Quarterly report pursuant to Section 13 or 15(d)

LONG-TERM LIABILITIES

v3.23.3
LONG-TERM LIABILITIES
9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
LONG-TERM LIABILITIES

NOTE 6. LONG-TERM LIABILITIES

Long-term liabilities consisted of the following at:

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Fortress credit agreement

 

$

58,326,929

 

 

$

59,400,000

 

Insurance notes payable

 

 

346,513

 

 

 

340,084

 

Long-term debt and liabilities, gross

 

 

58,673,442

 

 

 

59,740,084

 

Less: Unamortized debt issuance costs

 

 

(4,737,647

)

 

 

(5,839,228

)

Long-term debt and liabilities, net of debt issuance costs

 

 

53,935,795

 

 

 

53,900,856

 

Less: Current portion of long-term debt

 

 

(946,513

)

 

 

(940,084

)

Long-term debt and liabilities, net

 

$

52,989,282

 

 

$

52,960,772

 

 

Fortress Credit Agreement. On November 15, 2021, the Company entered into a senior secured term loan agreement with Fortress Credit Corp. (“Fortress Credit Agreement”) in the amount of $60.0 million. The proceeds of the loan were used to (i) pay approximately $39.5 million to Triangulum as full payment of the settlement amount due under the previously filed settlement agreement between Galaxy Gaming and Triangulum, as set forth above; (ii) repay approximately $11.1 million due and owing to NSB under the MSPLP and under the Amended and Restated Credit Agreement, dated as of May 13, 2021, made between Galaxy Gaming and Zions Bancorporation, N.A. dba Nevada State Bank, a Nevada state banking corporation, and (iii) approximately $4.1 million was used to pay fees and expenses. The remaining approximately $5.3 million was added to the Company’s cash on hand and used for corporate and operating purposes.

The Fortress Credit Agreement bears interest at a rate equal to, at the Company’s option, either (a) LIBOR (or a successor rate, determined in accordance with the Fortress Credit Agreement) plus 7.75%, subject to a reduction to 7.50% upon the achievement of a net leverage target or (b) a base rate determined by reference to the greatest of (i) the federal funds rate plus 0.50%, (ii) the prime rate as determined by reference to The Wall Street Journal’s “Prime Rate” and (iii) the one-month adjusted LIBOR rate plus 1.00%, plus 6.75%, subject to a reduction to 6.50% upon the achievement of a net leverage target. The Fortress Credit Agreement has a final maturity of November 13, 2026. The obligations under the Fortress Credit Agreement are guaranteed by the Company’s subsidiaries and are secured by substantially all of the assets of the Company and its subsidiaries. The Fortress Credit agreement requires, among other things, principal payments of $150,000 per quarter and includes an annual sweep of 50% of excess cash flow commencing in 2023 based on results for the prior fiscal year. The Fortress Credit Agreement contains affirmative and negative financial covenants (as defined in the Fortress Credit Agreement) and other restrictions customary for borrowings of this nature. The Company was required to maintain a Total Net Leverage Ratio of no more than 6.00x for the quarter ended September 30, 2023. As of September 30, 2023, the Company was in compliance with the covenants in the Fortress Credit Agreement. The Fortress Credit Agreement has no prepayment penalty after November 15, 2023.

In connection with entering into the Fortress Credit Agreement, the Company also issued warrants to purchase a total of up to 778,320 shares of the Company’s common stock to certain affiliates of Fortress at a price per share of $0.01 (the “Warrants”). The Warrants are exercisable at any time, subject to certain restrictions.

In response to ASU No. 2020-04, Reference Rate Reform (Topic 848) and effective May 30, 2023, the Benchmark Replacement replaced LIBOR under the Fortress Credit Agreement. The Benchmark Replacement is (a) the sum of: (i) Term SOFR and (ii) 0.11448% for an Available Tenor of one-month's duration, 0.26161% for an Available Tenor of three-months duration, and 0.42826% for an Available Tenor of six months duration, or (b) the sum of: (i) Daily Simple SOFR and (ii) the spread adjustment selected or recommended by the Relevant Governmental Body for the replacement of the tenor of USD LIBOR with a SOFR-based rate having approximately the same length as the interest payment period.

As of September 30, 2023, future maturities of our long-term liabilities are as follows:

 

 

 

Total

 

Years ended December 31,

 

 

 

2023

 

$

242,393

 

2024

 

 

854,120

 

2025

 

 

600,000

 

2026

 

 

56,976,929

 

Long-term liabilities, gross

 

$

58,673,442