Annual report pursuant to Section 13 and 15(d)

14. Notes Payable-Non-Related Parties

v3.3.1.900
14. Notes Payable-Non-Related Parties
12 Months Ended
Dec. 31, 2015
Pro forma financial information  
14. Notes Payable-Non-Related Parties

At December 31, 2015 and 2014, notes payable – non-related parties are comprised of the following: 

 

    December 31,     December 31,  
    2015     2014  
             
Subordinated Notes   $ 34,160,200     $ 46,166,667  
Discount on Subordinated Notes     (1,697,091 )     (3,677,733 )
Total notes payable - non-related parties     32,463,109       42,488,934  
Less: current portion     (685,780 )     (1,225,000 )
Long-term portion   $ 31,777,329     $ 41,263,934  

On August 28, 2015, simultaneously with the execution of the Credit Facility with Opus Bank (see Note 13), the Company executed the Third Amended and Restated Securities Purchase Agreement and Security Agreement (the “Third Amendment”) with Praesidian.  Under the Third Amendment, approximately $11.0 million of the notes held by Plexus were paid in full with borrowings under the Credit Facility with Opus Bank (see Note 13), and $9.0 million of the notes

 

held by Plexus were paid using the proceeds from the sale of Series F senior notes in the aggregate principal amount of $9.0 million, bearing interest at 10.8% annually and having a maturity date of February 28, 2021. Additionally, the maturity date of the all remaining notes was extended to February 28, 2021, and the continuing lenders agreed to subordinate their notes to borrowings extended under the Credit Facility with Opus Bank.

 

As a result of the retirement of the notes held by Plexus, the Company recorded a loss on extinguishment of debt of approximately $2.7 million, substantially consisting of unamortized discount. The Company pays interest monthly at a rate of 10.8%, and recognized interest expense of approximately $4.6 million during 2015.

 

On December 8, 2015, the Company executed the Fourth Amended SPA which amended the Third Amendment to (i) provide the consent of the continuing lenders to the acquisition of Fidelity (ii) joined Fidelity as a guarantor and credit party under the Fourth Amended SPA, and (iii) modifying or eliminating certain of the financial covenants contained in the Third Amendment, specifically , the requirement to maintain a minimum unencumbered cash bank balance of $1.0 million at all times effective as of December 31, 2015.

 

The following notes have been issued under the Fourth Amended SPA:

 

●   Series A and B Notes.   The Company sold $6.5 million aggregate principal amount of  Series A notes, bearing interest at the original rate of 10.0% annually, and $10.0 million aggregate principal amount of Series B notes bearing interest at the rate of 11.5% annually in October 2012, the  proceeds of which were used to finance the acquisition of NBS.
●   Series C and D Notes. The Company sold $0.5 million aggregate principal amount of Series C notes and $25.0 million aggregate principal amount of Series D notes in December 2013, to finance the acquisition of certain assets of Broadvox.
●   Series E Notes. The Company sold $5.0 million aggregate principal amount of Series E notes in October 2014 to fund its acquisition of PingTone.
●   Series F Notes. The Company sold $9.0 million aggregate principal amount of Series F notes in August 2015 to retire a portion of the approximately $20.0 million of notes held by Plexus.

 

Under the Amended Credit Facility and the Fourth Amended SPA the Company has to maintain the following financial covenants:

 

Financial Covenants*   Amended Credit Facility   Fourth Amended SPA
         
Borrower leverage ratio   4.75 : 1.00   4.75 : 1.00
Borrower fixed charge coverage ratio   1.20 : 1.00   1.20 : 1.00
Borrower capital expenditures   not greater than $4.5 million   not greater than $4.5 million
Borrower minimum adjusted EBITDA   $13 million   $13 million
Borrower maximum senior leverage ratio   3.00 : 1.00   N/A
         
* as defined in the agreements        

For the year ended December 31, 2015, the Company was in compliance with the above financial covenants.