Debt

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

DEBT

6. DEBT

In May 2021, in connection with the Company’s acquisition of our financing subsidiary, CAL, we were assigned a secured revolving credit facility (the “Revolving Loan”). The Revolving Loan has an aggregate borrowing base of up to $10,000,000 and bears interest, payable in cash in arrears, at a per annum rate equal to the greater of (x) Prime Rate plus 1.00% and (y) 4.75%. The Company incurred debt issuance costs of $100,000 related to the origination of the Revolving Loan, which were capitalized and are subsequently being amortized through maturity. The maturity date of the Revolving Loan is the earlier of (i) February 12, 2023 and (ii) the date on which the Revolving Loan is terminated pursuant to terms in the Revolving Loan Agreement.

On December 16, 2021, the Company amended the Revolving Loan Agreement (the “First Amendment”). The First Amendment increased the loan commitment from $10,000,000 to $45,000,000 and decreased the interest rate, from the greater of the (1) Prime Rate plus 1.00% and (2) 4.75% to the greater of (1) the Prime Rate plus the applicable margin and (2) 3.25%. The applicable margin depends on the ratio of debt to equity of CAL and increases from 0% at a ratio of 0.25 to 1 to 1.25% at a ratio of 1.5 to 1. The First Amendment also extended the maturity date from February 12, 2023 to the earlier of (i) December 16, 2023 and (ii) the date on which the Revolving Loan is terminated pursuant to the terms in the Revolving Loan agreement. The Company incurred debt issuance costs of $859,500 related to the First Amendment, which were capitalized and are subsequently being amortized through maturity.

On May 12, 2022, the Company amended the Revolving Loan Agreement a second time (the “Second Amendment”). The Second Amendment increased the loan commitment from $45,000,000 to $65,000,000. No other material terms of the Revolving Loan were modified as a result of the execution of the Second Amendment. The Company incurred debt issuance costs of $177,260 related to the Second Amendment, which were capitalized and are subsequently being amortized through maturity. As of June 30, 2022 and December 31, 2021, unamortized debt issuance costs related to the Revolving Loan and the First and Second Amendments of $804,188 and $868,022, respectively, are recorded in other receivables and assets, net on the consolidated balance sheets.

The Revolving Loan incurs unused fees at a rate of 0.25% per annum beginning July 1, 2022 pursuant to the Second Amendment. Additionally, for the period from January 1, 2022 to June 30, 2022, the Company borrowed $45.0 million against the Revolving Loan and incurred $276,562 in interest expense for the period then ended.

The Second Amendment provides for certain affirmative covenants, including requiring us to deliver financial information and any notices of default, and conducting business in the normal course. Additionally, the Company must comply with certain financial covenants including: (1) maximum capital expenditures of $150,000, (2) maintaining a debt service coverage ratio greater than 1.35 to 1, and (3) maintaining a leverage ratio less than 1.50 to 1. As of June 30, 2022, we were in compliance with all financial covenants with respect to the Revolving Loan.

The following table reflects a summary of interest expense incurred during the three and six months ended June 30, 2022. There was no interest expense incurred during the period March 30, 2021 (inception) to June 30, 2021.

	For three months ended June 30, 2022		For six months ended June 30, 2022
Interest expense	$	276,562	$	276,562
Unused Fee – Line of Credit		4,167		4,167
Amortization of debt issue costs		168,827		241,095
Total interest expense	$	449,556	$	521,824