9. Financial Liabilities

Financial liabilities consist of (in thousands):

	September 30, 2013		December 31, 2012
Current liabilities:
Secured note	$	2,896	$	2,404
Acquisition debt note		—		418
Equipment financing liabilities		1,916		973
Bank loan		1,532		428
Bank line of credit		76		253
Mortgage loan payable to bank		57		56
Total current liabilities	$	6,477	$	4,532
Non-current liabilities:
Secured note	$	4,061	$	6,167
Equipment financing liabilities		—		1,619
Bank loan		—		1,284
Mortgage loan payable to bank		698		725
Total non-current liabilities	$	4,759	$	9,795
Total	$	11,236	$	14,327

Secured Debt Facility

On October 30, 2012, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Hercules Technology Growth Capital, Inc. (the “Lender”). The Loan Agreement provides for a term loan in aggregate principal amount of up to $10.0 million with an initial drawdown of $7.5 million and, provided certain financial and other requirements are met, an additional $10.0 million in loan advances, all upon the terms and conditions set forth in the Loan Agreement. The initial drawdown of $7.5 million is reflected in the Secured Term Promissory Note dated October 30, 2012 (the “Secured Note”). The obligations of the Company under the Loan Agreement and the Secured Note are secured by substantially all assets of the Company (“Collateral”). The Company received net proceeds of approximately $6.9 million after incurring approximately $0.6 million in issuance costs related to the Secured Note. The issuance costs were accounted for in accordance with ASC Topic 835-30, Imputation of Interest (“ASC 835-30”). Amongst other commitments, the Loan Agreement requires the Company to maintain a certain amount of revenue, EBITDA, and current ratio on a consolidated basis (“covenants”). If any covenants are not met, the violation may constitute an event of default. Upon the occurrence and during the continuance of an event of default, the Lender may, at its option, do any of the following, including: accelerate and demand payment of all or any part of the secured obligations together with a prepayment charge, declare all obligations immediately due and payable, and release, hold, sell, lease, liquidate, collect, realize upon, or otherwise dispose of all or any part of the collateral and the right to occupy, utilize, process and commingle the Collateral. The agreement also provides for definitions and construction of the Loan Agreement, terms of payment, conditions of loans, creation of security interest, representations and warranties, affirmative and negative covenants, events of default, and the Lender’s rights and remedies. In addition, under the terms of the Loan Agreement, the Company and its subsidiaries are restricted in their ability to declare or pay cash dividends or to make cash distributions, except that the Company’s subsidiaries may pay dividends and make distributions to the Company. The Loan Agreement provides that, subject to the terms and conditions contained therein (including compliance with financial covenants), beginning October 1, 2013 and continuing until December 31, 2013, the Company may request an additional advance in an aggregate amount up to $2.5 million, however the Company has no intent of requesting this additional advance amount. After full drawdown of the $10.0 million term loan, the Company has the opportunity to secure additional advances up to a further $10.0 million subject to compliance with certain conditions and covenants as set out in the Loan Agreement or as may be otherwise required by the Lender. The Secured Debt Note matures on November 1, 2015 and bears interest at a rate of the greater of (i) the prime rate plus 7.75% and (ii) 11.00%. Interest on the Secured Note is payable monthly beginning on November 1, 2012, and the principal balance is payable in 30 equal monthly installments beginning on May 1, 2013.

In connection with the initial advance, the Company paid a $150,000 facility charge to the Lender, of which 50% will be credited to the Company if all advances under the Loan Agreement are repaid on but not before maturity. The Company may prepay outstanding amounts under the Secured Note, subject to certain prepayment charges as set out in the Loan Agreement. The Company will also pay additional fees to the Lender in the aggregate of $1,000,000, payable in three equal annual installments beginning on October 30, 2013. The entire amount of these fees is immediately due and payable if the Company prepays all of its obligations under the Loan Agreement or if the Lender declares all obligations due and payable after an event of default thereunder. The Company recorded interest expense on the Secured Note of approximately $0.2 million and $1.1 million during the three and nine months ended September 30, 2013 in its condensed consolidated statements of operations. The Company initiated discussions with the Lender early in 2013 as it became apparent that certain of the covenant thresholds would prove difficult to maintain. The Company and the Lender entered into a first amendment to the Loan Agreement on March 5, 2013 that reduced the monthly EBITDA requirement for the period January 1, 2013 through May 31, 2013. As consideration for the first amendment, the Company paid cash of $76,268 in fees. The Company entered into a second amendment to the Loan Agreement on April 22, 2013 that changes the period for the measurement of EBITDA to occur on a quarterly, rather than monthly basis. As consideration for the second amendment, the Company paid cash of $114,397 in fees. The Company and the Lender entered into a third amendment to the Loan Agreement on August 7, 2013 that changed the terms for prepayment of the loan and changed the amount of minimum EBITDA for the second, third and fourth quarter of 2013. The third amendment permits the Company to prepay a portion of the outstanding Advances (in addition to allowing full prepayment of the Advances) by paying the applicable prepayment charge together with the pro-rated End of Term Charge (as defined in the original agreement). In addition, the Lender also added a financial covenant for the Company to raise $6,000,000 in equity financing between July 1, 2013 and August 31, 2013. As stated in Note 4, Stockholders’ Equity of Identive Group, Inc., the Company raised $7.1 million in private placement on August 14, 2013. As of September 30, 2013, the Company was in compliance with all covenants.

