NOTE 13. SENIOR DEBT

Credit Facility

On October 28, 2015, the Company entered into an $8,000 senior credit facility (“Facility”). The Facility had a two-year term and provided for cash interest payments in the amount of 12%, paid quarterly in arrears and a PIK provision providing a 4% per annum increase in the principal balance monthly. The Facility was secured by all assets of the Company. As a condition of the Facility, the Company issued 163,441 shares of its Series D Preferred Stock and 391,903 shares of its Series F Preferred Stock to the lender.

On April 5, 2016, the Company entered into an amendment agreement to the Facility to include equity raises and changes to certain financial and operational covenants. On September 30, 2016, the Company entered into a second amendment agreement, amending certain covenants, consolidating a series of short-term bridge loans into a $5,000 loan, with a maturity date of April 30, 2017 bearing interest at 12% and a PIK provision of 4%and issuing warrants to purchase 93,750 shares of the Company’s common stock at any time for five years at an initial exercise price of $20 per share.

On April 20, 2017, as part of the Benchmark acquisition, the Facility was amended to provide for an additional $11,480 of which approximately $10,100 was applied to the cash purchase price and extended the maturity date of the Facility to March 31, 2019. We issued 256,801 shares of our common stock to the senior lender with a fair value of $5,649 as a term of the amendment which were recorded as a debt discount.

Between April and December 2017, we borrowed an additional $1,600 under the terms of the Facility and incurred extension fees and penalties totaling $552 to extend the terms of the Facility to March 31, 2019, which was added to the principal amount of the Facility.

Between January and October 2018, the Company received total cash of $4,536 for advances under the terms of the Facility due March 31, 2019, converted $867 in accrued interest into principal and recognized a total of $562 in debt discounts and $30 in deferred finance costs.

On February 12, 2019, the Company entered into an Amendment No. 4 (“Amendment No. 4”) to the Facility to provide for an additional $12,632 in funding, the “Super Senior Term Loans”. As part of Amendment No. 4, the Company issued 1,698,580 shares of its common stock to the lenders valued at $2,922 and paid $1,301 in fees to the lender. The Amendment No. 4 was recognized as a debt extinguishment, with the carrying value of the Facility being derecognized and recorded at fair value by present valuing the expected future cash flows discounted at the Company’s estimated effective borrowing rate as of the amendment date, resulting in the recognition of a loss on extinguishment of $2,547 during the year ended December 31, 2019.

On July 2, 2019, the Company entered into Amendment No. 5 to the Facility (“Amendment No. 5”). Pursuant to Amendment No. 5, the Super Senior Term Loans were amended to: (i) extend the maturity to September 30, 2019; (ii) amend the interest rate to 12% per annum payable in cash; (iii) add a 4% extension fee to the principal amount; and (iv) provide for monthly amortization payments based on available cash flow. In addition, the existing term loans under the Credit Agreement, with an aggregate balance of approximately $37,900 (“Existing Term Loans”) were amended to: (i) extend the maturity to April 30, 2021; (ii) amend the interest rate to 12% per annum payable in cash; (iii) add a 4% extension fee to the principal amount totaling $2,114, which was added to the existing outstanding principal at the time of the amendment; and (iv) include monthly amortization payments based on available cash flow. In addition, accrued interest of $2,234 on the existing Term Loans was converted into principal and accrued interest on the Super Senior Term Loans totaling $592 was paid in cash. Amendment No. 5 was recognized as a troubled debt restructuring; however, no adjustment to the carrying amount of the existing Term Loans was required as total undiscounted future cash payments of the amended Term Loans exceeding the carrying amount of the existing Term Loans. Fees paid to the lenders, including common stock, warrants and the extension fees were capitalized and amortized over the remaining term of the Super Senior Term Loans through September 30, 2019.

As consideration for the Amended and Restated Credit Amendment, the Company issued to the Lenders 2,055,724 shares of its common stock valued at $2,126 and warrants to purchase 3,173,730 shares of the Company’s common stock valued at $2,705 with an initial exercise price of $3.00 per share. Pursuant to the terms of the Warrants, in the event the Super Senior Term Loans were not paid and satisfied by October 31, 2019, the exercise per share of half of the Warrants would be automatically reset to $0.01 and in the event the Super Senior Term Loans were not paid by December 31, 2019, the exercise per share of the other half of the Warrants would be automatically reset to $0.01. The Company also agreed that on December 31, 2019, the aggregate number of shares of the Company’s common stock issuable upon exercise of the Warrants would be automatically adjusted such that Lateral and its affiliates would beneficially own, in the aggregate, inclusive of all shares of common stock previously issued, 25% of the outstanding shares of the Company’s common stock on a fully-diluted basis, subject to certain exceptions.

As additional consideration for the Amended and Restated Credit Agreement, the Company and Lateral entered into a registration rights agreement (the “Registration Rights Agreement”) whereby the Company agreed to register the common stock issued to Lateral. The Company and Lateral also entered into an investor rights agreement (the “Investor Rights Agreement”) whereby the Company agreed that within sixty days of its execution, the Company would set the number of directors on its Board of Directors at seven and Lateral would be entitled to nominate one of such seven directors.

Foreclosure Proposal

During July 2019, the Company was notified that judgments had been entered against the Company in favor of six holders of the Company’s convertible notes in the state of New York. Certain of these convertible noteholders sought to levy against the bank account of the Company’s former subsidiary, Benchmark, and filed an order directing the Company to turn over all Company’s assets. The Company’s failure to satisfy, vacate or stay these judgments constituted an event of default under the Credit Agreement. As a result, on October 10, 2019, the Company consented to the Foreclosure Proposal, the Foreclosing Lenders, pursuant to which the Lenders took possession and ownership of the Subject Collateral (see below) by means of a strict foreclosure by the Foreclosing Lenders.

On October 10, 2019, pursuant to the Foreclosure Proposal, the Company transferred: (i) to Benchmark Holdings all of its (a) equity interests in Benchmark, the Company’s principal operating subsidiary, and (b) cash on hand in excess of levels specified in the Foreclosure Proposal; and, (ii) to Lateral Recovery, all of the Credit Parties’ interests in certain commercial tort litigation claims, fraud claims, and insurance claims as specified in the Foreclosure Proposal. Accordingly, a total of $56,156 in Lateral Existing Term Loan and Super Senior Term Loan principal and interest, as well as $6,416 in unamortized deferred finance costs, was removed from the Company books.

Additional terms of the Foreclosure Proposal provided for: (i) the forgiveness of a note payable and accrued interest due to the Company’s former interim CEO totaling $1,097; (ii) the forgiveness of $18,993 in principal balance on a Series B Promissory Note issued as part of the acquisition of Benchmark in 2017; (iii) the transfer to Benchmark Holdings of a merchant credit agreement with a principal balance of $1,143 and unamortized deferred finance costs of $418; and, (iv) the transfer to Benchmark Holdings of a promissory note with a balance of $3,686 and unamortized deferred finance costs of $1,374.

As a result of the above-mentioned Foreclosure Proposal actions, on October 10, 2019, the Company removed the above-mentioned debts and its investment in its wholly-owned subsidiary Benchmark of $44,261 and recognized a gain on foreclosure of $31,538 as part of discontinued operations.

As part of the Foreclosure Proposal, Benchmark Holdings agreed to provide working capital cash payments to the Company of $3,000 on October 21, 2019 and monthly payments of $300 per month. Benchmark Holdings made two monthly payments to the Company in 2019 totaling $600. The above cash payments, as well as $529 in additional freed up restricted cash due under the foreclosure agreement, were recorded as cash totaling $4,129 for the year ended December 31, 2019. During January 2020, the Company entered into a note payable with Benchmark Builders for $4,129 (see Note 22).

The following table summarizes the remaining balances on Senior debt as of:

During the years ended December 31, 2019 and 2018, the Company recognized $6,937 and $4,540 in original issuance discounts and deferred finance costs additions on related senior debt issuances and recognized $5,753 and $5,835 in amortization expense on the straight-line method over the term of the Facility, respectively, which approximates the effective interest method. The unamortized original issuance discount and deferred finance costs balance was $0 and $2,118 as of December 31, 2019 and 2018, respectively.