Quarterly report pursuant to Section 13 or 15(d)

Debt and Interest

v3.2.0.727
Debt and Interest
6 Months Ended
Jun. 30, 2015
Debt Disclosure [Abstract]  
Debt
8. Debt and Interest
 
Debt
 
Long-term debt consists of the following as of June 30, 2015 and December 31, 2014:
 
($ in Thousands)
 
June 30, 2015
 
December 31, 2014
 
Interest Rate
 
Maturity
 
IDB Note
 
$
14,009
 
$
14,009
 
2.25
%
Feb - 2017
 
NSC Note
 
 
10,000
 
 
-
 
8.00
%
Mar - 2018
 
Total notes payable, long term
 
 
24,009
 
 
14,009
 
 
 
 
 
Discount of notes payable
 
 
777
 
 
-
 
 
 
 
 
Total notes payable, long term, net
 
$
23,232
 
$
14,009
 
 
 
 
 
 
Israel Discount Bank Note (“IDB Note”)
 
At June 30, 2015, the Company had $14.0 million outstanding under the IDB Note. Effective March 31, 2015, the Company extended the maturity date to February 2017. The Company pays interest only on the note through maturity.
 
NSC Note
 
In March 2015, the Company closed a private placement of a promissory note for $10 million through National Securities Corporation’s NSC Biotech Venture Fund I LLC, (the “NSC Note”). The Company will use the proceeds from the NSC Note to acquire medical technologies and products. The note matures in 36 months, provided that during the first 24 months the Company can extend the maturity date by six months. No principal amount will be due for the first 24 months (or the first 30 months if the maturity date is extended). Thereafter, the note will be repaid at the rate of 1/12 of the principal amount per month for a period of 12 months. Interest on the note is 8% payable quarterly during the first 24 months (or the first 30 months if the note is extended) and monthly during the last 12 months. National Securities Corporation (“NSC”), a wholly owned subsidiary of National Holdings, Inc., acted as the sole placement agent for the NSC Note. The Company paid NSC a fee of $0.9 million during the six months ended June 30, 2015, in connection with the note. At June 30, 2015 the Company recorded the fee as a discount to notes payable on the Unaudited Condensed Consolidated Balance Sheets and will amortize it over the life of the NSC Note. The effective interest rate on the NSC Note approximates 9%.
 
The NSC Note, was amended and restated on July 29, 2015, to provide that any time a Fortress Company receives from the Company any proceeds from the NSC Note, the Company may, in its sole discretion, cause the Fortress Company to issue to NSC Biotech Venture Fund I LLC a new promissory note (the “Amended NSC Note”) on identical terms as the NSC Note (giving effect to the passage of time with respect to maturity). The Amended NSC Note will equal the dollar amount of the Fortress Company’s share of the NSC Note and reduce the Company’s obligations under the NSC Note by such amount. The Company will guarantee the Amended NSC Note until the Fortress Company either completes an initial public offering of its securities or raises sufficient equity capital so that it has cash equal to five times the Amended NSC Note.
 
In connection with the transfer of NSC Note proceeds to a Fortress Company, NSC will receive a warrant to purchase the Fortress Company’s stock equal to 25% of the NSC Note proceeds transferred to that Fortress Company divided by the lowest price at which the Fortress Company sells its equity in its first third party financing. The warrants issued will have a term of 10 years and an exercise price equal to the par value of the Fortress Company’s common stock. As of June 30, 2015, no portion of the proceeds has been transferred to a Fortress Company and therefore, there are no warrants issued to NSC.
   
Interest
 
The following table shows the details of interest expense for all of debt arrangements during the periods presented. Interest expense includes contractual interest and amortization of the debt discount and amortization of fees represents fees associated with loan transaction costs, amortized over the life of the loan:
 
 
 
For the three months ended June 30,
 
For the six months ended June 30,
 
($ in Thousands)
 
2015
 
2014
 
2015
 
2014
 
IDB Note
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest
 
$
82
 
$
80
 
$
153
 
$
121
 
Amortization of fees
 
 
1
 
 
1
 
 
2
 
 
2
 
Total IDB Note
 
 
83
 
 
81
 
 
155
 
 
123
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NSC Debt
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest
 
 
208
 
 
-
 
 
279
 
 
-
 
Amortization of fees
 
 
61
 
 
-
 
 
82
 
 
-
 
Total NSC Debt
 
 
269
 
 
-
 
 
361
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ovamed Manufacturing Agreement
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest
 
 
-
 
 
38
 
 
167
 
 
75
 
Total Ovamed
 
 
-
 
 
38
 
 
167
 
 
75
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Hercules Debt
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest (1)
 
 
-
 
 
-
 
 
-
 
 
845
 
Amortization of fees
 
 
-
 
 
-
 
 
-
 
 
42
 
Total Hercules Debt
 
 
-
 
 
-
 
 
-
 
 
887
 
Total Interest Expense
 
$
352
 
$
119
 
$
683
 
$
1,085
 
  
(1) Interest expense related to the Hercules Note was $0.8 million, including $0.4 million related to accretion of the debt discount.