Note 7 - Notes Payable

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Debt Disclosure [Text Block]

7.          NOTES PAYABLE

Notes payable is summarized as follows:

	As of December 31,
(In thousands)	2022			2021
Syndicated debt (1)	$	114,725		$	105,000
Seller Financed notes payable - Front Line Power Construction, LLC acquisition (2)		69,168			86,730
Note payable - financing notes (3)		2,210			1,357
Seller Financed notes payable - Reach Construction Group, LLC acquisition (4)		3,480			3,480
Vehicle and equipment loans (5)		2,014			222
Non-recourse payable agreements (6)		10,400			8,269
Notes payable - Institutional investor (7)		60,780			33,922
Prepaid Advance agreement (8)		1,829			—
Conditional settlement note payable agreement (9)		2,250			3,000
Full Moon and CFS - loans to prior owners (10)		29			2
Subtotal		266,885			241,982
Unamortized prepaid financing fees and debt discounts		(21,649	)		(12,603	)
Total long-term debt		245,236			229,379
Less short term notes and current maturities of long term notes payable		(144,708	)		(72,774	)
Notes payable, less current portion	$	100,528		$	156,605

(1)	On November 17, 2021, the Company entered into a credit agreement and associated documents (the “Credit Agreement”) with Alter Domus (US), LLC (“Alter Domus”), as administrative agent and collateral agent and various lenders (the “Lenders”) in order to enable the Company to finance the acquisition of Front Line Power Construction, LLC. The Lenders made a Term Loan to Front Line in the initial principal amount of $105,000,000 for the purposes of financing the acquisition and the associated expenses. The term loan initially bears interest at the three-month Adjusted LIBOR Rate, plus the Applicable Margin, of which 2.5% may be paid in-kind. The Term Loan shall be repaid in consecutive quarterly installments of $262,500, and commenced on June 30, 2022. The Credit Agreement provides for mandatory prepayments on the occurrence of events such as sales of assets, Consolidated Excess Cash Flow and Excess Receipts during the term. The credit agreement provides for prepayment premiums (initially 5% on prepayments made in the first 30 months of the term, declining to 1% in the final year of the term). The Term Loan matures on November 17, 2026, subject to acceleration on Events of Default. The interest rate on the term notes at December 31, 2022 was 17.15% with an effective rate of 23.2%. In  November 2022, The Company resolved a dispute with the Syndicated lenders whereby the Syndicated lenders deemed the Company to be in default of its credit agreement due to the Company using proceeds from Front Line Power's operations to pay down $9.5 million of the Company's working capital adjustment with the sellers of Front Line Power. As part of a consent agreement with the lenders, the Company agreed to pay the lenders in a paid-in-kind amount of $10.5 million, which was added to the Syndicated debt balance and included $1.0 million of interest calculated from the date of the first intercompany advance that the Company made. The $10.5 million was added to the original issue discount and will be amortized to interest expense over the life of the loan. At December 31, 2022 and 2021, the Company was in compliance with all debt covenants.
(2)	On November 17, 2021, the Company entered into two unsecured promissory notes, one with Kurt A Johnson, Jr, for $34,256,000 and the second for $51,384,000 with Tidal Power Group LLC. These promissory notes bear interest at a rate of 6% per annum and as modified on April 29, 2022 and December 30, 2022, $20 million was paid on May 6, 2022, $15 million is due on or before April 1, 2023 and the remaining balance is due on May 31, 2023. On December 10, 2021, Kurt A Johnson Jr. received an additional unsecured promissory note in the principal sum of $1,090,000 also with a 6% per annum interest rate in exchange for a reduction of shares issued to Kurt of 400,000. This note was paid off as part of the  May 6, 2022 payment. Additionally in amendments to the note, the Company also agreed to reduce the restriction period under the Tidal Lockup letter from two years to one year and to the extent that if the value of the shares previously issued to Tidal Power were less than $4.00 per share upon expiration of the restriction period ending April 1, 2023, the Company has agreed to pay additional consideration to Tidal Power so that the value of Tidal Power's shares are equal to no less than $28,852,844. For the Johnson lockup letter, the Company agreed to pay additional consideration to Mr. Johnson upon expiration of the restriction period ending April 1, 2023, so that the value of his stock consideration is no less than $17,635,228, which is equal to $4.00 per common share. Any shortfall would be made up by issuing Mr. Johnson additional common shares. In 2022, the Company recorded a $26.2 million loss on extinguishment related to these loan modifications.
(3)	The Company executes notes payable with First Insurance Funding for the purposes of financing a portion of the Company's insurance coverage. The Company executed two notes payable in the third quarter of 2021 for $1.7 million and $54 thousand, respectively at interest rates of 3.00% and 4.35%, respectively. In the fourth quarter of 2021, the Company executed one additional notes payable for $0.5 million at an interest rate of 4.35%. These three notes payable were paid off in 2022. The Company executed a note payable in July 2022 for $3.3 million and one in November 2022 for $0.7 million both at 3.28% interest. These two notes are scheduled to mature in May 2023.
(4)	Includes two seller-financed notes payable, one for $5 million and the second for $1.5 million. In  August 2021, the $5 million note was amended from its original 18-month term; the Company paid $1 million in cash and exchanged 155,763 shares of common stock in exchange for an additional $1 million reduction in principal. The new loan had a face value of $2.0 million at a rate of 6% per annum and was recorded based on an estimated market interest rate of 10% per annum with an original issue discount of $48 thousand. The second seller financed note payable is due 36-months from the  April 1, 2020 acquisition date. Both notes had an original stated interest rate of 6% per annum. In 2022, the Company filed and served a Federal Civil Complaint asserting various causes-of-action against the holder of the note, including misrepresentations made during the course of negotiating this transaction. Based on that complaint, the evidence contained therein, and the conduct described, the Company reasonably believes that it owes no additional compensation as a result of this transaction.
(5)	Includes vehicle and equipment loans with interest rates ranging from 0.00% to 9.15%.
(6)	The Company entered into a non-recourse agreement, which was originated in November 2021 with a face amount of $9.5 million. The Company received net cash proceeds of $6.9 million. The Company recorded a liability of $9.5 million and a debt discount of $2.6 million. Under the terms of the agreement, for the first 12 weeks, the Company made weekly payments of $148 thousand and for the final 20 weeks, the Company was to make payments of $384 thousand. The agreement had no stated interest rate, but the discount and loan origination fees were being amortized based on an 89% interest rate.  In  April, 2022, the Company took out three non-recourse agreements for the sale of future revenues in the combined amount of $20.2 million. The Company received approximately $13.3 million after the deduction of an original issue discount and upfront fees. In  April 2022, the Company used part of the proceeds from these non-recourse agreements to pay off the non-recourse note of $4.2 million that was on the balance sheet as of  March 31, 2022 and recorded a loss on extinguishment of $0.4 million. The loans vary in length from 26 to 48 weeks. The Company paid off the smallest of the three notes in  June 2022 and recorded a loss on extinguishment of $0.1 million. Discounts on the remaining agreements were being amortized based on an effective interest rate of 88% and were scheduled to mature in the first quarter of 2023. In December 2022, The Company refinanced the remaining two agreements and recorded a loss on extinguishment of $0.5 million. As part of the refinancing, the Company took our three new agreements with a combined face amount of $11.4 million, which included combined original issue discounts of $3.6 million. Payments are $260 thousand per week until the agreements mature in October 2023, and the discounts are being amortized at a 94% effective interest rate. The combined carrying value of the agreements net of the approximately $3.0 million of original issue discounts at December 31, 2022 was $7.4 million.
