Notes Payable |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Payable |
Notes Payable
Notes payable consisted of the following:
Revolving Credit Agreement
In 2007, the Company entered into a $40,000 revolving credit agreement with Frost Gamma Investments Trust (“Frost Gamma”), an affiliate of the Company’s former chairman of the board and former principal shareholder. Borrowings of up to $40,000 were permitted under the Frost Gamma credit agreement and bore interest at a rate of 11% per annum, payable quarterly. On December 24, 2018, the $40,000 revolving credit agreement was terminated by agreement of the Company and Frost Gamma effective as of that date. At the time of its termination, no outstanding amounts were owed by the Company and no early termination penalties were incurred in connection with the termination. The Company borrowed and repaid $25,000 in November 2016. Interest expense amounted to $0, $0 and $113 in 2018, 2017 and 2016, respectively.
In connection with the revolving credit agreement, Frost Gamma received a warrant to purchase 2,000,000 shares of LTS common stock. The warrant was exercised on October 19, 2017 at an exercise price of $1.91 per share. The warrant, which was classified as debt issue cost, was valued at $3,200 based on the Black-Scholes option pricing model, and was amortized under the straight-line method over the remaining term of the revolving credit agreement.
NFS Forgivable Loan
On November 4, 2011, National Financial Services LLC (“NFS”), which is now known as Fidelity Clearing & Custody Solutions ("Fidelity"), a Fidelity Investments® company, provided the Company with a seven-year, $15,000 forgivable loan. The Company used the proceeds to fund expenses related to the Securities America acquisition. Interest on the loan accrued at the average annual Federal Funds effective rate plus 6% per annum, subject to the maximum rate of 11% per annum. Since Securities America met certain annual clearing revenue targets set forth in the loan agreement, the principal balance of the loan was forgiven in seven equal yearly installments of $2,143 through November 2018. Interest payments due with respect to each such year will also be forgiven if the annual clearing revenue targets are met. The Company expensed interest under this loan agreement until such time as such interest was forgiven. Securities America met the annual clearing revenue target for the period ending November 4, 2012, 2013, 2014, 2015, 2016 and 2017 resulting in the forgiveness of $2,143 of the aggregate principal amount of the loan in November of each period. Upon meeting annual revenue targets, principal and interest, respectively, of $2,143 and $295 in 2017 and $2,143 and $408 in 2016 were forgiven and included in other income. In May 2018, five of our broker-dealer subsidiaries entered into a six-year extension of their clearing agreements with NFS.
In connection with the extension, the Company entered into a termination of the NFS forgivable loan agreement whereby the remaining balance of the principal and interest, $2,143 and $79, respectively, on the loan was forgiven. This amount was included in other income in 2018.
Securities America Notes
On November 4, 2011 (the “Closing Date”), in connection with the Securities America acquisition, the Company entered into a loan agreement with various lenders (the “Lenders”), under which the Lenders provided a loan to the Company in an aggregate principal amount of $160,700 (the "November 2011 Loan"), a portion of which was used to fund the cash purchase price payable on the Closing Date. Interest on the November 2011 Loan was payable quarterly at 11% per annum. The remaining balance of the loan, together with accrued and unpaid interest thereon, was paid on November 10, 2016. On the Closing Date, the Company paid a one-time aggregate funding fee of $804 to the Lenders and issued warrants to purchase an aggregate of 10,713,332 shares of the Company's common stock.
The warrants were valued at $9,428 utilizing the Black-Scholes option pricing model. The value of the warrants were credited to additional paid-in capital with a corresponding reduction in the carrying value of the notes as debt discount, which was amortized over the term of the notes by the interest method.
On October 26, 2016, holders of the remaining unexercised warrants to purchase an aggregate of 10,699,999 shares of the Company's common stock exercised such warrants in full. Each holder paid the exercise price by cancellation of indebtedness represented by the remaining balance of the promissory note held by such lender. Accordingly, promissory notes with an aggregate remaining outstanding balance of $17,976 were canceled and no indebtedness related to the November 2011 Loan remained outstanding.
Interest paid under the November 2011 Loan to Frost Nevada Investments Trust, an affiliate of the Company's former chairman and former principal shareholder, and Vector Group Ltd ("Vector") amounted to $1,779 and $198, respectively in 2016.
