Interpace Biosciences®, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Note 12 - Long-term Debt

Note 12 - Long-term Debt

3 Months Ended

Mar. 31, 2016

12.	LONG-TERM DEBT

On October 31, 2014, the Company and Interpace LLC, entered into an agreement to acquire RedPath (the Transaction). In connection with the Transaction, the Company entered into a note with the Equityholder Representative, dated October 31, 2014 (as amended, the Note).

The Note is for $11.0 million, interest-free and payable in eight equal consecutive quarterly installments beginning October 1, 2016. In the second quarter of 2015, the final working capital adjustment was made, reducing the balance of the Note to approximately $10.7 million. In October 2015, in connection with the sale of substantially all of the CSO business in December 2015, the Note was amended to, among other things:

	●	permit the Company to enter into a revolving loan facility,
	●	permit the Company to sell the CSO business and to use the proceeds of the CSO sale to pay off the amounts due under the existing $20 million Credit Agreement and to continue to make payments on the debt due under the Note in accordance with the terms of the Note ,
	●	provide that, upon written request by the Equityholder Representative on April 30, 2016, the Company would make a one-time principal payment in the amount of $1,333,750 on July 1, 2016 rather than as originally due on July 1, 2018 (which such request the Company did not receive), and
	●	provide that the 500,000 shares of the Company’s common stock to be issued upon the commercial launch of PancraGen® for the management of Barrett’s esophagus would be deemed earned by the former RedPath Equityholders as of the closing of the sale of the CSO business (see Note 6, Commitments and Contingencies ).

The interest rate will be 5.0% in the event of a default under the Note. The obligations of the Company under the Note are guaranteed by the Company and its subsidiaries in favor of the Equityholder Representative. Pursuant to the guarantee, the Company and its subsidiaries also granted a security interest in substantially all of their assets, including intellectual property, to secure their obligations to the Equityholder Representative. Based on the Company's incremental borrowing rate under its Credit Agreement, the fair value of the Note at the date of issuance was $7.5 million. During the quarters ended March 31, 2016 and 2015, the Company accreted approximately $0.2 million into interest expense, respectively, for each period. As of March 31, 2016, the balance of the Note is approximately $8.6 million and the unamortized discount is $2.1 million.

Principal payments due related to the long-term debt over next three years are as follows:

		2016					2017					2018
Note		$	1,334				$	5,335				$	4,001

As discussed in Footnote 6, the Company currently has an indemnification asset and liability of $1.5 million ($0.5 million short-term and $1.0 million long-term) relating to the DOJ settlement with the former owners of RedPath that was recorded with the acquisition of RedPath. As the Company makes payments to the DOJ, it may reduce the balance owed on the note by the same amount.

In addition, the Company entered into the Credit Agreement with the Agent and the Lenders, as defined in the agreement, in connection with the Transaction in the aggregate principal amount of $20.0 million (the Loan). The maturity date of the loan was October 31, 2020. The Company received net proceeds of approximately $19.6 million following payment of certain fees and expenses in connection with the Credit Agreement.

Upon the sale of substantially all of the Commercial Services (CSO) business on December 22, 2015, the Company was obligated to use a portion of the net proceeds from the transaction to pay the balance of the outstanding Loan in the aggregate principal amount of $20.0 million, an exit fee and expenses of approximately $1.6 million. In connection with the termination of the Credit Agreement, the Guarantee and Collateral Agreement, dated October 31, 2014, by the Company and certain of its subsidiaries in favor of the Agent was also terminated on December 22, 2015.