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Debt and Interest
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2015
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt |
8. Debt and Interest
Debt NSC Note In March 2015, the Company closed a private placement of a promissory note for $10 million through National Securities Corporation (the “NSC Note”). The Company used 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 three months ended March 31, 2015, in connection with the note. At March 31, 2015 we recorded the fee as a deferred financing cost on the Condensed Consolidated Balance Sheet and will amortize it over the life of the NSC Note. The NSC Note allows the Company to transfer a portion of the proceeds from the note to a Fortress Company upon the completion by the subsidiary of an initial public offering in which the Fortress Company raises sufficient equity capital so that it has cash equal to five times the amount of the portion of the proceeds of the NSC Note so transferred. At the time of transfer the Company’s obligation under the NSC Note will be reduced by the amount transferred. In connection with this transfer NSC will receive a warrant to purchase the subsidiary’s stock equal to 25% of that subsidiary’s proceeds raised in the initial public offering divided by the lowest price the subsidiary 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 March 31, 2015, no portion of the proceeds have been transferred to a Fortress Company and therefore, there are no warrants issued to NSC. Israel Discount Bank Note (“IDB Note”) At March 31, 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. Debt consists of the following:
Interest
Interest expense for the three months ended March 31, 2015 and 2014, was $0.3 million and $1.0 million, respectively. During the three month period ended March 31, 2014, interest expense related to the Hercules Note was $0.8 million, including $0.4 million related to accretion of the debt discount, and $44,000 related to the amortization of financing costs, respectively. For the three-month period ended March 31, 2015 and 2014, borrowings under the IDB Note were $14.0 million, respectively, and interest expense incurred was $71,300 and $42,000, with $1,000 related to the amortization of financing cost in 2015 and none in 2014, respectively. For the three-month period ended March 31, 2015 interest related to the NSC Note was $72,300 and $20,000 related to the amortization of financing costs. |
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