Secured Lines of Credit, Long-term Debt, and Notes Due to Employees

9 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

Secured Lines of Credit, Long-term Debt, and Notes Due to Employees

The Company’s outstanding notes payable indebtedness was as follows as of (in thousands):

	September30, 2016 (Unaudited)			December 31, 2015
Hannoversche Volksbank credit line #1	$	1,399		$	1,120
Hannoversche Volksbank credit line #2		445			383
Hannoversche Volksbank term loan #1		-			61
Hannoversche Volksbank term loan #2		-			24
Hannoversche Volksbank term loan #3		141			182
Secured Promissory Notes		650			500
DZ Equity Partners Participation rights		841			818
Total		3,476			3,088
Discount on secured promissory notes and debt issuance costs		-			(110	)
Less current portion of long-term debt		(3,398	)		(2,857	)
Long-term debt	$	78		$	121

In July 2006, MEDITE GmbH, Burgdorf, entered into a master line of credit agreement #1 with Hannoversche Volksbank with maximum borrowings of Euro 1.1 million ($1.2 million as of September 30, 2016 which were reduced to Euro 1.1 million ($1.2 million as of September 30, 2016). The credit line was increased to Euro 1.3 million ($1.5 million as of September 30, 2016) in September 2016 without stated maturity date.  Borrowings on the master line of credit agreement #1 bears interest at a variable rate based on Euribor (Euro Interbank Offered Rate) depending on the type of advance elected by the Company and defined in the agreement. Interest rates depending on the type of advance elected ranged from 3.77 – 8.00% during the period ended September 30, 2016 and the year ended December 31, 2015. The line of credit is collateralized by the accounts receivable and inventory of MEDITE GmbH, Burgdorf, and a mortgage on the buildings owned by the Company and is guaranteed by Michaela Ott and Michael Ott, stockholders of the Company.

In June 2012, CytoGlobe, GmbH, Burgdorf, entered into a line of credit agreement #2 with Hannoversche Volksbank. The line of credit granted a maximum borrowing authority of Euro 400,000 ($448,880 as of September 30, 2016). Borrowings on the master line of credit agreement #2 bears interest at a variable rate based on Euribor (Euro Interbank Offered Rate) depending on the type of advance elected by the Company and defined in the agreement. Interest rates ranged from 3.77 – 8.00% during the period ended September 30, 2016 and the year ended December 31, 2015. The line of credit has no stated maturity date. The line of credit is collateralized by the accounts receivable and inventory of CytoGlobe GmbH, Burgdorf and is guaranteed by Michaela Ott and Michael Ott, stockholders of the Company, and the state of Lower Saxony (Germany) to support high-tech companies in the area.

In December 2006, MEDITE GmbH, Burgdorf, entered into a Euro 500,000 ($561,100 as of September 30, 2016) term loan agreement #1 with Hannoversche Volksbank with an interest rate of 3.4% per annum. The loan has been paid in full as of September 2016. The term loan was guaranteed by Michaela Ott and Michael Ott, stockholders of the Company, and a mortgage on the property of the Company. 

In June 2006, MEDITE GmbH, Burgdorf, entered into a Euro 400,000 ($448,880 as of September 30, 2016) term loan #2 with Hannoversche Volksbank with an interest rate of 3.6 % per annum. The loan was paid back in full as of June 2016. The term loan was guaranteed by Michaela Ott and Michael Ott, stockholders of the Company, and was collateralized by subordinated assignments of all of the receivables and inventories of MEDITE GmbH, Burgdorf and also had a subordinated pledge of share term life insurance policies.

        In November 2008, MEDITE GmbH, Burgdorf, entered into a Euro 400,000 ($448,880 as of September 30, 2016) term loan #3 with Hannoversche Volksbank with an interest rate of 4.7% per annum. The term loan has a maturity of December 31, 2018, and requires quarterly principal repayments of Euro 13,890 ($15,587 as of September 30, 2016). The term loan is guaranteed by Michaela Ott and Michael Ott, stockholders of the Company, and is collateralized by a partial subordinated pledge of the receivables and inventory of MEDITE GmbH, Burgdorf.

