Note 2 - Finance Receivables

3 Months Ended

Mar. 31, 2013

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 2. Finance Receivables

On December 5, 2012, the Company entered into a credit agreement pursuant to which the lenders party thereto provided to a neurology-focused specialty pharmaceutical company a term loan in the principal amount of $22,500,000.  The loan matures on December 5, 2017. The Company initially provided $19,000,000 and a client of the Company, provided the remaining $3,500,000 of the loan. The Company subsequently assigned $12,500,000 of the loan to its clients and retained the remaining $6,500,000. The loan is managed by the Company on behalf of its clients pursuant to the terms of each client’s investment management agreement.

Interest and principal under the loan will be paid by a tiered revenue interest that is charged on quarterly net sales and royalties of the borrower (the “Revenue Based Payment”) applied in the following priority (i) first, to the payment of all accrued but unpaid interest until paid in full; and (ii) second to the payment of all principal of the loans. All amounts applied under the Revenue Based Payment will be made to each lender according to its pro-rata share of the loan.

The loan shall accrue interest at either a base rate or the LIBOR rate, as determined by the borrower, plus an applicable margin; the base rate and LIBOR rate are subject to minimum floor values such that that minimum interest rate is 16%.  In addition, the Company is entitled to its proportionate share to an increasing exit fee, which is being accreted to interest income over the term of the loan.  As of March 31, 2013, the Company is entitled to their proportionate share which approximates $577,000 of a $2,000,000 exit fee.  The Company recognized $374,000 in interest income, of which $115,000 related to the accretion of the exit fee, recorded as revenue in the consolidated statement of operations and comprehensive income (loss) for the three months ended March 31, 2013.  

In the event of a change of control, a merger or a sale of all or substantially all of the borrower’s assets, the Loan shall be due and payable. The Lenders will be entitled to certain additional payments in connection with repayments of the Loan, both on maturity and in connection with a prepayment or partial prepayment.

Pursuant to the terms of the credit agreement, the borrower entered into a guaranty and collateral agreement granting the lenders a security interest in substantially all of the borrower’s assets. The credit agreement contains certain affirmative and negative covenants. The obligations under the credit agreement to repay the Loan may be accelerated upon the occurrence of an event of default under the credit agreement.  In connection with the Loan, the borrower was required to provide for an interest reserve of $1,000,000.  Pursuant to the terms of the Loan, $250,000 of this amount was returned to the borrower in March 2013 and the balance of $750,000 is included as restricted cash on the unaudited condensed consolidated balance sheet.