Quarterly report pursuant to Section 13 or 15(d)

Long-Term Debt

v3.19.3
Long-Term Debt
6 Months Ended
Jun. 30, 2019
Debt Disclosure [Abstract]  
Long-term Debt [Text Block] LONG-TERM DEBT (as restated)
Long-term debt consists of the following:
June 30, 2019 December 31, 2018
Marathon Tranche One Loan, due December 31, 2021, interest only quarterly payments, variable interest rate of 10.25% as of June 30, 2019 $ 10,000,000    $ 10,000,000   
Marathon Tranche Two Loan, due December 31, 2021, interest only quarterly payments, variable interest rate of 10.25% as of June 30, 2019 5,854,140    —   
Marathon Credit Agreement unamortized discount and issuance costs (1,427,818)   (1,687,921)  
Net Marathon Credit Agreement 14,426,322    8,312,079   
Less current portion 5,854,140    —   
Long-term debt $ 8,572,182    $ 8,312,079   
On December 31, 2018, the Company entered into a Credit Agreement (the “Credit Agreement”), with Marathon Asset Management, LP, on behalf of certain entities it manages, as lenders (collectively, the “Lenders”). The Credit Agreement provided the Company with a $10 million tranche of term loans (the “Tranche One Loan”) which may not be re-borrowed following repayment and (ii) a $25 million tranche of revolving loans which may be re-borrowed following repayment (the “Tranche Two Loans” together with the Tranche One Loan, the “Loans”).
The Trance Two Loan has been classified as current debt, because the agreement includes a lock box and cash sweep feature, which requires current presentation of the debt.
Second Amendment to Credit Agreement
On April 1, 2019, the Company entered into the Second Amendment to the Credit Agreement (the “Marathon Second Amendment”) with the Lenders. The Marathon Second Amendment delayed the application of certain financial covenants including:
(i)the minimum liquidity, providing that at least $4 million must be maintained at all times on or after April 30, 2019 rather than beginning on March 31, 2019;
(ii)the maximum total leverage ratio (ratio of total debt borrowed by the Company and its subsidiaries to EBITDA), providing that the maximum total leverage ratio shall not exceed 4.50:1.00 on the last day of the quarter ending December 31, 2019, rather than beginning with the quarter ending September 30, 2019, which total leverage ratio is adjusted for subsequent quarters as set forth in the Credit Agreement; and
(iii)the maximum debt service coverage ratio (ratio of EBITDA (for the four consecutive fiscal quarters most recently ended, subject to certain adjustments set forth in the Credit Agreement) to interest expense and payments for operating leases), providing that the maximum debt service coverage ratio shall not exceed 1.25:1.00 on the last day of the quarter ending December 31, 2019, rather than beginning with the quarter ending September 30, 2019, which debt service coverage ratio is adjusted for subsequent quarters as set forth in the Credit Agreement.
Third Amendment to Credit Agreement
On April 30, 2019, the Company entered into the Third Amendment to Credit Agreement (the “Marathon Third Amendment”). The Marathon Third Amendment amended the minimum liquidity covenant, providing that at least $4 million must be maintained at all times at or after May 31, 2019 rather than at all times on or after April 30, 2019. Unless the Company fails to maintain minimum liquidity as of the last day of any calendar month, the Company may cure a failure to maintain minimum liquidity by increasing liquidity to $4.0 million within five business days of the occurrence.
Purchase Warrants
In conjunction with entering into the Credit Agreement, the Company issued each Lender a Common Stock Purchase Warrant to purchase, in the aggregate, 8,053,390 shares of common stock at an exercise price of $1.25 per share exercisable in cash only for a period of three years and then for cash or cashless thereafter (collectively, the “Initial Warrants”). Until the later of the repayment of all obligations owed to the Lenders or two years from the closing date, the Company will be required to issue additional Common Stock Purchase Warrants (the “Additional Warrants”) to the Lenders equal to 10%, in the aggregate, of any additional equity issuances, subject to certain exceptions, on substantially the same terms and conditions of the Initial Warrants, except that (i) the applicable expiration date thereof shall be five years from the issuance date of the applicable warrant, (ii) the initial exercise price shall be a price equal to the price per share of common stock used in the relevant issuance multiplied by 110%, and (iii) the holder shall be entitled to exercise the warrant on a cashless exercise at any time the warrant is exercisable.
On April 16, 2019, the Company entered into an Amendment No. 1 to Common Stock Purchase Warrants with Marathon Asset Management LP, on behalf of certain entities it manages, as warrant holders (collectively, the “Holders”) (collectively, the “Marathon Warrant Amendment”), amending certain terms of the existing warrants issued by the Company in favor of each Holder. Pursuant to the Marathon Warrant Amendment, unless the Company has obtained the approval of its shareholders the number of shares to be issued under warrants held by the Holders shall not exceed 19.99% of the issued and outstanding common stock of the Company as of December 31, 2018. The Marathon Warrant Amendment also provide that the failure to obtain shareholder approval of an increase in the number of authorized shares of common stock of the Company, sufficient to enable the Company to issue common stock upon exercise of the warrants held by each Holder, will constitute an event of default under the existing Credit Agreement.
The Initial Warrants are required to be marked to market at each balance sheet date with a corresponding charge to interest expense. As of June 30, 2019 and December 31, 2018, the warrant liability was $15,876,415 and $965,747, respectively.
The Company has outstanding previously issued warrants to Arosa pursuant to agreements for debt issued in 2018. The Arosa debt was subsequently paid off on December 31, 2018, with the proceeds from the Credit Agreement. Through and including December 31, 2018, the warrants held by Arosa were required to be marked-to-market as the warrants were classified as liabilities. On January 1, 2019, the warrants no longer included dilution protection and therefore no longer met the criteria for liability classification and were reclassified to equity. As a result of the reclassification event, the $857,072 warrant liability for the Arosa warrants was reclassified as an increase to additional paid-in capital in 2019.