Long-term Debt and Other Financing Arrangements

The Company's long-term borrowing consisted of the following (in thousands, except for interest rates):



Description	Interest rate		September 30, 2015			December 31, 2014
Software Financing	11.25	%	158			202
Senior secured debt – HSBC Bank PLC	1.10	%	$	3,050		$	—
Promissory note—Payable to Former Shareholder of TLC	2.63	%	3,096			3,373
Promissory note—Lega Enterprises, LLC (formerly Agel Enterprises, LLC)	5.00	%	1,098			1,375
Other miscellaneous notes	4.00	%	367			516
Capital lease obligation	14.18	%	15,791			15,800
Total debt			23,560			21,266
Less current maturities			(1,121		)	(974		)
Long-term debt and other financing arrangements, net of current maturities			$	22,439		$	20,292

Software Financing

The Company entered into two financing arrangements for licensing and installation support for Sage X3 Premium, the ERP System utilized at the Longaberger Company. These financing arrangements were entered into on different dates. The first arrangement was entered into on September 27, 2013 and calls for 36 monthly payments of approximately $5,000. The second arrangement was entered into on January 30, 2014 and calls for 36 monthly payments of approximately $4,400.

Senior Secured debt – HSBC Bank PLC

On March 24, 2015, the Company secured $3.0 million in senior secured debt from HSBC Bank PLC, with a term of two years and an annual interest rate of 0.60% over the Bank of England Base Rate as published from time to time. The loan is denominated in pound sterling (GBP) and secured by approximately $2.9 million in cash shown as "restricted cash" on our unaudited condensed consolidated balance sheets and there are no other covenants related to the debt. The cash collateral is held in a GBP denominated account.

Promissory Note—Payable to Former Shareholder of TLC

On March 14, 2013, we issued a $4.0 million promissory note in connection with the purchase of TLC. The Promissory Note bears interest at 2.63% per annum, has a ten-year maturity, and is payable in equal monthly installments of outstanding principal and interest.

Promissory Note—Lega Enterprises, LLC

On October 22, 2013, we issued a $1.7 million promissory note to Lega Enterprises, LLC (formerly Agel Enterprises, LLC) in connection with our acquisition of assets from Agel Enterprises, LLC. The promissory note bears interest at 5% per annum, and is payable in equal monthly installments of outstanding principal and interest and matures on October 22, 2018. The note is secured by a lien on the assets of Agel.

Promissory Note – Other Miscellaneous

On December 4, 2014, we issued a $0.5 million promissory note in connection with a settlement agreement. The promissory note bears interest at 4% per annum, and is payable in equal monthly installments of outstanding principal and interest.

Capital Lease

On July 31, 2014, TLC entered into the Sale Leaseback Agreement with CFI NNN Raiders. The lease was deemed to qualify as a capital lease and the transaction is being accounted for as a sale leaseback arrangement. The gain arising from the sale of the three buildings and related property was deferred and is being recognized using the full accrual method over the term of the lease. The lease has been classified as a capital lease since the condition was met whereby the term of the lease is greater than 75% of the estimated economic life of the property. TLC has recorded the sale and removed the properties sold and related liabilities from the balance sheet. Since the lease is a capital lease, a leased asset will be recorded and depreciated over 15 years using the straight-line method.

The payment under the lease will be accounted for as interest and payments under capital lease using 15 year amortization. The interest expense associated with the lease payments was $560,000 and $558,000 for the three months ended September 30, 2015 and 2014 respectively. Interest expense recognized for the nine months ended September 30, 2015 and 2014 was $1,663,000 and $558 respectively. Amortization expense of $263,334 and $176,000 was recorded in the three months ended September 30, 2015 and 2014 respectively. $790,000 and $176,000 was recorded as amortization expense for the nine months ended September 30, 2015 and 2014, respectively. The gain on sales of real estate amortized over the life of the lease was $42,000 and $126,000 for the three and nine months ended September 30, 2015, respectively. The three and nine months ended September 30, 2014 had an amortized gain on the sale of real estate totaling $28,000. On September 30, 2015 the current portion of the lease totaled $54,000.

Outstanding Warrants

On March 4, 2015 the Company raised proceeds of $20 million though the sale of 6,667,000 shares of its common stock and warrants to purchase up to an aggregate of 6,667,000 shares of its common stock at a combined offering price of $3.00 in an underwritten public offering (“Offering”). The warrants have a per share exercise price of $3.75, are exercisable immediately and will expire five years from the date of issuance. The Company granted the underwriters a 45-day option to purchase up to an additional 1,000,050 shares of common stock and/or warrants to purchase up to an aggregate of 1,000,050 shares of common stock to cover additional over-allotments, if any. On March 4, 2015, the underwriters exercised a portion of their over-allotment option with respect to 113,200 warrants. In addition, 166,675 warrants were issued to the underwriters. The over-allotment option has expired as of the date of this filing.

The gross proceeds to the Company, including the underwriters' partial exercise of their over-allotment option, were approximately $20,000,000 before deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company. Assuming the exercise of all 6,667,000 warrants at the exercise price of $3.75 each, and assuming the Company maintains the conditions necessary for a cash exercise, the total additional gross aggregate proceeds to CVSL would be $25,001,250. However, there can be no assurance that any warrants will be exercised or that the Company will maintain conditions necessary for a cash exercise.

On May 6, 2014, the Company issued warrants to purchase up to 12,500 and 6,250 shares of its Common Stock in connection with exclusivity agreements. The warrants were exercisable commencing 75 days after their date of issuance, in whole or in part, until one year from the date of issuance for cash and/or on a cashless exercise basis at an exercise price of $11.00 per share, representing the average closing price of our common stock for the ten days preceding the issuance. The fair value of the warrants on the date of issuance approximated $116,000. The warrants expired in May 2015 and were not exercised.

On July 2, 2014, the Company issued a warrant exercisable for 50,000 shares of our common stock at an exercise price of $12.80 per share in consideration of a two-year consulting agreement with an individual with direct selling industry experience. The warrant is exercisable for a ten day period commencing 720 days after issuance. In addition, the warrant provides for piggyback registration rights upon request, in certain cases. The exercise price and number of shares issuable upon exercise of the warrants was subject to adjustment in the event of a stock dividend or our recapitalization, reorganization, merger or consolidation. On July 30, 2015 we executed an extension on the consulting agreement through July of 2017 in exchange for cancellation of the original warrant for 50,000 shares and the issuance of a new warrant exercisable for 50,000 shares of our common stock at an exercise price of $1.16 per share. The new warrant is also exercisable for a ten day period commencing 720 days after issuance.