Quarterly report pursuant to Section 13 or 15(d)

LONG-TERM DEBT

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LONG-TERM DEBT
9 Months Ended
Sep. 30, 2017
Debt Disclosure [Abstract]  
LONG-TERM DEBT

NOTE 10. LONG-TERM DEBT

Long-term debt consisted of the following at September 30, 2017 and December 31, 2016:

 

 

 

2017

 

 

2016

 

Term loan

 

$

9,712,500

 

 

$

10,500,000

 

Notes payable, related party

 

 

 

 

 

509,135

 

Equipment notes payable

 

 

133,935

 

 

 

162,274

 

Insurance notes payable

 

 

 

 

 

36,063

 

     Notes payable, gross

 

 

9,846,435

 

 

 

11,207,472

 

Less:

 

 

 

 

 

 

 

 

     Unamortized debt issuance costs

 

 

(513,151

)

 

 

(595,462

)

     Warrants issued

 

 

(624,097

)

 

 

(743,604

)

     Notes payable, net

 

 

8,709,187

 

 

 

9,868,406

 

Less: Current portion

 

 

(1,088,957

)

 

 

(1,199,255

)

     Long-term debt, net

 

$

7,620,230

 

 

$

8,669,151

 

 

Term loan.  In August 2016, we entered into a term loan agreement (the “Term Loan Agreement”) for an aggregate principal amount of $10,500,000 (the "Term Loan").  Proceeds of the Term Loan were primarily used to prepay in full the outstanding notes payable to unrelated parties. The remainder of the proceeds from the Term Loan was used for general corporate purposes and working capital needs.  The Term Loan is secured by a senior lien on substantially all of our assets.  In conjunction with the 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”). See Note 14. The estimated fair value of the Warrants 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 is being amortized ratably over the term of the Warrants to interest expense.

 

Under the Term Loan, we are subject to quarterly financial covenants that, among other things, limit our annual capital expenditures (as defined in the Term Loan Agreement), and require us to maintain a specified leverage ratio and minimum EBITDA amounts, each of which are defined in the Term Loan agreement.  We were in compliance with the financial covenants of the Term Loan Agreement as of September 30, 2017.

 

During the initial twelve-month period of the Term Loan, the outstanding principal will accrue interest at the rate of 14.0% per annum. Thereafter, the outstanding principal will accrue interest at the lesser of 14.0% per annum or 12.5% per annum for any quarterly period in which we achieve a specified leverage ratio.  

 

The Term Loan required quarterly interest-only payments through December 31, 2016, after which we are required to make quarterly principal payments of $262,500 plus accrued interest. The remaining principal and any unpaid interest will be payable in full on August 29, 2021. Voluntary prepayments of the Term Loan, in full or in part, are permitted after the first anniversary of the Term Loan, subject to certain premiums.  The Term Loan also requires certain mandatory prepayments in the amount of 100% of the proceeds from certain asset dispositions (other than in the ordinary course of business) and certain other extraordinary events, and 25% of the proceeds from the sale and issuance of capital stock.

 

The foregoing summary of the 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.

 

Notes payable, related party.  In connection with an asset purchase agreement executed in December 2007, we executed a note payable to an entity owned and controlled by Mr. Saucier (the “Related Party Note Payable”).  The Related Party Note Payable required annual principal and interest payments of $109,908, at a fixed interest rate of 7.3% through December 2018, at which time there was a balloon payment due of $354,480.  On August 11, 2017, we repaid in full the then-outstanding principal balance along with accrued and unpaid interest (in the aggregate amount of $459,683) on the Related Party Note Payable.  This payment constituted a Restricted Payment as defined in our Term Loan, and we received a waiver with respect to the payment from the administrative agent for the Term Loan.

 

As of September 30, 2017, maturities of our long-term debt obligations are as follows:

 

September 30,

 

Total

 

2018

 

$

1,088,957

 

2019

 

 

1,090,223

 

2020

 

 

1,076,750

 

2021

 

 

6,584,849

 

2022

 

 

5,656

 

Total notes payable

 

 

9,846,435

 

Less:

 

 

 

 

Unamortized debt issuance costs

 

 

(513,151

)

Warrants issued

 

 

(624,097

)

Notes payable, net

 

$

8,709,187