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v3.25.1

Notes Payable | 3 Months Ended
--- | ---
Mar. 31, 2025
Debt Disclosure [Abstract] |
Notes Payable | 8. Notes Payable Our debt obligations were as follows (in thousands):
|  | Interest |  | March 31, |  |  | December 31, |
|  | Rate (1) |  | 2025 |  |  | 2024 |
|  |  |  | (Unaudited) |  |  |  |
Monroe Term Loan (2) |  | 9.94% |  | $ | 51,498 |  |  | $ | 54,000 |
PNC ABL Facility (3) |  | 6.32% |  |  | 24,055 |  |  |  | 23,109 |
PNC Equipment Term Loan 1 (4) |  | 7.07% |  |  | 1,575 |  |  |  | 2,729 |
PNC Equipment Term Loan 2 (4) |  | 7.07% |  |  | 390 |  |  |  | — |
Green Remedies Promissory Note (5) |  | 3.00% |  |  | 430 |  |  |  | 564 |
Total notes payable |  |  |  |  | 77,948 |  |  |  | 80,402 |
Less: Current portion of long-term debt |  |  |  |  | (1,545 | ) |  |  | (1,651 | )
Less: Unamortized debt issuance costs |  |  |  |  | (2,070 | ) |  |  | (2,171 | )
Less: Unamortized OID |  |  |  |  | (57 | ) |  |  | (83 | )
Less: Unamortized OID warrant |  |  |  |  | (161 | ) |  |  | (232 | )
Notes payable, net |  |  |  | $ | 74,115 |  |  | $ | 76,265 |
(1) Interest rates as of March 31, 2025 |  |  |  |  |  |
(2) Bears interest based on SOFR plus Applicable Margin ranging from 4.5% to 5.5% |
(3) Bears interest based on Term SOFR plus a margin of 2.0% |  |  |  |  |  |
(4) Bears interest based on Term SOFR plus a margin of 2.75% |  |  |  |  |  |  |  |
(5) Stated interest rate of 3.0% |  |  |  |  |  |
We capitalize financing costs we incur related to implementing our debt arrangements. We record these debt issuance costs associated with our revolving credit facility and our term loan as a reduction of long-term debt, net and amortize them over the contractual life of the related debt arrangements. The table below summarizes changes in debt issuance costs (in thousands).
|  |  |  | March 31, |
|  |  |  | 2025 |
Debt issuance costs, net of accumulated amortization |  |  |  |  |
Balance at December 31, 2024 |  |  |  | $ | 2,171 |
Financing costs deferred |  |  |  |  | — |
Less: Amortization expense |  |  |  |  | (101 | )
Balance at March 31, 2025 (Unaudited) |  |  |  | $ | 2,070 |
Revolving Credit Facility On August 5, 2020, QRHC and certain of its subsidiaries entered into a Loan, Security and Guaranty Agreement (the “PNC Loan Agreement”), which was most recently amended on March 31, 2025, with BBVA USA (which was subsequently succeeded in interest by PNC Bank, National Association (“PNC”)), as a lender, and as administrative agent, collateral agent, and issuing bank, which provides for a credit facility (the “ABL Facility”) comprising an asset-based revolving credit facility in the maximum principal amount of $45.0 million with a sublimit for issuance of letters of credit of up to $3.5 million. The revolving credit facility bears interest, at the borrowers’ option, at either the Base Rate, plus a margin of 1.0% (no borrowings as of March 31, 2025), or the Term SOFR Rate for the interest period in effect plus a margin of 2.0% (6.32% as of March 31, 2025). The revolving credit facility matures on December 30, 2029. The PNC Loan Agreement also provides for an equipment term loan facility (“Equipment Term Loan 2”) in the maximum principal amount of $3.0 million. Equipment Term Loan 2 bears interest, at the borrower’s option, at either the Base Rate, plus a margin of 1.75%, or the Term SOFR Rate for the interest period in effect plus a margin of 2.75% (7.07% as of March 31, 2025). As of March 31, 2025, we have drawn $390 thousand on Equipment Term Loan 2 to fund 80% of the aggregate purchase price of certain compactors and related equipment. The Equipment Term Loan 2 matures on December 30, 2029. As of March 31, 2025, we had $1.6 million outstanding on a PNC senior secured equipment term loan facility (“Equipment Term Loan 1”). Equipment Term Loan 1 bears interest, at the borrower’s option, at either the Base Rate, plus a margin of 1.75%, or the Term SOFR Rate for the interest period in effect plus a margin of 2.75% (7.07% at March 31, 2025). Equipment Term Loan 1 will amortize in equal quarterly installments of $144 thousand with the remaining balance payable on December 30, 2029. $1.0 million principal was repaid on this loan with proceeds from the sale of assets as further discussed in Note 3, Sale of Assets. As of March 31, 2025, the ABL Facility borrowing base availability was $44.0 million, of which $24.1 million principal was outstanding. We repaid $1.5 million of the outstanding principal balance on the ABL Facility with proceeds from the sale of assets as further discussed in Note 3, Sale of