As consideration for the third amendment, the Company paid cash of $106,000 in fees and issued a warrant to purchase 992,084 shares of its common stock at an exercise price of $0.71 per share to Hercules on August 7, 2013. The warrant was issued in reliance upon the exemptions from the registration requirements under the Securities Act of 1933, as amended, in accordance with Section 4(a)(2) thereof. The term of the warrant is five years and contains usual and customary terms. The Company calculated the fair value of the warrants using the Black-Scholes option pricing model using the following assumptions: estimated volatility of 99.00%, risk-free interest rate of 1.38%, no dividend yield, and an expected life of five years. The fair value of the warrants is determined to be $0.5 million. The warrants are classified as equity in accordance with ASC 505 as the settlement of the warrants will be in shares and are within the control of the Company. The considerations, both cash and equity, paid for the loan agreement amendments are recorded as discounts on secured note and reported in the balance sheet as an adjustment to the carrying amount of the secured debt liability and not presented as a deferred charge, pursuant to ASC 835-30. The loan agreement amendments fees are amortized into interest expense pursuant to ASC 835-30 over the remaining term of the loan agreement.

Acquisition Debt Note

In connection with its acquisition of FCI Smartag Pte. Ltd. (“Smartag”) in November 2010, the Company issued a debt note with a face value of $2.2 million to FCI Asia Pte. Ltd. The debt note carries an interest rate of 6% per year, compounded daily, and is payable within 30 months from the closing date. The acquisition debt note was fully paid off in May 2013. The Company recorded interest expense on the debt note of $0 and $7,000 during the three and nine months ended September 30, 2013, respectively, and $11,000 and $43,000 during the three and nine months ended September 30, 2012, respectively, in its condensed consolidated statements of operations.

Other Obligations

In connection with its acquisition of payment solution, through its majority-owned subsidiary Bluehill ID AG the Company acquired obligations for equipment financing liabilities, a bank loan and a revolving line of credit payable to a bank.

The equipment financing liabilities in connection with its acquisition of payment solution are partially secured by payment solution’s systems installed in the stadiums to which they relate and will mature in 2014. Amounts outstanding under the equipment finance obligations accrue interest in the range of 8.6% to 18.6%, and interest is payable quarterly. payment solution was obligated to pay a quarterly sum of approximately $0.2 million in principal and interest during 2012. The payments increased to approximately $0.3 million per quarter in 2013, with a final payment of approximately $0.8 million due in October 2014. The Company recorded interest expense on the equipment financing obligations of approximately $0.1 million and $0.3 million during the three and nine months ended September 30, 2013, respectively, and $0.1 million and $0.3 million during the three and nine months ended September 30, 2012, respectively, in its condensed consolidated statements of operations. The Company initiated discussions with the lessor early in September 2013 to restructure its obligations under equipment financing liabilities as it became apparent that it would prove difficult to continue to fulfill its obligations. As a result, these liabilities are classified as “current” in accordance with ASC 470, Debt (“ASC 470”) as of September 30, 2013.

A bank loan with Kreditbank fuer Wiederaufbau, Germany (KFW) assumed in connection with the acquisition of payment solution is secured by some of payment solution’s tangible assets installed in the various stadiums and will mature in 2017. Amounts outstanding under the bank loan accrue interest at 11.15% and interest is payable quarterly. payment solution is obligated to pay a quarterly sum of approximately $0.1 million in principal and interest over the life of the loan. The Company recorded interest expense on the bank loan of approximately $50,000 and $0.2 million during the three and nine months ended September 30, 2013, respectively, and $50,000 and $0.1 million during the three and nine months ended September 30, 2012, respectively, in its condensed consolidated statements of operations. The Company initiated discussions with KFW early in September 2013 to restructure its obligations under the bank loan as it became apparent that it would prove difficult to continue to fulfill its obligations. As a result, these bank loan liabilities are classified as “current” in accordance with ASC 470 as of September 30, 2013.

The total amount that can be advanced under the revolving line of credit related to the acquisition of payment solution is approximately $0.1 million. The advances on the revolving line of credit accrue interest at a base rate of 6.25% up to 11.25%, payable quarterly. Any advances over the limit will accrue interest at 15.95%. The revolving line of credit is ongoing with no specific end date. Interest expense on the line of credit was approximately $3,000 and $9,000 during the three and nine months ended September 30, 2013, respectively. Interest expense was $3,000 and $9,000 during the three and nine months ended September 30, 2012.

In connection with its acquisition of Bluehill ID, the Company acquired an obligation for a mortgage loan and a related revolving line of credit payable to a bank. The mortgage loan and the revolving line of credit are related to one of the 100%-owned subsidiaries of Bluehill ID and are secured by the land and building to which it relates as well as total inventory, machinery, stock, products and raw materials of the subsidiary. Amounts outstanding under the mortgage loan accrue interest at 5.50%, and interest is payable monthly. The mortgage loan will mature in 2026. The Company is obligated to pay a monthly amount of approximately $4,800 over the life of the mortgage loan towards the principal amount in addition to monthly interest payments. The total amount that can be advanced under the line of credit is approximately $0.3 million. The advances on the revolving line of credit accrue interest at a base rate determined by the bank plus 2%, payable quarterly. Any advances over the limit will accrue interest at 10.75%. The revolving line of credit is ongoing with no specific end date. The Company recorded interest expense of approximately $16,000 and $41,000 during the three and nine months ended September 30, 2013, respectively, and $11,000 and $40,000 during the three and nine months ended September 30, 2012, respectively, in its condensed consolidated statements of operations.

The following table summarizes the Company’s financial obligations for the next five years as of September 30, 2013:

(in thousands)	2013
	(remaining three months)
Secured note	$	990	$	2,915	$	3,052	$	—	$	—	$	—	$	6,957
Equipment financing liabilities		1,916		—		—		—		—		—		1,916
Bank loan (KFW)		1,532		—		—		—		—		—		1,532
Mortgage loan payable to bank		14		57		57		57		57		513		755
Bank line of credit		76		—		—		—				—		76
	$	4,528	$	2,972	$	3,109	$	57	$	57	$	513	$	11,236