a debt refinancing. If the Company were to violate any of its covenants under its senior loan agreement or its other debt arrangements, any such violations could cause an acceleration of the indebtedness under such loan agreements. In the event that our lenders accelerate the repayment of the indebtedness under any loan agreement, we would not have sufficient resources and/or cash flow to repay the indebtedness.

Deferred financing costs related to our debt agreements of $72,000 are included in prepaid expenses and other current assets and $125,000 are included in other assets as of December 31, 2015. Deferred financing costs related to our debt agreements of $276,000 are included in other assets as of December 31, 2014. The financing costs are amortized to interest expense using the effective interest method over the term of each loan through each maturity date. We recorded $87,000 and $89,000 of amortization of financing costs for the years ended December 31, 2015, and 2014, respectively.

In connection with the October 2012 acquisition of Affinity, the Company issued a promissory note (the “SRS Note”) to Shareholder Representative Services LLC (“SRS”), on behalf of the prior stockholders of Affinity. As of December 31, 2015 and 2014 the principal balance on the SRS Note was $1,785,000. On February 27, 2015, the Company amended and restated the SRS Note. The amended SRS Note, (i) extended the maturity date from January 4, 2016 to July 6, 2017, (ii) increased the interest rate from 10% to 15% per annum effective March 1, 2015 and (iii) revised the payment of interest from quarterly in arrears to payment on July 6, 2017 of all interest earned after March 1, 2015, unless certain trailing AEBITDA targets are met as defined in the agreement. 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 sum of the Company’s trailing six month AEBITDA less $3,000,000. During the years ended December 31, 2015 and 2014, the Company made principal payments of $0 and $100,000, respectively, on the SRS Note based on achievement of the AEBITDA threshold. As of December 31, 2015, accrued interest expense on the SRS Note was $238,000.

As of December 31, 2015, the current portion of long-term debt recorded on the Company’s balance sheet was $400,000, and represents the outstanding borrowings on the Main Street Revolver. The Company expects that any principal payments under the Main Street Loan Agreement, which are based on 50% of Excess Cash Flow as discussed above, will be applied to outstanding borrowings on the Main Street Revolver during the twelve months ending December 31, 2016. Therefore, the Company expects that no principal payments will be applied against the Main Street Term Loan during the twelve months ended December 31, 2016; and thus all outstanding borrowings on the Main Street Term Loan are classified as long term debt as of December 31, 2015. The principal payments related to these debt agreements are estimates and actual payments may vary.

Future maturities of debt are estimated as follows (in thousands):



	Main Street Revolver		Main Street Term Loan		SRS Note		Total
2016	$	400	$	—	$	—	$	400
2017	—		—		1,785		1,785
2018	—		9,000		—		9,000
	$	400	$	9,000	$	1,785	$	11,185