Bank Loans - Securities America
On November 6, 2013, SAFC entered into a loan agreement (the "SA Loan Agreement") with a third-party financial institution for (i) a term loan in the aggregate principal amount of approximately $1,709 and (ii) a revolving credit facility. The term loan bore interest at 5.5%, and was re-paid in full in May 2017. Revolving loans bear interest at 5.5% per annum over a 5-year term. At December 31, 2018 and 2017, $89 and $216, respectively, were outstanding under the revolving credit facility. On April 21, 2017, the SA Loan Agreement was amended to modify the interest rate for new revolving loans to prime plus 2.25%. As of December 31, 2018, SAFC had $1,000 of availability under the revolving credit facility. This loan agreement also provided for an additional term loan in the aggregate principal amount of $8,000, subject to certain conditions. This second term loan bore interest at 5.75%, with a maturity date of May 1, 2020. The loans are collateralized by the assets of SAFC and Securities America Advisors, Inc. The term loan was paid in full in July 2018.
On February 6, 2019, SAFC entered into a loan agreement with a third-party financial institution for a term loan in the aggregate principal amount of $7,000, with interest at the rate of 5.52%. Securities America began monthly payments of principal and interest in the amount of $212, on March 6, 2019. The term loan matures on February 6, 2022.
Promissory Notes - Highland
As of December 31, 2017, HCHC Acquisition, as successor in interest to Highland's parent, had outstanding $6,738 of its 10% promissory notes due February 26, 2019. In July 2018, HCHC Acquisition prepaid the promissory notes, including accrued interest.
Promissory Notes - KMS
On October 15, 2014, as part of the consideration paid for the acquisition of KMS, the Company issued four-year promissory notes to the former shareholders of KMS in the aggregate principal amount of $8,000, bearing interest at 1.84% per annum and payable in equal quarterly installments of principal and interest, which were valued at $7,508 based on an imputed interest rate of 5.5%. The remaining balances under the notes were prepaid in July 2018. The carrying value of the notes at December 31, 2017, net of $98 unamortized discount, amounted to $1,958.
Promissory Notes - SSN
On January 2, 2015, as part of the consideration paid for the acquisition of SSN, the Company issued four-year promissory notes to the former shareholders of SSN in the aggregate principal amount of $20,000, bearing interest at 1.74% per annum and payable in equal quarterly installments of principal and interest, which were valued at $18,697 based on an imputed interest rate of 5.1%. The remaining balances under the notes were prepaid in July 2018. The carrying value of the notes at December 31, 2017, net of $326 of unamortized discount, amounted to the $6,074.
Senior Notes
On November 21, 2017, the Company sold $72,500 principal amount of its 6.5% senior notes due November 2027 (the "6.5% Senior Notes"). Interest on the 6.5% Senior Notes accrues from November 21, 2017 and is paid quarterly in arrears on March 31, June 30, September 30 and December 31 of each year. The Company may redeem the 6.5% Senior Notes in whole or in part on or after November 30, 2020, at its option, at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest. On December 12, 2017, the underwriters exercised their option to purchase an additional $4,069 principal amount of the 6.5% Senior Notes, which resulted in total gross proceeds of $76,569, before deducting the underwriting discount paid to unaffiliated underwriters and offering expenses aggregating $3,313, including $1,187 of brokerage commissions earned by employees of Ladenburg, which served as the lead underwriter in the offering. In connection with the offering of Notes, certain members of the Company's management and Board of Directors purchased $10,400 of the Notes offered by the Company. In February 2018, the Company entered into a note distribution agreement under which the Company may sell up to $25,000 principal amount of additional 6.5% Senior Notes from time to time in an "at the market" offering in accordance with Rule 415 under the Securities Act. Ladenburg is acting as the representative of the agents named in the note distribution agreement in the "at the market" offering and may receive commissions of up to 2% of gross sales. During the 12 months ended December 31, 2018, the Company sold $6,240 principal amount of 6.5% Senior Notes pursuant to the "at the market" offering.
On May 22, 2018, the Company sold $40,000 principal amount of its 7% senior notes due May 2028 (the "7% Senior Notes") pursuant to an underwritten offering. Interest on the 7% Senior Notes accrues from May 30, 2018 and is paid quarterly in arrears on March 31, June 30, September 30 and December 31 of each year. The Company may redeem the 7% Senior Notes in whole or in part on or after May 31, 2021, at its option, at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest. On June 22, 2018, the underwriters exercised their option to purchase an additional $1,412 principal amount of the 7% Senior Notes, which resulted in total gross proceeds of $41,412, before deducting the underwriting discount paid to unaffiliated underwriters and offering expenses aggregating $2,139, including $464 of brokerage commissions earned by employees of Ladenburg, which served as the lead underwriter in the offering. In June 2018, the Company entered into a note distribution agreement under which the Company may sell up to $25,000 principal amount of additional 7% Senior Notes from time to time in an "at the market" offering. Ladenburg is acting as the representative of the agents named in the note distribution agreement in the "at the market" offering and may receive commissions of up to 2% of gross sales. During the twelve months ended December 31, 2018, the Company sold $2,729 principal amount of 7% Senior Notes pursuant to the "at the market" offering. At December 31, 2018, Ladenburg held $1,622 of 7% Senior Notes which are not included in notes payable.
