NOTE 10. LONG-TERM DEBT

Long-term debt consisted of the following at March 31, 2018 and December 31, 2017:

Breakaway Term loan.  In August 2016, we entered into a term loan agreement (the “Breakaway Term Loan Agreement”) for an aggregate principal amount of $10,500,000 (the "Breakaway Term Loan").  Proceeds of the Breakaway Term Loan were primarily used to prepay in full the outstanding notes payable to unrelated parties. The Breakaway Term Loan was secured by a senior lien on substantially all of our assets.  In conjunction with the Breakaway Term Loan, we also entered into a warrant agreement (the “Warrant Agreement”), pursuant to which we issued the lenders a six-year warrant to purchase 1,965,780 shares of our common stock (the “Warrants”). The estimated fair value of the Warrants (Note 14) on the grant date was determined to be $809,632 using the Black-Scholes option pricing model, and was recorded as a reduction of the related debt. The estimated fair value of the Warrants on the grant date was amortized ratably over the term of the Warrants to interest expense.

Under the Breakaway Term Loan, we were subject to quarterly financial covenants that, among other things, limited our annual capital expenditures (as defined in the Breakaway Term Loan Agreement), and required us to maintain a specified leverage ratio and minimum EBITDA amounts, each of which were defined in the Breakaway Term Loan Agreement.  

The outstanding principal initially accrued interest at the rate of 14.0% per annum, which decreased to 12.5% per annum for any quarterly period in which we achieved a specified leverage ratio.  Beginning October 1, 2017, the interest rate per annum decreased to 12.5% due to the achievement of such ratio.

The foregoing summary of the Breakaway Term Loan Agreement and the Warrant Agreement is qualified in its entirety by reference to the respective agreements, which are found as Exhibits 99.1 and 99.2, respectively, to our Form 8-K filed with the SEC on August 29, 2016.

Nevada State Bank Credit Agreement.  On April 24, 2018, we entered into a credit agreement with ZB, N.A. dba Nevada State Bank (“NSB” and the “NSB Credit Agreement”), which provides for a $11.0 million five-year term loan (the “NSB Term Loan”) and a $1.0 million one-year revolving credit facility (the “NSB Revolver”).  Upon execution of the NSB Credit Agreement, we borrowed $11.0 million under the NSB Term Loan and $0.1 million under the NSB Revolver and used the proceeds to pay off in full the outstanding balance under the Breakaway Term Loan, redeem the Warrants and pay interest, fees and an early redemption premium associated with these transactions (Note 16).

As of March 31, 2018, future maturities of our long-term debt obligations are as follows, without giving effect to the NSB Credit Agreement: