(8) Long-Term Debt

Long-term debt to unrelated entities consisted of the following (in thousands):



	September 30,		December 31,
	2016		2015
Note payable to a financial institution, with interest only payment until maturity.	$	2,187	$	869
Less unamortized debt issuance cost		(15)		(10)
Note payable to a financial institution, net of unamortized debt issuance cost		2,172		859

Installment notes bearing interest at the rate of 4.16% to 4.6% per annum collateralized by vehicles with monthly payments including interest, insurance and maintenance of approximately $10		117		152
Total long-term debt		2,289		1,011
Less current maturities		(58)		(65)
Long-term debt, less current maturities	$	2,231	$	946

Unamortized debt issuance cost at December 31, 2015 was reclassified from an asset to a reduction of long-term debt. This reclassification was done to comply with ASU 2015-03 Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Cost.

On March 28, 2016, the Company’s senior credit facility with Prosperity Bank after Prosperity Bank’s most recent review of the Company’s currently owned producing properties was amended to decrease the Company’s borrowing base from $7.8 million to approximately $3.2 million, extend the term of the facility to January 30, 2018, and delete the Leverage Ratio covenant. For the quarter ended December 31, 2015, the Company was in default on compliance with the Leverage Ratio covenant. In addition, the amendment also added a Debt to Tangible Net Worth covenant, waived the default on the Interest Coverage ratio for the quarter ended December 31, 2015, waived the anticipated default for the quarter ended March 31, 2016, and waived compliance with the Interest Coverage ratio for all applicable periods through the maturity date. Although the Company was in default of the Leverage and Interest Coverage ratios for the quarter ended December 31, 2015, the Company was in compliance at March 28, 2016 as a result of the amendment and waivers. For the quarter ended June 30, 2016, the Company was in default on compliance with the Debt to Tangible Net Worth covenant. On August 10, 2016, the Company received a waiver of the covenant default for the quarter ended June 30, 2016 as well as a waiver for the anticipated default for the quarter ended September 30, 2016. On October 17, 2016, the Company filed a registration statement with the Securities and Exchange Commission on Form S-1 with respect to a proposed rights offering to existing shareholders. The Company anticipates that the net proceeds of the rights offering will be used initially to pay bank indebtedness. Based on this rights offering, it is anticipated that the Company will be in compliance with the Debt to Tangible Net Worth covenant for the quarter ended December 31, 2016 and will also result in the Company having additional borrowing capacity to fund daily operations. If the Company is not successful raising equity through the rights offering, it could have a material effect on the ability to fund operations and the Company may then need to seek other sources of financing. Although the Company was in default of the Debt to Tangible Net Worth covenant for the quarter ended June 30, 2016, the Company was in compliance as of August 10, 2016 as a result of the waiver. As a result of the waivers received on default of both the Interest Coverage ratio and the Debt to Tangible Net Worth ratio, the Company was in compliance with both of these covenants at September 30, 2016. The borrowing base remains subject to the existing periodic redetermination provisions in the credit facility. The interest rate remains prime plus 0.50% per annum. This rate was 4.00% at the date of the amendment. The maximum line of credit of the Company under the Prosperity Bank credit facility remains $40 million. The next borrowing base review will take place in November 2016.