Note 8 - Debt

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

Debt Disclosure [Text Block]

Note

8

– Debt

Successor Company Debt

As of

June 30

,

2017,

the Company had

no

debt outstanding.

Deerfield Facility

Agreement

In

2014,

we entered into the Deerfield Facility Agreement, a

$35

million

five

-year senior secured convertible credit facility with Deerfield due

March 31, 2019.

Deerfield had the right to convert the principal amount of the related notes (the “Notes”) into shares of our common stock (“Conversion Shares”) at a per share price equal to

$0.52.

In addition, we granted to Deerfield the option to require the Company to redeem up to

33.33%

of the total amount drawn under the facility, together with any accrued and unpaid interest thereon, on each of the second, third, and

fourth

anniversaries of the closing, with the option right triggered upon the Company

’s net revenues failing to be equal to or in excess of certain quarterly milestone amounts. We also granted Deerfield the option to require us to apply

35%

of the proceeds received by us in equity-raising transaction(s) to redeem outstanding principal and interest of the Notes, provided that the

first

$10

million so raised by us would be exempt from this put option. We entered into a security agreement which provided, among other things, that our obligations under the Notes would be secured by a

first

priority security interest, subject to customary permitted liens, on all of our assets.

Under the terms of the facility, we also issued stock purchase warrants to purchase up to

97,614,999

shares of our

Old Common Stock common stock at an initial exercise price of

$0.52

per share (subject to adjustments). We also entered into a registration rights agreement pursuant to which we filed a registration statement to register the resale of the Conversion Shares and the shares underlying the stock purchase warrants.

As of

January 26, 2016 (

the date of our voluntary filing for bankruptcy protection), we were in default under the Deerfield Facility Agreement, and Deerfield had the right to demand repayment of the entire amount owed to them, including accrued interest. The total amount owing under the Deerfield Facility Agreement, including accrued interest, was compromised by the Bankruptcy Court. This amount of approximately

$38.3

million and the

$5.75

million outstanding under the DIP Credit Agreement (as defined below) was settled as of the Effective Date through the issuance of

29,038

shares of our Series A Preferred Stock, and the assignment to Deerfield of all rights, title, and interest under the Arthrex Agreement, including the rights to receive royalty payments thereunder. Because the amounts owed to Deerfield pursuant to the Deerfield Facility Agreement were subject to compromise and, in fact, subsequently were compromised by the Court, we stopped accruing interest on the debt effective

January 26, 2016.

Debtor-in-Possession Financing

On

January 28, 2016,

the Bankruptcy Court entered an interim order approving the Company's debtor-in-possession financing (“DIP Financing”) pursuant to terms set forth in a senior secured, super-priority debtor-in-possession credit agreement (the “DIP Credit Agreement”), dated as of

January 28, 2016,

by and among the Company, as borrower, each lender from time to time party to the DIP Credit Agreement, including, but

not

limited to Deerfield Private Design Fund II, L.P., Deerfield Private Design International II, L.P., and Deerfield Special Situations Fund, L.P. (collectively, the “Deerfield Lenders”), and Deerfield Mgmt, L.P., as administrative agent (the “DIP Agent”) for the Deerfield Lenders. The Deerfield Lenders comprised

100%

of the lenders under the then-existing Deerfield Facility Agreement.

On

March 9, 2016,

the Bankruptcy Court approved on a final basis the Company's motion for approval of the DIP Credit Agreement and use of cash collateral, and approved a Waiver and First Amendment to the DIP Credit Agreement (the “Waiver and First Amendment”) with the Deerfield Lenders and DIP Agent, pursuant to which the DIP Credit Agreement was approved to include certain amendments, including to set forth the material terms of the proposed restructuring of the prepetition and post-petition secured debt, unsecured debt, and equity interests of the Company, the terms of which were eventually effected pursuant to the Plan of Reorganization (as defined below). The Waiver and First Amendment provided for senior secured loans in the aggregate principal amount of up to

$6,000,000

in post-petition financing (collectively, the “DIP Loans”).

We received

$5.75

million in gross proceeds from the DIP Financing in the period from

January 1, 2016

through

May 4, 2016,

and incurred approximately

$0.3

million in issuance costs. In accordance with the Plan of Reorganization, as of the Effective Date, the DIP Credit Agreement was terminated.

Interest Expense

In

terest expense was approximately

$1,000

and

$9,000

for the

three

and

six

month periods ended

June 30, 2017.

For the period from

January 1, 2016

through

May 4, 2016

interest expense was approximately

$253,000

of which approximately

$79,000

in interest expense pertained to the DIP Financing and

$173,000

to the Deerfield Facility Agreement.