|6 Months Ended|
Jun. 30, 2017
|Debt Disclosure [Abstract]|
Note 6 – Debt
On November 30, 2016, the Company entered into a loan agreement (the “Loan Agreement”) with two of the Company’s largest stockholders, one of which was, at the time, the holder of approximately 20% of the Company’s outstanding shares of common stock, par value $0.001 per share (the “Common Stock”). A portion of the proceeds from the Loan Agreement was used to pay the remaining outstanding amount payable (approximately $1 million) by the Company under an equipment purchase agreement dated October 10, 2014, as amended, with Gordon Brothers Commercial & Industrial, LLC for the purchase of certain turbine powered pressure pumping equipment (“TPU”).
At December 31, 2016, the Company had a balance of $2,000,000 and accrued interest of $24,548. The indebtedness created under the Loan Agreement was repaid on March 6, 2017 with a portion of the proceeds from the Fir Tree Transaction (as described in Note 1).
On January 1, 2017, the Company financed its operations insurance premiums with US Premium Finance for a total of $211,681 at an interest rate of 5.87%. As of June 30, 2017, the Company had a balance of $387,029 and accrued interest of $2,354.
Long-Term Notes Payable
Convertible Note Facility
On May 28, 2014 (the “Closing Date”), the Company entered into a Convertible Note Facility Agreement (the “ACM Note Agreement”) with ACM Emerging Markets Master Fund I, L.P. and ACM Multi-Strategy Delaware Holding LLC (collectively, the “ACM Entities”). The proceeds from the ACM Note Agreement were used primarily for capital expenditures, certain working capital needs and approved operating budget expenses.
The ACM Note Agreement allowed the Company to issue ACM Entities a multiple draw secured promissory note with maximum aggregate principal amount of $22,000,000, convertible into Common Stock at a price of $6.00 per share at the option of ACM Entities (the “Existing ACM Note”). The outstanding debt under the facility was convertible immediately and accrued interest at 14% per annum with interest payments due annually in arrears.
As of December 31, 2016, the Company had drawn down the full $22,000,000 available under the ACM Note Agreement, which was primarily used for capital expenditures, certain working capital needs and approved operating budget expenses.
On March 6, 2017, the Company closed the Fir Tree Transaction, which was part of a comprehensive recapitalization designed to create a path to a potential conversion to equity of substantially all the Company’s debt, subject to stockholder approval and satisfaction of certain other conditions. In connection with the Fir Tree Transaction, the Company entered into the Amended and Restated Convertible Note Facility Agreement (“A&R Note Agreement” and, together with the Fir Tree Transaction, the “Fir Tree Recapitalization”) with the Fir Tree Affiliate, which became effective on March 6, 2017 and replaced the ACM Note Agreement. Pursuant to the terms of the A&R Note Agreement, the Company issued to the Fir Tree Affiliate a secured promissory note (the “Amended and Restated Convertible Note”) in a principal amount of $22 million, which replaced the Existing ACM Note, and a secured promissory note (the “New Convertible Note,” and together with the Amended and Restated Convertible Note, the “Notes”) in a principal amount of approximately $19.4 million, representing an additional $17 million aggregate principal amount of convertible notes issued by the Company to the Fir Tree Affiliate on March 6, 2017 and approximately $2.4 million principal amount of convertible notes in payment of accrued and unpaid interest on the Existing ACM Note acquired by the Fir Tree Affiliate from the ACM Entities. The unpaid principal amount of the Notes bears an interest rate of 20% per annum and matures on May 28, 2018.
After giving effect to the Fir Tree Recapitalization, the Company held approximately $41.4 million of outstanding convertible notes. The Fir Tree Affiliate agreed to convert all the outstanding convertible notes into Common Stock at a conversion price of $1.40 per share. This conversion was subject to receipt of stockholder approval at the June 15, 2017 Annual Meeting and satisfaction of certain other conditions. As shareholder approval for the conversion was granted at the June 15, 2017 Annual Meeting, and satisfaction of the certain other conditions obtained, all convertible debt had been converted into approximately 29.5 million shares of the Company’s Common Stock as of June 30, 2017. Costs associated with the conversion are approximately $1.1 million.
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://www.xbrl.org/2003/role/presentationRef