Note

– Debt

East West Bank Revolving Credit Facility

August 10, 2017,

we entered into the

2017

Credit Agreement, as amended,

with East West Bank which provides for a

three

-year

$37

million senior secured revolving credit facility (the "Credit Facility"). The

2017

Credit Agreement allows us to borrow up to

85%

of our eligible receivables and up to

85%

of the appraised value of our eligible equipment. Under the

2017

Credit Agreement, there are

required principal payments until maturity and we have the option to pay variable interest rate based on (i)

-month LIBOR plus a margin of

3.5%

or (ii) interest at the Wall Street Journal prime rate plus a margin of

1.75%.

Interest is calculated monthly and paid in arrears. Additionally, the Credit Facility is subject to an unused credit line fee of

0.5%

per annum multiplied by the amount by which total availability exceeds the average monthly balance of the Credit Facility, payable monthly in arrears. The Credit Facility is collateralized by substantially all of our assets and subject to financial covenants. The outstanding principal loan balance matures on

August 10, 2020.

Under the terms of the

2017

Credit Agreement, collateral proceeds are collected in bank-controlled lockbox accounts and credited to the Credit Facility within

one

business day.

As of

December 31, 2019,

we had an outstanding principal loan balance under the

Credit Facility of approximately $

34.0

million with a weighted average interest rates of

5.47

% per year for

$28.0

million of outstanding LIBOR Rate borrowings and

6.75

% per year for the approximately $

6.0

million of outstanding Prime Rate borrowings.

As of

December 31

2019,

our available cash was approximately

$663,000

and we did

not

have any availability under the

2017

Credit Agreement, as discussed below. As of June

30,

2019,

we had borrowed approximately

$753,000

in excess of the maximum amount available under the Credit Facility and, under the Credit Facility we were required to immediately repay the borrowing excess. While we paid all of the borrowing excess on July

2019,

the non-payment on July

2019

constituted a payment default under the Credit Agreement. On August

12,

2019,

we entered into the Third Amendment to Loan and Security Agreement and Waiver with East West Bank that (i) waived the foregoing default; (ii) provided for slightly higher interest rates on borrowings under the Credit Facility; and (iii) reduced our allowable capital expenditures in any fiscal year from

$3.0

million to

$1.5

million.

Under the

2017

Credit Agreement, we are subject to the following financial covenants:

(

)

Maintenance of a Fixed Charge Coverage Ratio (“FCCR”) of

not

less than

1.10

1.00

at the end of each month, with a build up beginning on

January 1, 2017,

through

December 31, 2017,

upon which the ratio is measured on a trailing

twelve

-month basis;

(

)

In periods when the trailing

twelve

-month FCCR is less than

1.20

1.00,

we are required to maintain minimum liquidity of

$1,500,000

(including excess availability under the Credit Facility and balance sheet cash).

As of

December 31, 2019,

we were in violation of

two

financial covenants contained in the

2017

Credit Agreement and we have failed to pay an overadvance that has continued through

March

2020.

January 6, 2020,

the Company received a notice (the “Default Notice”) from East West Bank regarding events of default of the Company with respect to the Company's existing Loan and Security Agreement (the

“2017

Credit Agreement”) by and between the Company and East West Bank, a California banking corporation (“East West Bank”). As a result of the events of default, East West Bank

may

accelerate the

$34.0

million outstanding loan balance under the

2017

Credit Agreement to be immediately due and payable. As of the date of this report, East West Bank has

not

accelerated the outstanding loan balance amount but it

may

do so in the future.

The Default Notice indicates that the Company is in default under the

2017

Credit Agreement as a result of its:

●

failure to immediately repay a loan overadvance that occurred on

October 10, 2019

that has continued through

January 6, 2020;

●

failure to maintain a minimum liquidity of

not

less than

$1,500,000

for the months ended

October 31, 2019

and

November 30, 2019;

and

●

failure to maintain a minimum fixed charge coverage ratio of

not

less than

1:10

1:00

for the months ended

October 31, 2019

and

November 30, 2019.

