Notes Payable and Convertible Notes

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

NOTES PAYABLE AND CONVERTIBLE NOTES

NOTE 6 – NOTES PAYABLE AND CONVERTIBLE NOTES

The Company had the following long-term debt from continuing operations, excluding liabilities held for sale:

	December 31, 2017			June 30, 2018
Goldman Sachs - Tranche A Term Loan - LIBOR Interest on loan date plus 8%, 9.65% at June 30, 2018, respectively	$	7,083,257		$	7,100,000
Promissory note payable to a bank, unsecured, bearing interest at a variable rate, 4.75%, at June 30, 2018 with a floor of 4.75% due on demand		1,000,000			1,000,000
Promissory note payable to a bank, unsecured, bearing interest at 5.5%, due on demand		299,578			310,803
Promissory note payable to a bank, unsecured, bearing interest at a variable rate, 5%, at June 30, 2018 with a floor of 5.00% due in monthly installments of $12,300, maturing August 2022		622,259			565,165
Note payable, see description below		-			2,173,990
Note payable, related party, see description below		-			937,500
Note payable, see description below		-			937,500
Note payable, see description below		-			500,000
Note payable, related party, see description below		-			375,000
Note payable, see description below		-			187,500
Note payable, see description below		-			62,500
Notes payable to seller of Meridian, subordinated debt		1,475,000			1,475,000
Less: deferred loan costs		-			(1,259,668	)
Total debt		10,480,094			14,365,290
Less: current portion		(8,502,387	)		(7,094,677	)
Long term debt less current portion	$	1,977,707		$	7,270,613

GOLDMAN SACHS CREDIT AGREEMENT

On April 20, 2018 (the “Restatement Date”), Attis closed a Second Amended and Restated Credit and Guaranty Agreement (the “New Credit Agreement”) by and among Operations, Mobile Science Technologies, Inc. (“Mobile”), Attis Healthcare, LLC (“Healthcare”), Integrity Lab Solutions, LLC, (“Integrity”), Red X Medical LLC (“Red X”), Welness Benefits, LLC (“Welness”), LGMG, LLC (“LGMG”), Attis Innovations, LLC (“Attis Innovations”), Advanced Lignin Biocomposites LLC (“Advanced Lignin”), Attis Envicare Medical Waste, LLC (“Envicare”), Attis Genetics, LLC (“Genetics”), Attis Federal Labs, LLC (“Federal Labs”) and Attis Commercial Labs, LLC (“Commercial Labs” and together with Mobile, Healthcare, Integrity, Red X, Welness, LGMG, Attis Innovations, and Advanced Lignin, Envicare, Genetics and Federal Labs, the “New Credit Companies”), the Company and certain subsidiaries of the Company, as guarantors, the lenders party thereto from time to time and Goldman Sachs Specialty Lending Group, L.P., as Administrative Agent, Collateral Agent, and Lead Arranger. The Credit Agreement amended and restated the Amended and Restated Credit and Guaranty Agreement entered into as of February 15, 2017 by and among Attis, certain of the Acquired Entities, and certain current or former subsidiaries of the Company, as Guarantors and co-borrowers, the Lenders party thereto from time to time and Goldman Sachs Specialty Lending Group, L.P., as Administrative Agent, Collateral Agent, and Lead Arranger (as amended prior to the Restatement Date, the “Prior Credit Agreement”).

Pursuant to the New Credit Agreement, the Lenders thereunder have agreed to waive any mandatory prepayments under the Prior Credit Agreement in connection to the Transaction and restructure the remaining indebtedness and accrued interest under the Prior Credit Agreement as a term loan payable by the New Credit Companies, in an aggregate amount of approximately $8.7 million (the “Loan”), including interest accrued but unpaid for the interest periods ending on January 1, 2018 through June 30, 2018 in an aggregate amount of approximately $1.6 million. Subsequent to June 30, 2018, interest payments have not been made creating a default of the new credit agreement.

The Loan matures on December 22, 2020, principal amounts of the Term Loans shall be repaid in consecutive quarterly installments of $350,000 on the last day of each fiscal quarter commencing on June 30, 2018, unless such Loan becomes due and payable earlier by acceleration or otherwise. So long as no default or event of default has occurred that is then continuing, the New Credit Companies have the option to convert any part of the Loan equal to $500,000 and integral multiples of $100,000 in excess thereof into a “Base Rate Loan” or a “LIBOR Rate Loan.” Base Rate Loans bear interest at the greatest of (i) the rate of interest quoted in The Wall Street Journal, Money Rates Section as the Prime Rate in effect on such date, (ii) the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers in effect on such day, plus one-half of 1%, (iii) the sum of (1) the Adjusted LIBOR Rate (as defined below) for a period of one month and (2) 1.00%, in each instance, as of such day, and (iv) 4.25%, plus 7.00%. LIBOR Rate Loans bear interest at the greater of (i) the rate per annum obtained by dividing (a)(1) the rate per annum equal to the rate determined by the Administrative Agent to be the London interbank offered rate administered by the ICE Benchmark Administration for deposits with a term equivalent to such period in U.S. dollars displayed on the ICE LIBOR USD page of the Reuters screen (the “Eurodollar Screen Rate”) or (2) in the event the Eurodollar Screen Rate is not available, the rate per annum equal to the offered rate that is set forth on or in such other available quotation page or service as is acceptable to the Administrative Agent in its sole discretion and the provide an average ICE Benchmark Administration Limited Interest Settlement Rate or another London interbank offered rate administered by any other person that takes over the administration of such rate for deposits with a term equivalent to such period in U.S. dollars, or (3) in the event the rates reference in preceding clauses (1) and (2) are not available or if such information, in the reasonable judgment of the Administrative Agent shall cease to accurately reflect the rate offered by leading banks in the London interbank market as reported by any publicly available source of similar market data selected by the Administrative Agent, the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate (collectively, the “Adjusted LIBOR Rate”) plus 8.00%.

