Certain Relationships and Related Party Transactions

12 Months Ended

Dec. 31, 2012

Certain Relationships and Related Party Transactions [Abstract]

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

NOTE 11 – CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

In connection with the acquisition of SafeStitch LLC, the Company entered into the Credit Facility with The Frost Group and Jeffrey G. Spragens, the Company’s Chief Executive Officer and President and a director. The Frost Group is a Florida limited liability company whose members include Frost Gamma, a trust controlled by Dr. Phillip Frost, one of the largest beneficial holders of the issued and outstanding shares of the Company’s common stock, Dr. Jane H. Hsiao, the Company’s Chairman of the Board and Steven D. Rubin, a director. As of December 31, 2012 there was a balance outstanding under the Credit Facility of $300,000 (see Note 5), plus accrued interest of $8,000, and there was a balance outstanding under the Credit Facility of $2,475,000 plus accrued interest of $48,000 at December 31, 2011.

On November 20, 2012, the Company entered into a Promissory Note in the principal amount of $300,000.00 with Hsu Gamma Investments, L.P. (“Hsu Gamma”), an entity controlled by the Company’s Chairman of the Board, Jane H. Hsiao, (the “Hsu Gamma Note”). The interest rate payable by the Company on the Hsu Gamma Note is 10% per annum, payable on the maturity date of June 30, 2013. The Hsu Gamma Note may be prepaid in advance of the Maturity Date without penalty.

On December 26, 2012, the Company entered into a Promissory Note in the principal amount of $300,000.00 with Frost Gamma, an entity controlled by the Company’s largest beneficial holder of common stock, Dr. Phillip Frost. (the “Frost Gamma Note”). The interest rate payable by the Company on the Frost Gamma Note is 10% per annum, payable on the maturity date of June 30, 2013. The Frost Gamma Note may be prepaid in advance of the Maturity Date without penalty.

The Company entered into a five-year lease for office space in Miami, Florida with a company controlled by Dr. Frost. The non-cancelable lease, which commenced January 1, 2008, provides for a 4.5% annual rent increase over the life of the lease. The Miami office lease was amended in July 2011 to include additional office space in the same building, and current rental payments under the lease are approximately $21,000 per month. The Company recorded $255,000 and $199,000 of rent expense related to the Miami lease for the years ended December 31, 2012 and 2011, respectively.

Dr. Hsiao, Dr. Frost and director Steven Rubin are each significant stockholders and/or directors of Non-Invasive Monitoring Systems, Inc. (“NIMS”), a publicly-traded medical device company, Aero Pharmaceuticals, Inc. (“Aero”), a privately-held pharmaceutical distribution company that dissolved in December 2011, Tiger X Medical, Inc. (“Tiger X”) (formerly known as Cardo Medical, Inc.), a publicly-traded medical device company, and TigerMedia, Inc. (“TigerMedia) (formerly known as SearchMedia Holdings Limited), a publicly-traded media company operating primarily in China. Director Richard Pfenniger is also a shareholder of NIMS. The Company’s Chief Financial Officer also serves as the Chief Financial Officer and supervises the accounting staffs of NIMS and, until its dissolution, Aero, under a Board-approved cost sharing arrangement whereby the total salaries of the accounting staffs of the three companies are shared. Aero has not participated in the cost sharing arrangement since June 30, 2011 and was dissolved in December 2011. Since December 2009, the Company’s Chief Legal Officer has served under a similar Board-approved cost sharing arrangement as Corporate Counsel of TigerMedia and as the Chief Legal Officer of each of NIMS and Tiger X. The Company has recorded reductions to SG&A costs and expenses for the years ended December 31, 2012 and 2011 of $60,000 and $78,000, respectively, to account for the sharing of accounting costs under this arrangement. The Company has recorded $145,000 and $178,000 of reductions to SG&A costs and expenses for the year ended December 31, 2012 and 2011, respectively, to account for the sharing of legal costs under this arrangement. Aggregate accounts receivable from NIMS, Tiger X and TigerMedia were approximately $59,000 and $66,000 as of December 31, 2012 and 2011, respectively, and are included in other receivable – related party.