(7)	On  March 23, 2021, the Company completed a note payable agreement with an institutional investor with a face amount of $10.7 million, a stated interest rate of 9.0%, an estimated effective interest rate of 19.6%, and an original issue discount of $1.0 million.  This note was paid off in  August 2022. On  May 11, 2021, the Company completed a note payable agreement with the institutional investor with a face amount of $10.7 million, a stated interest rate of 9.0% per annum, and estimated effective interest rate of 19.6% at inception, and a combined original issue discount and unamortized prepaid fees of $1.0 million. The net proceeds were to be used for working capital, future acquisitions and general corporate purposes. Beginning six (6) months from the purchase price date, investor has the right, in its sole and absolute discretion, to redeem all or any portion of the Note (such amount, the “Redemption Amount”) subject to the maximum monthly redemption amount of $1 million per calendar month, by providing Company with a “Redemption Notice." This note was refinanced in December 2022 as part of a forbearance and investment agreement with the investor - see description below. On  December 20, 2021, the Company completed a note payable agreement with the institutional investor with a face amount of $16.1 million, an original issue discount of $1.1 million, and a stated interest rate of 9.0%. The original issue discount has been amortized to interest expense starting with an estimated effective interest rate of 16.3%, which was later adjusted to 11.8% as of December 2022 due to changes in timing of payments. The note payable is payable within eighteen (18) months after the purchase date and the creditor  may request payment of up to $1.5 million per month beginning 6 months after initial issuance. The carrying value was $17.2 million at December 31, 2022.  On  June 9, 2022, the Company completed a note payable agreement with the institutional investor with a face amount of $10.7 million, a stated interest rate of 9.0%, an estimated effective interest rate of 16.4%, which was later adjusted to 14.4% due to changes in timing of payments and an original issue discount of $0.7 million. The note payable is payable within eighteen (18) months after the purchase date and the creditor  may request payment of up to $1.0 million per month beginning 6 months after initial issuance. This note also includes a debt reduction clause whereby the Company agreed to make payments on all of its outstanding agreements with the investor totaling at least $4 million for each of the months of  June and   July 2022. If the Company failed to make the required payments, the Lender’s sole and exclusive remedy was to require as liquidated damages, a ten percent (10%) increase to the outstanding balance for such month on this note. This note was refinanced in December 2022 as part of a forbearance and investment agreement with the investor - see description below.  On  August 2, 2022, the Company completed a note payable agreement with the institutional investor with a face amount of $8.6 million, a stated interest rate of 9.0%, an estimated effective interest rate of 16.4%, and an original issue discount of $0.6 million. The note payable was payable within eighteen (18) months after the purchase date and the creditor could request payment of up to $0.8 million per month beginning 6 months after initial issuance. This note also included a debt reduction clause whereby the Company had agreed to make payments on all of its outstanding agreements with the investor totaling at least $4 million for each of the months of  October,  November and  December 2022. If the Company failed to make the required payments, the Lender’s sole and exclusive remedy was to require as liquidated damages, a ten percent (10%) increase to the outstanding balance for such month on this note. This note was refinanced in December 2022 as part of a forbearance and investment agreement with the investor - see description below. On  September 29, 2022, the Company completed a note payable agreement with the institutional investor with a face amount of $5.4 million, a stated interest rate of 9.0%, an estimated effective interest rate of 16.5%, and an original issue discount of $0.4 million. The note payable was payable within eighteen (18) months after the purchase date and the creditor could request payment of up to $0.5 million per month beginning 6 months after initial issuance. This note also includes a debt reduction clause whereby the Company has agreed to make payments on all of its outstanding agreements with the investor totaling at least $4 million for each of the months of  February,  March and  April 2023. If the Company failed to make the required payments, the Lender’s sole and exclusive remedy was to require as liquidated damages, a ten percent (10%) increase to the outstanding balance for such month on this note. This note was refinanced in December 2022 as part of a forbearance and investment agreement with the investor - see description below.  