9. Financial Liabilities

Financial liabilities consist of (in thousands):

	March 31,		December 31,
	2014		2013
Current liabilities:
Secured note	$	—	$	2,971
Total current liabilities	$	—	$	2,971
Non-current liabilities:
Secured term loan	$	9,503	$	—
Secured note		—	$	3,051
Bank revolving loan facility		4,000		—
Total non-current liabilities	$	13,503	$	3,051
Total	$	13,503	$	6,022

Bank Term Loan and Revolving Loan Facility

On March 31, 2014, Identive Group, Inc. (the “Company”) entered into a Credit Agreement (the “Credit Agreement”) with Opus Bank, a California commercial bank (“Opus”). The Credit Agreement provides for a term loan in aggregate principal amount of $10.0 million (“Term Loan”) which was drawn down on March 31, 2014, and an additional $10.0 million revolving loan facility (“Revolving Loan Facility”), of which $4.0 million was drawn down on March 31, 2014. In connection with the closing of the Credit Agreement, the Company repaid all outstanding amounts under its Loan and Security Agreement, dated as of October 30, 2012, as amended from time to time (the “Secured Debt Facility”), with Hercules Technology Growth Capital, Inc. The proceeds of the Term Loan and the initial loans under the Revolving Loan Facility, after payment of fees and expenses and all outstanding amounts under the Secured Debt Facility, are approximately $7.8 million. The obligations of the Company under the Credit Agreement are secured by substantially all assets of the Company. Certain of the Company’s material domestic subsidiaries have guaranteed the credit facilities and have granted to Opus security interests in substantially all of their respective assets. Both the Term Loan and the Revolving Loan Facility mature and will become due and payable on March 31, 2017 (the “Maturity Date”). Both the principal amount of Term Loan and the principal amount outstanding under the Revolving Loan Facility bear interest at a floating rate equal to the greater of (i) the prime rate plus 2.75% and (ii) 6.00%. Interest is payable monthly beginning on May 1, 2014. The principal balance of the Term Loan is payable in 24 equal monthly installments beginning on May 1, 2015. The Company may voluntarily prepay the Term Loan and outstanding amounts under the Revolving Loan Facility, without prepayment charges, and is required to make prepayments of the Term Loan in certain circumstances using the proceeds of asset sales or insurance or condemnation events.

The Company paid $170,000 in customary Lender fees and expenses, including facility fees. In connection with the Company’s entry into the Credit Agreement, the Company issued to Opus a warrant (the “Warrant”) to purchase up to 1,000,000 shares of the Company’s common stock at a per share exercise price of $0.99. The Warrant is immediately exercisable for cash or by net exercise and will expire 5 years after the date of issuance, which is March 31, 2019. The shares issuable upon exercise of the Warrant were registered in May 2014 at the request of Opus pursuant to the Registration Rights Agreement, entered into on March 31, 2014 by the Company and Opus. The Registration Rights Agreement provides for standard S-3 and piggyback registration rights. The Company calculated the fair value of the warrants using the Black-Scholes option pricing model using the following assumptions: estimated volatility of 92.09%, risk-free interest rate of 1.73%, no dividend yield, and an expected life of five years. The fair value of the warrants is determined to be $0.8 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 Company allocated the considerations, both cash and equity, paid to Opus between Bank Term Loan and Revolving Loan Facility using relative value of these loans. The Company recognized $0.9 million in issuance costs, both cash and equity, related to the Bank Term Loan and Revolving Loan Facility. The cost consideration of $0.5 million allocated for Bank Term Loan are recorded as discounts on Bank Term Loan and reported in the balance sheet as an adjustment to the carrying amount of the secured term loan and not presented as a deferred charge, pursuant to ASC Topic 835-30, Imputation of Interest (“ASC 835-30”). The issuance costs and discounts on secured term loan are amortized into interest expense in accordance with ASC 835-30 over the term of the loan agreement.

The Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, limits or restrictions on the Company’s ability to incur liens, incur indebtedness, make certain restricted payments, merge or consolidate and dispose of assets. The Credit Agreement also provides for customary financial covenants, including a minimum tangible net worth covenant, a maximum senior leverage ratio and a minimum asset coverage ratio. In addition, it contains customary events of default that entitle Opus to cause any or all of the Company’s indebtedness under the Credit Agreement to become immediately due and payable. The events of default (some of which are subject to applicable grace or cure periods), include, among other things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults and material judgment defaults. Upon the occurrence and during the continuance of an event of default, Opus may terminate its lending commitments and/or declare all or any part of the unpaid principal of all loans, all interest accrued and unpaid thereon and all other amounts payable under the Credit Agreement to be immediately due and payable.

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 (“Maximum Term Loan Amount”) 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 Company received net proceeds of $6.9 million after incurring $0.6 million in issuance costs related to the Secured Note. The issuance costs were being amortized into interest expense in accordance with ASC 835-30 over the term of the loan agreement. Amongst other commitments, the Loan Agreement required the Company to maintain a certain amount of revenue, EBITDA, and current ratio on a consolidated basis (“covenants”). If any covenants were not met, the violation may constitute an event of default. 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% would have been credited to the Company if all advances under the Loan Agreement were 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, consisting of end of term charge and success fee at the rate of 5% each of the maximum term loan amount, 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 $0.4 million and $0.4 million during the three months ended March 31, 2014 and 2013, respectively, in its condensed consolidated statements of operations.

The Company and the Lender entered into a first amendment to the Loan Agreement on March 5, 2013 and as consideration for the first amendment, paid cash of $76,268 in fees. The Company entered into a second amendment to the Loan Agreement on April 22, 2013 and as consideration for the second amendment, 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. As consideration for the third amendment, the Company paid cash of $106,000 in fees and issued warrants to purchase 992,084 shares of its common stock at an exercise price of $0.71 per share to Hercules. The warrants were 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 warrants is five years and contains usual and customary terms. The fair value of the warrants was determined to be $0.5 million. The warrants were 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 as mentioned above were 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. As mentioned above, the Company repaid all outstanding amounts under its secured debt facility with Hercules in connection with entering into the Credit Agreement with Opus as of March 31, 2014 and recorded $1.6 million in additional interest expense during the three months ended March 31, 2014 in its condensed consolidated statements of operations. The total amount of $1.6 million in interest expense includes $0.9 million related to write-off of deferred costs, $0.6 million related to write-off of discounts on the secured note and $0.1 million related to prepayment fees as stipulated in the Loan Agreement and forfeiture of facility charge paid at the inception of the agreement.

Other Obligations

In connection with its acquisition of payment solution in January 2012, through its majority-owned subsidiary Bluehill ID AG the Company had acquired obligations for equipment financing liabilities, a bank loan and a revolving line of credit payable to a bank. As disclosed in Note 2, Discontinued Operations, the Company sold payment solution in December 2013 and all the financial liabilities were sold along with the sale of the subsidiary, resulting in balances of zero as of December 31, 2013. Interest expense related to these financial obligations for the three months ended March 31, 2013 has been included within the results of discontinued operations in its condensed consolidated statements of operations.

In connection with its acquisition of Bluehill ID, the Company had 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 were related to Multicard Nederland BV, one of the 100%-owned subsidiaries of Bluehill ID, and were secured by the land and building to which they relate as well as total inventory, machinery, stock, products and raw materials of the subsidiary. As disclosed in above in Note 2, Discontinued Operations, the Company sold Multicard Nederland BV in December 2013 and all the loan liabilities were sold along with the sale of the subsidiary, resulting in balances of zero as of December 31, 2013. Interest expense related to this mortgage loan and revolving line of credit for the three months ended March 31, 2013 has been included within the results of discontinued operations in its condensed consolidated statements of operations.

The following table summarizes the Company’s financial obligations for the next five years as of March 31, 2014 (in thousands):

	2014				2015				2016				2017				Total
Bank term loan and revolving loan facility	$	—			$	3,333			$	5,000			$	5,667			$	14,000