The amounts outstanding pursuant to the Loan are secured by a first position security interest in substantially all of the Company’s assets and the New Credit Companies’ assets in favor of the Agent, in accordance with that certain Amended and Restated Pledge and Security Agreement dated as of April 20, 2018 (the “New Pledge and Security Agreement”).

The Credit Agreement and the New Pledge and Security Agreement contain customary representations and warranties as well as customary affirmative and negative covenants. Negative covenants include, among others, limitations on incurrence of liens and secured indebtedness, and limitations on incurrence of any indebtedness by the Company’s subsidiaries. The Credit Agreement also contains customary events of default. Upon the occurrence and during the continuance of an event of default, the Lender may declare the outstanding loans and all other obligations under the Credit Agreement immediately due and payable. The Credit Agreement also contains financial covenants for adjusted EBITDA and minimum consolidated liquidity, effective September 30, 2018.

SUBORDINATED DEBT

In connection with the acquisition with Meridian Waste Services, LLC on May 15, 2014, notes payable to the sellers of Attis issued five-year term subordinated debt loans paying interest at 8.00%. At June 30, 2018 and December 31, 2017, the balance on these loans was $1,475,000 and $1,475,000, respectively. In 2015 the term of these notes was extended an additional 1 and 1/2 years.

OTHER DEBTS

NOTE PAYABLE

In February of 2018, the Company added two note payables from an individual with a principal amount of $2,500,000, to be repaid in weekly installments of approximately $64,000 for 12 months starting from the funding date. The total amount to be repaid is $3,325,000. The Company has the option to prepay the note at certain times. If the Company chooses this option, it will reduce the amount of interest cost associated with this note. The Company recorded original issue discount (“OID”) of approximately $890,000 and deferred loan costs of approximately $125,000. The balance of the OID and the deferred loan costs at June 30, 2018 was approximately $676,666. The note is guaranteed by an officer of the Company.

On May 9, 2018, the Company added a note payable from a related party with a principal amount of $937,500, with an OID of $187,500. The maturity date of this loan is November 9, 2018 and no payments are due until that date. If the note is not satisfied by the initial maturity date, the note will be extended for 90 days and the principal will be increased by $75,000. The Company recorded the OID and deferred loan costs of $60,000. The balance of the OID and the deferred loan costs at June 30, 2018 was $165,000. The note is guaranteed by an officer of the Company.

On May 15, 2018, the Company added a note payable from an individual with a principal amount of $937,500, with an original issuance discount of $187,500. The maturity date of this loan is November 15, 2018 and no payments are due until that date. If the note is not satisfied by the initial maturity date, the note will be extended for 90 days and the principal will be increased by $75,000. The Company recorded the OID and deferred loan costs of $60,000. The balance of the OID and the deferred loan costs at June 30, 2018 was $165,000. The note is guaranteed by an officer of the Company.

On May 23, 2018, the Company added a note payable from an individual with a principal amount of $187,500, with an original issuance discount of $37,500. The maturity date of this loan is November 23, 2018 and no payments are due until that date. If the note is not satisfied by the initial maturity date, the note will be extended for 90 days and the principal will be increased by $15,000. The Company recorded the OID and deferred loan costs of $60,000. The balance of the OID and the deferred loan costs at June 30, 2018 was $41,250. The note is guaranteed by an officer of the Company.

On May 30, 2018, the Company added a note payable from an individual with a principal amount of $62,500, with an original issuance discount of $12,500. The maturity date of this loan is November 30, 2018 and no payments are due until that date. If the note is not satisfied by the initial maturity date, the note will be extended for 90 days and the principal will be increased by $5,000. The Company recorded the OID and deferred loan costs of $60,000. The balance of the OID and the deferred loan costs at June 30, 2018 was $13,750. The note is guaranteed by an officer of the Company.

On June 12, 2018, the Company added a note payable from a related party with a principal amount of $375,000, with an original issuance discount of $75,000. The maturity date of this loan December 12, 2018 and no payments are due until that date. If the note is not satisfied by the initial maturity date, the note will be extended for 90 days and the principal will be increased by $5,000. The Company recorded the OID and deferred loan costs of $60,000. The balance of the OID and the deferred loan costs at June 30, 2018 was $82,500. The note is guaranteed by an officer of the Company.

On June 26, 2018, the Company added a note payable from an individual with a principal amount of $500,000, with an original issuance discount of $100,000. The maturity date of this loan July 27, 2018 and no payments are due until that date. If the note is not satisfied by the initial maturity date, the note will be extended for 30 days and the principal will be increased by $40,000. The Company recorded the OID and deferred loan costs of $60,000. The balance of the OID and the deferred loan costs at June 30, 2018 was $132,500. The note is guaranteed by an officer of the Company.