Assets. Monroe Term Loan On October 19, 2020, QRHC and certain of its subsidiaries entered into a Credit Agreement (the “Credit Agreement”), dated as of October 19, 2020, which was most recently amended on March 31, 2025, with Monroe Capital Management Advisors, LLC (“Monroe Capital”), as administrative agent for the lenders thereto. Among other things, the Credit Agreement provides for the following: • A senior secured term loan facility, which had a principal amount of $51.5 million as of March 31, 2025 ($2.5 million of which was repaid with proceeds from the sale of assets as further discussed in Note 3, Sale of Assets). The senior secured term loan accrues interest at the SOFR Rate for SOFR Loans plus the Applicable Margin; provided, that if the provision of SOFR Loans becomes unlawful or unavailable, then interest will be payable at a rate per annum equal to the Base Rate from time to time in effect plus the Applicable Margin for Base Rate Loans. The maturity date of the term loan facility is June 28, 2030 (the “Maturity Date”). The senior secured term loan will amortize in aggregate annual amounts equal to 1.0% of the original principal amount of the senior secured term loan facility with the balance payable on the Maturity Date. • A delayed draw term loan facility in the maximum principal amount of $25.0 million. Loans under the delayed draw term loan facility may be requested at any time until December 30, 2026. Proceeds of the delayed draw term loan are permitted to be used for Permitted Acquisitions. At the same time as the borrowing of the initial $11.5 million under the Credit Agreement in October 2020, in a separate agreement, we issued Monroe Capital a warrant to purchase 500,000 shares of QRHC’s common stock exercisable immediately. For the delayed draw term loan facility, we issued a separate warrant to purchase 350,000 shares upon drawing on this facility on October 19, 2021. Both warrants have an exercise price of $1.50 per share and an expiration date of March 19, 2028. We estimated the value of the warrants issued using the Black Scholes option pricing model and recorded a debt discount (“OID”) of approximately $766 thousand in 2020 for the 500,000-share warrant and $536 thousand in 2021 for the 350,000-share warrant which are being amortized over the term of the Credit Agreement. We also executed a letter agreement that provides that the warrant holder will receive minimum net proceeds of $1.0 million less any net proceeds received from the sale of the warrant shares, which is conditional on the full exercise and sale of all the warrant shares at the same time. Debt Covenants Our PNC Loan Agreement and our Monroe Credit Agreement contain certain financial covenants, including a minimum fixed charge coverage ratio and a senior net leverage ratio. While as of March 31, 2025, we were not in compliance with the required fixed charge coverage ratio and the senior net leverage ratio primarily due to the limitations on add-backs related to the sale of the under-performing mall related business, we had been in contact for several months with the lenders to prevent formal breach of the financial covenants. If in violation of covenants, the lenders would be contractually entitled to require immediate repayment of the outstanding term loans and the outstanding ABL Facility, subject to not meeting certain cure provisions. However, on May 12, 2025 we entered into the Sixth Amendment to the PNC Loan Agreement with PNC and the Seventh Amendment to the Monroe Credit Agreement with Monroe Capital to, among other things, waive the covenant violations and revise the adjusted EBITDA requirements for future periods. We expect to be in compliance with financial covenants under our loan agreements in the second quarter of 2025 and thereafter. Green Remedies Promissory Note On October 19, 2020, we issued an unsecured subordinated promissory note to Green Remedies Waste and Recycling, Inc. in the aggregate principal amount of $2.7 million, payable commencing on January 1, 2021 in quarterly installments through October 1, 2025 and subject to an interest rate of 3.0% per annum. Interest Expense The amount of interest expense related to borrowings for the three months ended March 31, 2025 and 2024 was $1.8 million and $2.0 million, respectively. Interest expense related to amortization of debt issuance fees and debt discount costs as well as interest related to vendor supply chain financing programs totaled $0.4 million and $0.5 million, respectively, for the three months ended March 31, 2025 and 2024.

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