Secured Lines of Credit, Long-Term Debt, and Notes Due to Employees

12 Months Ended

Dec. 31, 2015

Debt Disclosure [Abstract]

Secured Lines of Credit, Long-Term Debt, and Notes Due to Employees

Our secured lines of credit and long-term debt were as follows as of (in thousands):

	December 31,		December 31,
	2015		2014
Hannoversche Volksbank credit line #1	$	1,120	$	1,880
Hannoversche Volksbank credit line #2		383		465
Hannoversche Volksbank term loan #1		61		135
Hannoversche Volksbank term loan #2		24		81
Hannoversche Volksbank term loan #3		182		270
Ventana Medical Systems, Inc. Promissory Note		-		21
Secured Promissory Note		500		-
DZ Equity Partners Participation rights		818		912
Total		3,088		3,764
Discount on secured promissory notes and debt issuance costs		(110)		-
Less current portion of long-term debt		(2,857)		(2,555)
Long-term debt	$	121	$	1,209

In July 2006, MEDITE GmbH, Burgdorf, entered into a master line of credit agreement #1 with Hannoversche Volksbank. The line of credit was amended in 2012 and was later amended to increase the credit limit to Euro 1.8 million ($2.0 million as of December 31, 2015). In 2015, the credit line was reduced to Euro 1.1 million ($1.2 million as of December 31, 2015). Borrowings on the master line of credit agreement #1 bears interest at a variable rate based on Euribor (Euro Interbank Offered Rate) depending on the type of advance elected by the Company and defined in the agreement. Interest rates depending on the type of advance elected ranged from 3.77 – 8.00% during the period ended December 31, 2015. The line of credit has no stated maturity date. The line of credit is collateralized by the accounts receivable and inventory of MEDITE GmbH, Burgdorf, and a mortgage on the buildings owned by the Company and is guaranteed by Michaela Ott and Michael Ott, the former sole stockholders of the Company.

In June 2012, CytoGlobe, GmbH, Burgdorf, entered into a line of credit agreement #2 with Hannoversche Volksbank. The line of credit granted a maximum borrowing authority of Euro 400,000 ($436,244 as of December 31, 2015). Borrowings on the master line of credit agreement #2 bears interest at a variable rate based on Euribor (Euro Interbank Offered Rate) depending on the type of advance elected by the Company and defined in the agreement. Interest rates ranged from 3.77 – 8.00% during the period ended December 31, 2015. The line of credit has no stated maturity date. The line of credit is collateralized by the accounts receivable and inventory of CytoGlobe GmbH, Burgdorf and is guaranteed by Michaela Ott and Michael Ott, the former sole stockholders of the Company, and the state of Lower Saxony (Germany) to support high-tech companies in the area.

In December 2006, MEDITE GmbH, Burgdorf, entered into a Euro 500,000 ($545,350 as of December 31, 2015) term loan agreement #1 with Hannoversche Volksbank with an interest rate of 3.4% per annum. The term loan has a maturity of September 2016 and requires semi-annual principal payments of approximately Euro 27,780 ($30,296 as of December 31, 2015). The term loan is guaranteed by Michaela Ott and Michael Ott, the former sole stockholders of the Company and a mortgage on the property of the Company. 

In June 2006, MEDITE GmbH, Burgdorf, entered into a Euro 400,000 ($436,244 as of December 31, 2015) term loan #2 with Hannoversche Volksbank with an interest rate of 3.6 % per annum. The term loan has a maturity of June 2016, requires 18 semi-annual principal repayments of approximately Euro 22,220 ($24,233 as of December 31, 2015). The term loan is guaranteed by Michaela Ott and Michael Ott, the former sole stockholders of the Company and is collateralized by subordinated assignments of all of the receivables and inventories of MEDITE GmbH, Burgdorf and also has a subordinated pledge of share term life insurance policies. 

In November 2008, MEDITE GmbH, Burgdorf, entered into a Euro 400,000 ($436,244 as of December 31, 2015) term loan #3 with Hannoversche Volksbank with an interest rate of 4.7% per annum. The term loan has a maturity of December 31, 2018, and requires quarterly principal repayments of Euro 13,890 ($15,148 as of December 31, 2015). The term loan is guaranteed by Michaela Ott and Michael Ott, the former sole stockholders of the Company, and is collateralized by a partial subordinated pledge of the receivables and inventory of MEDITE GmbH, Burgdorf.

