Quarterly report pursuant to Section 13 or 15(d)

Debt

v3.10.0.1
Debt
9 Months Ended
Sep. 30, 2018
Debt Disclosure [Abstract]  
Debt

7 – Debt

 

The carrying values of our debt obligations, net of unamortized debt issuance costs of $347,005 and $0 as of September 30, 2018 and December 31, 2017, respectively, are as follows:

 

    September 30, 2018     December 31, 2017  
    Short Term     Long Term     Short Term     Long Term  
Demand Promissory Note   $ 8,189,013     $     $     $  
Vendor equipment financing     3,995,190       591,782       7,047,020       1,172,712  
Insurance financing     136,134                    
Total   $ 12,320,337     $ 591,782     $ 7,047,020     $ 1,172,712  

 

Negotiable Demand Promissory Note

 

On June 8, 2018, the Company executed a Negotiable Demand Promissory Note (the “Demand Note”) in the principal amount of up to $15.0 million in favor of Eco-Lender, LLC (the “Lender”), a Delaware limited liability company and an affiliate of one or more funds that are managed by Fir Tree Capital Management LP (together with its affiliated funds, “Fir Tree”) and/or its affiliates, which affiliated funds collectively hold a majority of the outstanding shares of capital stock of the Company. Pursuant to the Demand Note, on June 8, 2018, the Lender advanced approximately $5.5 million of gross proceeds and $5.1 million of net proceeds after transaction expenses to the Company (the “Initial Advance”) and on August 16, 2018 the Lender advanced an additional $3.0 million of gross proceeds and $2.97 million of net proceeds to the Company. The Company does not have any right to re-borrow any amounts that have been advanced and repaid under the Demand Note. In addition, the Lender is not obligated to make any additional advances under the Demand Note. As of September 30, 2018, the aggregate principal amount outstanding under the Demand Note was approximately $8.5 million.

 

Interest on the unpaid principal balance of the Note accrues at an annual rate of 10%, subject to a default interest rate of 14.00% or 24.00%, depending on the payment date following the occurrence of a default. All payments of principal, interest and other amounts under the Demand Note are payable immediately upon written demand by the Lender to the Company; provided, however, the Lender cannot make any demand for payment under the Demand Note until the earlier of (A) 45 days after the date of the Demand Note, (B) the occurrence of a material adverse change as defined in the Note and determined by the Lender in its sole and absolute discretion, (C) the occurrence of any default or event of default under any material agreement of the Company or any of its subsidiaries, and (D) the date upon which the Company or any of its subsidiaries ceases operating for any reason.

 

The Company may prepay, in whole or in part, at any time, the principal, interest and other amounts owing under the Demand Note subject to a prepayment premium of 4.00% of the aggregate amount of such prepayment (inclusive of interest and other amounts due and owing under the Demand Note), provided that the minimum amount of any such prepayment is equal to the lesser of $1 million and the then outstanding balance of the Demand Note.

 

All of the Company’s obligations under the Demand Note are guaranteed by EcoStim, Inc., a Texas corporation and a wholly owned subsidiary of the Company (“EcoStim”), and secured by a security interest (subject to permitted liens) in substantially all of the personal property of the Company and EcoStim, including 100% of the outstanding equity of the Company’s U.S. subsidiaries (including EcoStim) and 65% of the outstanding equity of the Company’s non-U.S. subsidiaries; provided, however, that the Lender had a subordinate lien on those assets of the Company and EcoStim that were subject to the lien of Porter Capital pursuant to the Receivables Agreement. See Note 10 – Subsequent Events.

 

Vendor Equipment Financing

 

During various dates beginning in late September through November 2017, the Company purchased equipment through a financing arrangement with an international equipment manufacturer at an interest rate of 8% for 12 months. At September 30, 2018, the Company had a loan balance of $2,850,523 and accrued interest of $18,743 with monthly payments of $570,113. Carrying value at September 30, 2018 for the equipment purchased through this financing arrangement was $4,600,000.

 

Beginning August 23, 2017 through September 28, 2017, the Company purchased trucks through a financing arrangement with an auto finance group at an interest rate of 4.99% annual interest for 36 months. At September 30, 2018, the Company had a loan balance of $676,408 and accrued interest of $0, with monthly payments of $29,168. Carrying value at September 30, 2018 for the equipment purchased through this financing arrangement was $806,594.

 

Beginning September 21, 2017 through September 29, 2017, the Company purchased tractors through a financing arrangement with an auto finance group at an interest rate of 8.59% for 24 months. At September 30, 2018, the Company had a loan balance of $563,427 and accrued interest of $0 with monthly payments of $45,625. Carrying value at September 30, 2018 for the equipment purchased through this financing arrangement was $943,567.

 

On December 20, 2017, the Company purchased tractors through a financing arrangement with an auto finance group at an interest rate of 8.9% for 36 months. At September 30, 2018, the Company had a loan balance of $286,050 and accrued interest of $0 with monthly payments of $11,729. Carrying value at September 30, 2018 for the equipment purchased through this financing arrangement was $389,532.

 

On February 21, 2018, the Company purchased a truck through a financing arrangement with an auto finance group at an interest rate of 7.49% for 48 months. At September 30, 2018, the Company had a loan balance of $39,764 and accrued interest of $0 with monthly payments of $1,079. Carrying value at September 30, 2018 for the equipment purchased through this financing arrangement was $34,200.

 

During various dates beginning April 12 through April 23, 2018, the Company purchased equipment through a financing arrangement with an equipment manufacturer at an implied interest rate of 8% for 8 months. At September 30, 2018, the Company had a loan balance of $170,800 and accrued interest of $0 with monthly payments of $57,328. Carrying value at September 30, 2018 for the equipment purchased through this financing arrangement was $35,000.

 

The total future minimum payments due on our vendor equipment financings as of September 30, 2018 are noted as follows:

 

2018   $ 3,258,082  
2019     896,736  
2020     416,743  
2021     12,209  
2022 and thereafter     3,202  
Total payments   $ 4,586,972