Notes Payable and Financing Leases
|12 Months Ended|
Dec. 31, 2019
|Debt Disclosure [Abstract]|
|Notes Payable and Financing Leases||
NOTE 12: NOTES PAYABLE AND FINANCING LEASES
Benchmark Builders Seller Notes
On April 20, 2017, the Company issued Series A convertible promissory notes (“Series A Notes”), in the aggregate principal amount of $12,500 to the Benchmark Sellers (“Benchmark Sellers”), which matured on April 20, 2019. These notes were convertible into conversion shares, at the holder’s option, upon an event of default at a conversion price per share of $11.88. Interest was computed at the rate of 5% percent per annum on the outstanding principal through July 2, 2019, when it was increased to 8% as discussed below. Interest expense was $900 and $695 for the year ended December 31, 2019 and 2018, respectively.
On April 20, 2017, the Company issued Series B Notes in the aggregate principal amount of $30,000 to the Benchmark Sellers, which mature on April 20, 2020. Interest was computed at the rate of 3% per annum on the outstanding principal through July 2, 2019, when it was increased to 8% as discussed below. Interest expense was $1,934 and $929 for the years ended December 31, 2019 and 2018, respectively.
On April 20, 2017, the Company issued Series C Notes in the aggregate principal amount of $7,500 to the Benchmark Sellers, which matured on October 20, 2018 and were repaid in full. Interest was computed at the rate of 3% per annum on the outstanding principal. Interest expense was $138 for the year ended December 31, 2018.
On February 12, 2019, in conjunction with the Amendment No. 4 of the Senior Credit Facility (see Note 13), the Company issued a promissory note to Fred Sacramone, a Benchmark Seller, for cash received in the principal amount of $1,000 (the “Sacramone Bridge Note”), which note originally matured on March 31, 2019, incurred interest at 12% per annum and was unsecured. The default interest rate on the note was 15%, which began accruing April 1, 2019. As inducement, Mr. Sacramone was issued 356,513 shares of Common Stock valued at $613, or $1.72 per share, which was deferred and amortized to expense through the maturity date of March 31, 2019.
On July 2, 2019, in conjunction with the Amendment No. 5 of the Senior Credit Facility (see Note 13), the Series A Notes and Series B Notes were amended to extend the maturity dates to July 30, 2021 and change the interest rate to 8% per annum to be paid in kind until the borrowings under the Amended and Restated Credit Agreement were repaid in full. Additionally, the Sacramone Bridge Note was amended to extend the maturity date to September 30, 2020, to capitalize the accrued interest as of July 2, 2019 and to provide for monthly cash interest payments.
As consideration for amending and restating the Series A and Series B Notes, the Company entered into subscription agreements for 1,951 shares of the Company’s Series A Preferred Stock and 296 shares of the Company’s Series A-1 Preferred Stock (collectively, the “Series A Preferred”), which the Benchmark Sellers immediately exchanged, pursuant to exchange agreements, for an aggregate of 100 shares of a new series of preferred stock, Series H Preferred Stock (See Note 19). The Series H Preferred Stock had no dividend rights, no liquidation preference, was not convertible and had perpetual voting rights equivalent to 51% of the total number of votes that could be cast by all outstanding shares of capital stock of the Company.
On October 10, 2019, as part of the Foreclosure Proposal (see Note 13) and pursuant to an Agreement Regarding Debt and Series H Preferred Stock (the “Debt and Series H Agreement”) between the Company and the Benchmark Sellers. The Benchmark Sellers released the Company from (i) all obligations represented by the Sacramone Bridge Note, which had an outstanding amount equal to approximately $1,097 and (ii) indebtedness represented by the Series B Notes in the amount of $18,983. The remaining indebtedness was to be automatically released and discharged as of December 31, 2019 unless (i) on or before November 10, 2019, the Company entered into a business combination transaction that enabled the Company’s common stock to remain listed on the NYSE American Exchange or any other U.S. national securities exchange and (ii) such business combination transaction was consummated on or before December 31, 2019 (such transaction, a “Qualified Business Combination”). Additionally, the Debt and Series H Agreement also required Benchmark Sellers to sell their shares of Series H Preferred Stock to the Company for a nominal price in the event an agreement for a Qualified Business Combination was entered into on or before November 10, 2019, and such Qualified Business Combination was consummated on or before December 31, 2019.
On November 8, 2019, the Company and Benchmark Sellers entered into an amendment to the Debt and Series H Agreement, pursuant to which the parties agreed to extend the date by which an agreement for a Qualified Business Combination must be entered into from November 10, 2019 to December 31, 2019 and to extend the date by which a Qualified Business Combination must close from December 31, 2019 to February 28, 2020.
On December 23, 2019, the Company entered into a separate agreement with Benchmark Sellers pursuant to which the Company repurchased all outstanding shares of its Series H Preferred Stock for $1.00 per share, as a result of which no shares of Series H Preferred Stock remain outstanding at December 31, 2019.
The following is a summary of the balance of Benchmark Seller Notes as of December 31, 2019 and 2018:
( See Note 22)
During the years ended December 31, 2019 and 2018, the Company recognized $2,415 and $1,730 in interest expense and $3,474 and 2,427 in amortization expense on debt discount and deferred finance costs on the Benchmark Seller Notes, respectively.
Promissory Notes and Other Notes Payable
Outstanding promissory and other notes payable consist of the following:
Fair Value of Debt
The Company used the market approach to value the secured promissory notes using the services of a third-party valuation specialists to determine the fair value of these debt instruments. Based on the assumptions used to value these liabilities at fair value, these debt instruments are categorized as Level 2 in the fair value hierarchy.
Debt Maturities Schedule
The required principal payments for all borrowings for each of the five years following the balance sheet date are as follows:
During the years ended December 31, 2019 and 2018, the Company recognized $1,315 and $704 in interest expense and $753 and $0 in amortization expense on debt discount and deferred finance costs on notes payable, respectively, and have included $571 and 84 in accrued expenses at December 31, 2019 and 2018, respectively.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef