NOTE 6 – NOTES PAYABLE AND CONVERTIBLE NOTES

The Company had the following long-term debt:

	March 31, 2017			December 31, 2016
Goldman Sachs - Tranche A Term Loan - LIBOR Interest on loan date plus 8%, 9% at March 31, 2017	$	65,500,000		$	40,000,000
Goldman Sachs – Revolver- LIBOR Interest on loan date plus 8%, 9.338% at March 31, 2017		4,864,212			3,195,000
Goldman Sachs – Tranche B Term Loan - Interest 11% annually		8,600,000			-
Convertible Notes Payable		-			1,250,000
Mortgage note payable to a bank, secured by real estate and guarantee of Company, bearing interest at 4.6%, due in monthly installments of $9,934, maturing May 2020		1,295,427			-
Notes payable, secured by equipment, bearing interest at 0%, due in monthly installments of approximately $8,000 through October 2016, then approximately $4,600 monthly thereafter until March 2019		109,294			-
Equipment loans		203,447			282,791
Notes payable to seller of Meridian, subordinated debt		1,475,000			1,475,000
Less: debt issuance cost/fees		(2,166,789	)		(1,195,797	)
Less: debt discount		(1,719,365	)		(1,810,881	)
Total debt		78,161,226			43,196,113
Less: current portion		(250,752	)		(1,385,380	)
Long term debt less current portion	$	77,910,474		$	41,810,733

Goldman Sachs Credit Agreement

On February 15, 2017, the Company closed an Amended and Restated Credit and Guaranty Agreement (the “Credit Agreement”). The Credit Agreement amended and restated the Credit and Guaranty Agreement entered into as of December 22, 2015 “Prior Credit Agreement”).

Pursuant to the Credit Agreement, certain credit facilities to the Companies, in an aggregate amount not to exceed $89,100,000, consisting of $65,500,000 aggregate principal amount of Tranche A Term Loans (the “Tranche A Term Loans”), $8,600,000 aggregate principal amount of Tranche B Term Loans (the “Tranche B Term Loans”), $10,000,000 aggregate principal amount of MDTL Term Loans (the “MDTL Term Loans”), and up to $5,000,000 aggregate principal amount of Revolving Commitments (the “Revolving Commitments”). The principal amount of the Tranche A Term Loans in the Credit Agreement is $25,500,000 greater than the principal amount provided in the Prior Credit Agreement; the Tranche B Term Loans were not contemplated in the Prior Credit Agreement; and the principal amount of the MDTL Term Loans and Revolving Credit Agreements in the Credit Agreement are the same as provided in the Prior Credit Agreement. The proceeds of the Tranche A Term Loans made on the Closing Date were used to pay a portion of the purchase price for the acquisitions made in connection with the closing of the Prior Credit Agreement, to refinance existing indebtedness, to fund consolidated capital expenditures, and for other purposes permitted. The proceeds of the Tranche A Term Loans and Tranche B Term Loans made on the Restatement Date shall be applied by Companies to (i) partially fund the Restatement Date Acquisition, (ii) refinance existing indebtedness of the Companies, (iii) pay fees and expenses in connection with the transactions contemplated by the Credit Agreement, and (iv) for working capital and other general corporate purposes.

The proceeds of the Revolving Loans will be used for working capital and general corporate purposes. The proceeds of the MDTL Term Loans may be used for Permitted Acquisitions (as defined in the Credit Agreement). The Loans are evidenced, respectively, by that certain Tranche A Term Loan Note, Tranche B Term Loan Note, MDTL Note and Revolving Loan Note, all issued on February 15, 2017 (collectively, the “Notes”). Payment obligations under the Loans are subject to certain prepayment premiums, in addition to acceleration upon the occurrence of events of default under the Credit Agreement.

The amounts borrowed pursuant to the Loans are secured by a first position security interest in substantially all of the Company’s and subsidiaries assets.

In December of 2015 the Company incurred $1,446,515 of issuance cost related to obtaining the notes. In February 2017, the Company incurred an additional $1,057,950 of issuance costs related to the amendment and restatement of these notes. These costs are being amortized over the life of the notes using the effective interest rate method. At March 31, 2017 and December 31, 2016, the unamortized balance of the costs was $2,166,789 and $1,195,797, respectively.

As of March 31, 2017 the Company is in compliance with all of its financial covenants related to the Credit agreement.

In addition, in connection with the prior credit agreement, the Company issued warrants to Goldman, Sachs & Co. (“GS”) for the purchase of shares of the Company equal to 6.5% of the total common stock outstanding and common stock equivalents at a purchase price equal to $449,553, exercisable on or before December 22, 2023. The warrants grant the holder certain other rights, including registration rights, preemptive rights for certain capital raises, board observation rights and indemnification.

Due to the put feature contained in the agreement, the warrant was recorded as a derivative liability at December 31, 2016.

In January of 2017, the Company entered into an Amended and Restated Warrant Cancellation and Stock Issuance Agreement (the “Warrant Cancellation Agreement”). Pursuant to the Warrant Cancellation Agreement, upon the closing of a “Qualified Offering” as defined in the Warrant Cancellation Agreement, the Amended and Restated Warrant was cancelled and the Company issued to GS restricted shares of common stock in the amount equal to a 6.5% ownership interest in the Company calculated on a fully-diluted basis, which includes the shares of common stock issued pursuant to this offering, but excludes all warrants issued pursuant to such Qualified Offering and all shares underlying such warrants, pursuant to the terms and conditions of the Warrant Cancellation Agreement. A “Qualified Offering” is defined as an underwritten offering by the Company pursuant to which (1) the Company receives aggregate gross proceeds of at least $10,000,000 and (2) the Common Stock becomes listed on The Nasdaq Capital Market, or the New York Stock Exchange. As a result the Company issued GS 421,326 shares of common stock, with a fair value of $1,243,000 on January 30, 2017 for the warrant cancellation. The warrant liability fair value and carrying value at January 30, 2017 was $960,000 accordingly a loss on extinguishment of liability of $283,000 was recognized. Pursuant to the Warrant Cancellation Agreement, GS entered into a lock-up agreement, prohibiting the offer for sale, issue, sale, contract for sale, pledge or other disposition of any of the Company’s common stock or securities convertible into common stock for a period of 180 days after the date of the Qualified Offering, and no registration statement for any of our common stock owned by GS can be filed during such lock-up period.

The liability is revalued at each reporting period and changes in fair value are recognized currently in the consolidated statement of operations. Upon the initial recording of the derivative warrant at fair value the instrument was bifurcated and the Company recorded a debt discount of $2,160,000. This debt discount is being amortized as interest expense using the effective interest rate method over the life of the note, which is 5 years. At March 31, 2017 and December 31, 2016 the balance of the debt discount is $1,719,365 and $1,810,881, respectively.

The key inputs used in the March 31, 2016, December 31, 2016 and January 30, 2017 fair value calculations were as follows:

	January 30, 2017			December 31, 2016			March 31, 2016
Purchase Price	$	450,000		$	450,000		$	450,000
Time to expiration		12/22/2023			12/22/2023			12/23/2023
Risk-free interest rate		1.41	%		1.42	%		1.60	%
Estimated volatility		60	%		60	%		45	%
Dividend		0	%		0	%		0	%
Stock price	$	2.95		$	10.34		$	36.00
Expected forfeiture rate		0	%		0	%		0	%

The change in the market value for the period ending March 31, 2017 is as follows:

Fair value of warrants @ December 31, 2016	$	1,250,000

Unrealized gain on derivative liability		(290,000	)

Extinguishment of warrant liability		(960,000	)

Fair value of warrants @ March 31, 2017	$	-

The change in the market value for the period ending March 31, 2016 was as follows:

Fair value of warrants @ December 31, 2015	$	2,820,000

Unrealized gain on derivative liability		(180,000	)

Fair value of warrants @ March 31, 2016	$	2,640,000

Convertible Notes Payable

In 2015, as part of the purchase price consideration of the Christian Disposal acquisition, the Company issued a convertible promissory note to the seller in the amount of $1,250,000. The note bears interest at 8% and matures on December 31, 2020. The seller may convert all or any part of the outstanding and unpaid amount of this note into fully paid and non-assessable common stock in accordance with the agreement. The conversion price shall equal the volume weighted average prices of the Company’s common stock in the 10 trading days immediately prior to the date upon which the note is converted.

In February of 2017 the convertible promissory note issued to the seller of Christian Disposal was paid in full, including all accrued interest.

Notes Payable, related parties

At December 31, 2014 the Company had a short term, non-interest bearing note payable of $150,000 which was incurred in connection with the Membership Interest Purchase Agreement. The Company also had a loan from Here to Serve Holding Corp. due to expenses paid by Here to Serve on behalf of the Company prior to the recapitalization. This loan totaled $376,585 bringing total notes payable to $526,585. In 2015, the short term, non-interest bearing note was paid off, and at December 31, 2016, the Company’s loan from Here to Serve Holding Corp. was $359,891, and is included in current liabilities on the consolidated balance sheet. Also included in current liabilities on the consolidated balance sheet is a short-term loan received from an officer of the Company in December 2016 of $250,000. This loan was paid back, by the Company, in full, including interest of $20,000 on January 30, 2017. Also in February of 2017 the Company paid back $3,000 to Here to Serve Holding Corp, which reduced the loan to $356,891, and is included in current liabilities on the condensed consolidated balance sheet.

Total interest expense for the three months ended March 31, 2017 and March 31, 2016 was approximately $1,695,000 and $1,659,000, respectively. Amortization of debt discount was approximately $90,000 and $100,000, respectively. Amortization of capitalized loan fees was approximately $60,000 and $54,000, respectively. Interest expense on debt was approximately $1,545,000 and $1,500,000, respectively.