On August 9, 2018, the Company sold $60,000 principal amount of its 7.25% senior notes due September 2028 (the "7.25% Senior Notes") pursuant to an underwritten offering. Interest on the 7.25% Senior Notes accrues from August 16, 2018 and is paid quarterly in arrears on March 31, June 30, September 30 and December 31 of each year. The Company may redeem the 7.25% Senior Notes in whole or in part on or after September 30, 2021 at its option, at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest. The offering resulted in total gross proceeds of $60,000, before deducting the underwriting discount paid to unaffiliated underwriters and offering expenses aggregating $2,190, including $120 of brokerage commissions earned by employees of Ladenburg, which served as one of the five underwriters in the offering.
Promissory Note - KFG
On August 31, 2018, as part of the consideration paid for the acquisition of KFG, the Company issued a promissory note (the "KFG Note") to the former shareholders of KFG in the aggregate principal amount of $5,450, bearing interest at 4.00% per annum and payable in equal monthly installments beginning on September 15, 2018, with the final installment being due and payable on or before November 15, 2036. The KFG Note may be prepaid in full or in part at any time without premium or penalty. The KFG Note contains customary events of default, which if uncured, entitle the holder to accelerate the due date of the unpaid principal amount of, and all accrued and unpaid interest on, the KFG Note. Total interest expense on the KFG Note was $73 for the year ended December 31, 2018.
Promissory Note - FSFG
On November 1, 2018, as part of the consideration paid for the acquisition of FSFG, the Company issued two promissory notes (the "FSFG Notes") to the former shareholders of FSFG in the aggregate principal amount of $372, one bearing interest at 3.99% per annum and payable in equal monthly installments beginning on November 1, 2018, with the final installment being due and payable on or before October 1, 2021 and the other bearing interest at 4.75% per annum and payable in equal monthly installments beginning on November 15, 2018, with the final installment being due and payable on or before January 15, 2024. The FSFG Notes may be prepaid in full or in part at any time without premium or penalty. The FSFG Notes contains customary events of default, which if uncured, entitle the holder to accelerate the due date of the unpaid principal amount of, and all accrued and unpaid interest on, the FSFG Notes. Total interest expense on the FSFG Notes was $2 for the year ended December 31, 2018.
Promissory Notes - Frost
On December 24, 2018, the Company entered into an agreement (the “Repurchase Agreement”) with its former principal shareholder, Phillip Frost, M.D., and an entity affiliated with Dr. Frost, Frost Nevada Investments Trust (together with Dr. Frost, the “Sellers”), pursuant to which the Company agreed to repurchase 50,900,000 shares of its common stock directly from the Sellers (the “Share Repurchase”) in a private transaction at a price of $2.50 per share. The Company funded the Share Repurchase with $50,900 in cash on hand and by issuing $76,350 on aggregate principal amount of 7.25% Senior Notes due 2028 (the “Frost Notes”) to the Sellers. In addition, pursuant to the Repurchase Agreement, options to purchase 3,610,000 shares of the Common Stock held by Dr. Frost were cancelled in exchange for $3,000 in cash.
The Frost Notes are senior unsecured obligations of the Company and rank equally in right of payment with all of the Company’s existing and future senior unsecured and unsubordinated indebtedness. The Frost Notes are effectively subordinated in right of payment to all of the Company’s existing and future secured indebtedness and structurally subordinated to all existing and future indebtedness of the Company’s subsidiaries. The Frost Notes bear interest from December 24, 2018 at the rate of 7.25% per annum, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on March 31, 2019, and at maturity. The Frost Notes mature on September 30, 2028. Total interest expense related to the Frost Notes was $123 for the year ending December 31, 2018.
The Company may, at its option, at any time and from time to time, on or after September 30, 2021, redeem the Frost Notes, in whole or in part, at a redemption price equal to 100% of the outstanding principal amount thereof plus accrued and unpaid interest to, but excluding, the date fixed for redemption. On and after any redemption date, interest will cease to accrue on the redeemed Frost Notes.
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