|9 Months Ended|
Sep. 30, 2019
|Debt Disclosure [Abstract]|
|Long-term Debt||LONG-TERM DEBT
Long-term debt consists of the following:
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 provides the Company with a $10 million term loan (the “Tranche One Loan”) which may not be re-borrowed following repayment and (ii) a $25 million revolving loan which may be re-borrowed following repayment (the “Tranche Two Loan” together with the Tranche One Loan, the “Loans”). The Tranche One Loan requires principal payments of $0.5 million on June 30, 2020, December 31, 2020 and June 30, 2021 with the remaining balance due on December 31, 2021. The Tranche Two Loan matures on December 31, 2021.
The Trance Two Loan has been classified as current, because the agreement includes a lock box and cash sweep feature, which requires current presentation of the debt.
The Credit Agreement requires the Company to maintain certain financial covenants including:
a.Maintaining a minimum of $4.0 million of liquidity;
b.Maintaining as of December 31, 2019 a total leverage ratio (ratio of total debt to EBITDA for the preceding four quarters) not to exceed 4.50:1.00. The total leverage ratio is adjusted in subsequent quarters as set forth in the Credit Agreement; and
c.The debt service coverage ratio (ratio of EBITDA for the last four quarters, subject to certain adjustments as defined in the Credit Agreement, to interest expense and payments for operating leases), not to exceed 1.25:1.00 as of December 31, 2019. The debt service coverage ratio is adjusted in subsequent quarters as set forth in the Credit Agreement.
If the Company is unable to meet its financial covenants the Credit Agreement has an equity cure available which can be used to satisfy the covenants.
The Tranche Two Loan requires that as long as there are amounts outstanding under the loan, that the Company maintains $0.9 million in a restricted cash account.
In conjunction with entering into the Credit Agreement, the Company issued Common Stock Purchase Warrants (“Initial Warrants”) to purchase 8,053,390 shares of common stock at an exercise price of $1.25 per share. The Initial Warrants are exercisable for cash only through December 31, 2021 and then for cash or cashless thereafter. Until the later of the repayment of all amounts outstanding under the Credit Agreement or December 31, 2021, the Company must issue additional Warrants to the Lenders equal to 10%, in the aggregate, of any additional equity issuances on substantially the same terms and conditions of the Initial Warrants, except that (i) the expiration date shall be five years from the issuance date, (ii) the exercise price shall be equal to 110% of the issuance price per share in the relevant issuance, and (iii) the holder shall be entitled to exercise the warrant on a cashless basis at any time.
On April 16, 2019, the Company entered into Amendment No. 1 to the Common Stock Purchase Warrants with the Lenders (collectively, the “Holders”) (the “Marathon Warrant Amendment”). Pursuant to the Marathon Warrant Amendment, unless the Company has obtained the approval of its shareholders, then 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 provides 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 Credit Agreement.
Currently the Initial Warrants are classified as liability financial instruments and required to be marked-to-market at each balance sheet date with a corresponding charge to interest expense. As of September 30, 2019 and December 31, 2018, the warrant liability for the Initial Warrants was $19,901,139 and $965,747, respectively. Any additional warrants issued in connection with Credit Agreement have been classified as equity instruments and are not required to be marked-to-market at each balance sheet date.
The Company has outstanding warrants issued to Arosa 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 to additional paid-in capital in 2019.
The entire disclosure for long-term debt.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef