|12 Months Ended|
Dec. 31, 2017
|Debt Disclosure [Abstract]|
Long-term debt consists of the following at December 31, 2017 and December 31, 2016:
(1) Our revolving credit facility is collateralized by our accounts receivable and our term loan is collateralized by our property, plant, and equipment.
(2) See below “Revolving Credit and Term Loan Agreement” for monthly payment interest options. Prior to April 1, 2016, the monthly installment payment under the term loan was approximately $190,000.
(3) Net of debt issuance costs of ($115,000) and ($151,000) at December 31, 2017 and December 31, 2016, respectively.
Revolving Credit and Term Loan Agreement
The Company entered into an Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated October 31, 2011 (“Amended Loan Agreement”), with PNC National Association (“PNC”), acting as agent and lender. The Amended Loan Agreement has been amended from time to time since the execution of the Amended Loan Agreement. The Amended Loan Agreement, as subsequently amended (“Revised Loan Agreement”), provides the Company with the following credit facility with a maturity date of March 24, 2021: (a) up to $12,000,000 revolving credit (“revolving credit”) and (b) a term loan (“term loan”) of approximately $6,100,000, which requires monthly installments of approximately $101,600 (based on a seven-year amortization). The maximum that we can borrow under the revolving credit is based on a percentage of eligible receivables (as defined) at any one time reduced by outstanding standby letters of credit and borrowing reductions that our lender may impose from time to time.
Under the Revised Loan Agreement, we have the option of paying an annual rate of interest due on the revolving credit at prime plus 2% or London Inter Bank Offer Rate (“LIBOR”) plus 3% and the term loan at prime plus 2.5% or LIBOR plus 3.5%.
Pursuant to the Revised Loan Agreement, the Company may terminate the Revised Loan Agreement, upon 90 days’ prior written notice upon payment in full of its obligations under the Revised Loan Agreement. The Company agreed to pay PNC 1.0% of the total financing in the event the Company had paid off its obligations on or before March 23, 2017, .50% of the total financing if the Company pays off its obligations after March 23, 2017 but prior to or on March 23, 2018, and .25% of the total financing if the Company pays off its obligations after March 23, 2018 but prior to or on March 23, 2019. No early termination fee shall apply if the Company pays off its obligations after March 23, 2019.
At December 31, 2017, the borrowing availability under our revolving credit was approximately $3,687,000, based on our eligible receivables and includes an indefinite reduction of borrowing availability of $2,000,000 that the Company’s lender has imposed. The $2,000,000 in borrowing availability reduction included a $750,000 additional reduction imposed by the Company’s lender upon the receipt by the Company in May 2017 of $5,941,000 in finite risk funds in connection with the cancellation the closure policy for the Company’s PFNWR subsidiary (see “Note 13 – Commitments and Contingencies – Insurance” for further discussion of the closure policy). Our borrowing availability under our revolving credit was also reduced by outstanding standby letters of credit totaling approximately $2,675,000.
In connection with one of the amendments that the Company entered into with PNC during 2016 extending the maturity date of the credit facility, the Company recorded approximately $68,000 in loss on extinguishment of debt in accordance with ASC 470-50, “Debt – Modifications and Extinguishments,” which was included in interest expense in the accompanying Consolidated Statements of Operations for fiscal year 2016. Additionally, the Company paid its lenders closing fees totaling approximately $122,000 in connection with the amendments executed in 2016 which is being amortized over the remaining term of the loan as interest expense-financing fees.
The Company’s credit facility with PNC contains certain financial covenants, along with customary representations and warranties. A breach of any of these financial covenants, unless waived by PNC, could result in a default under our credit facility allowing our lender to immediately require the repayment of all outstanding debt under our credit facility and terminate all commitments to extend further credit. The Company met all of its quarterly financial covenant requirements in 2017 and expects to meet these financial covenant requirements in 2018 and into the first quarter of 2019.
The Company entered into a $3,000,000 loan dated August 2, 2013 with Robert Ferguson and William Lampson (each known as the “Lender”). As consideration for the Company receiving the loan, the Company issued to each Lender a Warrant to purchase up to 35,000 shares of the Company’s Common Stock at an exercise price of $2.23 per share. On August 2, 2016, each Lender exercised his Warrant for the purchase of 35,000 shares of our Common Stock, resulting in total proceeds paid to the Company of approximately $156,000. As further consideration for the loan, the Company had also issued to each Lender 45,000 shares of the Company’s Common Stock. The fair value of the Warrants and Common Stock and the related closing fees incurred from this transaction were recorded as debt discount, which has been fully amortized using the effective interest method over the term of the loan as interest expense – financing fees. The loan was repaid in full by the Company in August 2016.
The following table details the amount of the maturities of long-term debt maturing in future years at December 31, 2017 (net of debt issuance costs of $115,000).
The entire disclosure for long-term debt.
Reference 1: http://www.xbrl.org/2003/role/presentationRef