In March 2009, the Company entered into a participation rights agreement with DZ Equity Partners in the form of a debenture with a mezzanine lender who advanced the Company up to Euro 1.5 million, ($1.6 million as of December 31, 2015) in two tranches of Euro 750,000 each, ($817,958 as of December 31, 2015). The first tranche was paid to the Company at closing with the second tranche being conditioned on MEDITE GmbH, Burgdorf and its subsidiaries hitting certain performance targets. Those targets were not met and the second tranche was never called. The debenture pays interest at the rate of 12.15% per annum and matures at December 31, 2016.

On February 23, 2015, the Company reached an agreement with Ventana Medical Systems, Inc. whereby both parties agreed that Ventana Medical Systems, Inc. will accept $38,281 as payment in full for all outstanding principal and accrued interest. At December 31, 2014, the $21,000 is included in secured lines of credit and current portion of long-term debt on the consolidated balance sheet. As part of this agreement, Ventana Medical Systems, Inc. converted $1.75 million stated value of Series D Preferred stock and $525 of book value and all outstanding accrued dividends of $656,250 for 12,100 shares of the Company’s common stock. At the date of this report payment of $38,281 to Ventana was fulfilled.

On December 31, 2015, the Company entered into a Securities Purchase Agreement (the “2015 Purchase Agreement”) with seven (7) individual accredited investors  (collectively the “Purchasers”), pursuant to which the Company agreed to issue to the Purchasers secured promissory notes in the aggregate principal amount of $500,000 with interest accruing at an annual rate of 15% (the “Note(s)”) and warrants to purchase up to an aggregate amount of 250,000 shares of the common stock, par value $0.001) per share, of the Company (the “Warrant(s)”).  The Notes mature on the earlier of the third (3rd) month anniversary date following the Closing Date, as defined in the Note, or the third (3rd) business day following the Company’s receipt of funds exceeding one million dollars ($1,000,000) from an equity or debt financing, not including the financing contemplated under the 2015 Purchase Agreement. The Notes are secured by the Company’s accounts receivable and inventories held in the United States. The Warrants have an initial exercise price of $1.60 per share, which are subject to adjustment, and are exercisable for a period of five (5) years.  If the Notes are not redeemed by the Company on maturity, the Purchasers are entitled to receive 10% of the principal balance of the Notes outstanding in warrants for every month that the Notes are not redeemed.  On March 31, 2016, these Notes matured and were not repaid.  Therefore the Notes were in default as of the date of this filing.  The Company agreed to pay the Purchasers 10% of the principal balance of the Notes in warrants for the month of April 2016.  On March 15, 2016, the Board of Directors approved the renegotiated terms to increase the warrants issued to the Purchasers from a total of 250,000 warrants to 500,000 for certain considerations.  See Subsequent Events in Note 13.

The Company recorded a discount related to the issuance of warrants attributed to the secured promissory notes of approximately $90,000.  The discount will be amortized to interest expense over the three month term of the secured promissory notes.  See Note 8 relating to the warrants issued in conjunction with the secured promissory notes.

On February 12, 2016, one of the Purchasers of a $100,000 secured promissory note and holder of 50,000 warrants to purchase shares of common stock was elected to the Board of Directors to serve as Director and Chairman of the Company’s audit committee.

In November 2015 and subsequent to December 31, 2015, the Company entered into promissory notes totaling $927 with certain employees to repay wages earned prior to December 31, 2014 not paid (“Notes Due to Employees").  The Notes Due to Employees are to be paid monthly through September 2019, with no interest due on the outstanding balances.  The monthly amounts increase over the payment term.  The Notes Due to Employees have been presented separately on the consolidated balance sheet at December 31, 2015.  These accrued wage amounts were included in accounts payable and accrued expenses at December 31, 2014.  (See Note 7)  Certain employees may convert any of the amounts owed during the duration of the notes due to employees to equity at a discounted priced defined in the agreement.

At the time of the merger, the Company owed its then CEO and Chairman of the board approximately $121,700. During 2015 and 2014, the Company paid $40,000 and $10,000, respectively, and imputed $1,700 of non-cash interest expense on these advances.

The following table summarizes the maturities of the Company’s outstanding secured lines of credit and long-term debt at December 31, 2015 ($1,503 of secured line of credit have no maturity date but considered here as due in 2016) and Notes Due to Employees, at December 31, 2015 (in thousands):

Year	Secured Lines of Credit and Long-Term Debt		Notes Due to Employees
2016	$	2,967	$	202
2017		61		310
2018		60		338
2019		-		77
Total	$	3,088	$	927