The Default Notice indicated that although East West Bank was

not

as of

January 6, 2020,

exercising its rights and remedies available as a result of the events of default, it specifically did

not

waive its rights and remedies resulting from the the events of default and it reserves all other available rights and remedies under the Credit Agreement, certain other related documents and applicable law.

We are also currently negotiating and working with East West Bank in an effort to obtain a waiver for our breaches of the

2017

Credit Agreement. Our ability to continue as a going concern is dependent on our renegotiation of the

2017

Credit Agreement and our ability to further reduce costs and raise further capital, of which there can be

assurance. Further, there can be

assurance that we will successfully obtain a waiver from the East West Bank or maintain or increase our cash flows from operations. Given our current financial situation we

may

be required to accept terms on the transactions that we are seeking that are onerous to us.

Amended and Restated Subordinated Loan Agreement

November 11, 2019

Enservco and Cross River Partners, L.P. entered into an Amended and Restated Subordinated Loan Agreement (the “Amended Subordinated Loan”). The Amended Subordinated Loan increases the principal of the subordinated debt by

$500,000

from

$2.0

million to

$2.5

million and provides Cross River Partners with a

five

-year warrant to purchase

625,000

shares of the Company’s common stock at an exercise price of

$0.20

per share which are fully vested upon issuance.

Debt Issuance Costs

We have capitalized certain debt issuance costs incurred in connection with the Credit Facility discussed above and these costs are being amortized to interest expense over the term of the facility on a straight-line basis. The long-term portion of debt issuance costs of approximately

$82,000

and

$208,000

is included in Other Assets in the accompanying condensed consolidated balance sheets for

December 31, 2019

and

2018,

respectively. D

uring the years ended

December 31, 2019

and

2018,

the Company amortized approximately $

140,00

and $

105,000

, respectively, of these costs to Interest Expense.

Notes Payable

Long-term debt (excluding borrowings under our Credit Facility described above) consists of the following (in thousands):

	December 31,			December 31,
	2019			2018

Seller Subordinated Note. Interest is at 8%. Matured March 31, 2019	$	-		$	4,000	(1)

Subordinated Promissory Note with related party, Interest is at 10%, and is paid quarterly. Matures June 28, 2022		1,000			1,000

Subordinated Promissory Note with related party, Interest is at 10%, and is paid quarterly. Matures June 28, 2022		1,000			1,000

Subordinated Promissory Note with related party. Interest is at 10%, and is paid quarterly. Matures June 28, 2022		500			-

Real Estate Loan for a facility in North Dakota, interest at 5.75%, and monthly principal and interest payment of $5,255 until October 3, 2028. Collateralized by land and property purchased with the loan.		218			258

Vehicle loans for three pickups, interest at 8.59%, monthly principal and interest payments of $3,966, matures in August 2021		74			113

Note payable to the seller of Heat Waves. The note was garnished by the Internal Revenue Service (“ IRS”) in 2009 and is due on demand; paid in annual installments of $36,000 per agreement with the IRS.		53			89
Total		2,845			6,460
Less debt discount		(119	)		(167	)
Less current portion		(147	)		(4,149	)
Long-term debt, net of debt discount and current portion	$	2,579		$	2,144

(

) In accordance with the Settlement Agreement discussed in Notes

the agreed upon due date was extended to

April 10, 2019,

subject to a

nine

-day grace period. On

April 19, 2019,

Enservco made the final payment to settle the principal balance and accrued interest on the Seller Subordinated Note and has

further obligations to the Seller.

Aggregate maturities of debt, (excluding the

2017

Credit Agreement described in above), are as

follows (in thousands):

Years Ended December 31,
2020	$	148
2021		85
2022		2,558
2023		54
2024		-
Thereafter		-
Total	$	2,845