On December 9, 2022, the Company entered into a Forbearance and Investment Agreement with an institutional investor and its successors and/or assigns, an institutional accredited investor pursuant to which the Company issued a Secured Promissory Note in the face amount of $42.1 million (the “New Note”). The New Note reflects the cancellation of $36.7 million of obligations under certain prior promissory notes issued to the institutional investor and $5,000,000 of additional funds made available to the Company.  As part of the cancellation of the former debt, the Company recorded a loss on extinguishment of $1.3 million. The New Note carries an original issue discount of $350,000 and reimbursement of Investor’s transactional expenses of $50,000, which are included in the initial principal balance of the New Note. The New Note bears interests at nine percent (9%) per annum and has a maturity date of 18 months after its issuance date of December 9, 2022. We may prepay all or a portion of the outstanding obligations under the New Note at a price equal to 115% of the amount we elect to prepay. Beginning six (6) months after December 9, 2022, the Investor has the right to redeem up to $2,500,000 per month of amounts due under the New Note, as more fully described in the New Note.     Subject to certain conditions, as described in the New Agreement, the Investor agreed to fund an additional $5.0 million to us on each of January 15, 2023 and February 15, 2023. As a result of the Company not meeting its debt reduction requirements in various months during 2022, the Company recorded a total of $8.0 million of liquidated damages in 2022.
(8)	On  August 18, 2022, the Company entered into a Prepaid Advance Agreement (the “PPA”) with YA II PN, Ltd., a Cayman Islands exempt limited partnership (“Yorkville”). In accordance with the terms of the PPA, the Company  may request advances of up to $5.0 million from Yorkville (or such greater amount that the parties  may mutually agree) (the “Pre-Paid Advance”), with a limitation on outstanding Pre-Paid Advances of $5.0 million and an aggregate limitation on the Pre-Paid Advances of $50.0 million. Each such Pre-Paid Advance will be offset upon the issuance of the Company’s common stock, par value $0.001 per share (“Common Stock”) to Yorkville at a price per share equal to the lower of: (a) a price per share equal to $0.01 above the market price on The Nasdaq Global Select Market (“Nasdaq”) as of the trading day immediately prior to the date of each closing (the “Fixed Price”), or (b) 96% of the lowest daily volume weighted average price of our Common Stock on Nasdaq during the five (5) trading days prior to each conversion date (the “Market Price” and the lower of the Fixed Price and the Market Price shall be referred to as the “Purchase Price”); however, in no event shall the Purchase Price be less than $0.20 per share. The Company elected the fair value option for this agreement with the debt being marked to market on a quarterly basis. The debt had an original issue discount of $150 thousand and with a carrying value of $1.8 million at December 31, 2022. The discount is amortized through interest expense over the life of the loan. The note had an original maturity date of  October 27, 2022, which was extended to  February 2023 in  October 2022. See note 3 for fair value information on this prepaid advance agreement.
(9)	In October 2020, the Company entered into a conditional settlement agreement with a subcontractor as amended to make payments of $3.5 million, of which $2.6 million is at zero interest, $0.9 million is at 5% interest and the total term of the agreement as amended to be two and a half years. The Company made a $0.5 million payment in the fourth quarter of 2021. The Company made a $150,000 payment in February 2022, a $350,000 payment on  March 31, 2022, and a $150,000 payment in December 2022. The Company is scheduled to make the final payments on the note in 2023 with the final payment of $1.5 million along with any accrued interest in April 2023.
(10)	Represents Full Moon Telecom, LLC and Coax Fiber Services opening balance sheet loan to prior Full Moon Telecom, LLC and Coax Fiber Services owners.

The following shows the elements of the Non-recourse payable agreements:

(In thousands)
	Face Value		Repayments			Loan Origination Fees			Discounts			Amortization of Discounts		Balance as of December 31, 2022
Non-recourse payable agreements	$	11,440	$	(1,040	)	$	(160	)	$	(3,440	)	$	555	$	7,355

The following table details the maturity of the notes payable for Orbital Infrastructure Group, Inc.:

(In thousands)
	As of December 31,
	2022
2023	$	176,383
2024		24,835
2025		21,318
2026		131,680
2027		138
Less interest portion of payments		(109,118	)
Total	$	245,236