                In March 2009, the Company entered into a participation rights agreement with DZ Equity Partners in the form of a debenture with a mezzanine lender who advanced the Company up to Euro 1.5 million, ($1.7 million as of September 30, 2016) in two tranches of Euro 750,000 each, ($841,650 as of September 30, 2016). The first tranche was paid to the Company at closing with the second tranche being conditioned on MEDITE GmbH, Burgdorf and its subsidiaries hitting certain performance targets. Those targets were not met and the second tranche was never called. The debenture pays interest at the rate of 12.15% per annum and matures at the time the German financial statements for the year ended December 31, 2016 are issued, anticipated to be May 31, 2017.

On December 31, 2015, the Company entered into a Securities Purchase Agreement (the “2015 Purchase Agreement”) with seven (7) individual accredited investors, one which serves on the Company’s Board of Directors and is the chairman of the Company’s Audit Committee  (collectively the “Purchasers”), pursuant to which the Company agreed to issue to the Purchasers secured promissory notes in the aggregate principal amount of $500,000 with interest accruing at an annual rate of 15% (the “Note(s)”) and warrants to purchase up to an aggregate amount of 250,000 shares of the common stock, par value $0.001) per share, of the Company (the “Warrant(s)”). See Note 8 for further discussion on warrants issued on the Notes.   The Notes matured on March 31, 2016 and were not repaid. Therefore, the Notes were in default on April 1, 2016.  The Company agreed to pay the Purchasers 10% of the principal balance of the Notes in warrants until the principal balance is repaid. See Note 8 for further discussion on Warrants issued on the Notes.  The Notes are secured by the Company’s accounts receivable and inventories held in the United States.

On May 25, 2016, the Company entered into a Securities Purchase Agreement (the “May Purchase Agreement”) with two (2) individual accredited investors, one of which who serves on the Company’s  Board of Directors (collectively the “May Purchasers”), pursuant to which the Company agreed to issue to the May Purchasers secured promissory notes in the aggregate principal amount of $150,000 (the “May Note(s)”) with an interest rate of 15% and warrants to purchase up to an aggregate amount of 150,000 shares of the common stock, par value $0.001 per share, of the Company (the “May Warrant(s)”). The Notes mature on the earlier of the third (3rd) month anniversary date following the Closing Date or August 25, 2016 and were not repaid. The May Notes may be converted into Units issued pursuant to the Company’s private financing of up to $5,000,000 (the “Follow On Offering”) Units at a price of $.80/Unit (the “Units”) consisting of: (i) a  2 year unsecured convertible note, which converts into shares of common stock at an initial conversion price of $.80 per share and (ii) a warrant to purchase one half additional share of common stock, with an initial exercise price equal to $.80 per share (the “Follow On Warrant”). The May Notes are secured by the Company’s accounts receivable and inventories held in the United States.

The Company engaged TriPoint Global Equities, LLC (the “Agent”) as placement agent in connection with the sale of securities in the offering (the “Offering”) and agreed to pay the Agent (i) cash commissions equal to three percent (3%) of the gross proceeds ($4,500) received by the Company; and (ii) warrants to purchase such number of securities equal to three percent (3%) of the aggregate number of shares of common stock issuable in connection with the Offering (the “Agent Warrant(s)”). The Agent’s Warrants will have the same terms and conditions as the May Warrants purchased by the May Purchasers. At September 30, 2016, a total of 4,500 warrants were issued to TriPoint (See Note 8 for further discussion on warrants).

In November 2015 and February 2016, the Company entered into promissory notes totaling $927,000 with certain employees to repay wages earned prior to December 31, 2014 not paid (“Notes Due to Employees").  The Notes Due to Employees are to be paid monthly through September 2019, with no interest due on the outstanding balances.  The monthly amounts increase over the payment term.  The amounts due become immediately due and payable if payments are more than ten days late either one or two consecutive months as defined in the agreement with the employee.  At September 30, 2016, all Notes Due to Employees, except one, are in default and due on demand. Therefore, the Notes Due to Employees in default are presented as current in the condensed consolidated balance sheets.  Certain employees may convert any of the amounts owed during the duration of the note to equity at a discounted price as defined in the agreement. The Company is currently negotiating with the employees whose notes are in default to extend the payment terms.