Note 4 - Subordinated Secured Promissory Note Receivable

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

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

4 . Subordinated Secured Promissory Note Receivable

The Company received a

$7.4

million subordinated secured promissory note from the Buyer as partial consideration for the sale of substantially all of our assets during the

first

quarter of

2018.

  The note matures on

March 2, 2023,

at which time the total principal amount is due.  Interest on the principal balance of the note accrues daily at an annual fixed rate of

6.00%.

  Cash interest payments begin upon certain availability thresholds defined in the Buyer’s senior secured loan facility.  These thresholds were

not

met for the period ended

June 30, 2018

resulting in the Company accruing approximately

$112,000

of interest income on the note.  Given that the availability thresholds were

not

met, the accrued interest was considered paid in kind and capitalized to the principal balance of the note.

During the

first

quarter

2018,

we evaluated the fair value of the subordinated secured promissory note, which resulted in a fair value adjustment of

$2.6

million.  We recorded accreted interest income on the fair value adjustment of the note of

$111,000

during the

three

months ended

June 30, 2018.

Resulting from the interest being paid in kind and the accretion of the fair value adjustment, the carrying value of the note increased

$223,000

during the period ended

June 30, 2018

to

$5.1

million.