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Long-Term Debt

12 Months Ended

Mar. 31, 2020

5. Long-Term Debt

Long-term debt on the Consolidated Balance Sheets consisted of the following as of March 31:

	2020			2019
Credit facility	$	795,000		$	-
Unamortized debt issuance costs		(37,577	)		-
Total long-term debt	$	757,423		$	-

On December 28, 2018, the Company entered into a loan agreement (the “Agreement”) with West Texas National Bank (“WTNB”), which provided for a credit facility of $1,000,000 with a maturity date of December 28, 2021. The Agreement has no monthly commitment reduction and a borrowing base to be evaluated annually.

On February 28, 2020, the Agreement was amended to increase the credit facility to $2,500,000, extend the maturity date to March 28, 2023 and increase the borrowing base to $1,500,000.

Under the Agreement, interest on the facility accrues at a rate equal to the prime rate as quoted in the Wall Street Journal plus one-half of one percent (.5%) floating daily. Interest on the outstanding amount under the Agreement is payable monthly. In addition, the Company will pay an unused commitment fee in an amount equal to one-half of one percent (.5%) times the daily average of the unadvanced amount of the commitment. The unused commitment fee is payable quarterly in arrears on the last day of each calendar quarter. As of March 31, 2020, there was $705,000 available on the facility.

No principal payments are anticipated to be required through the maturity date of the credit facility, March 28, 2023. Upon closing with WTNB on the original Agreement, the Company paid a .5% loan origination fee in the amount of $5,000 plus legal and recording expenses totaling $34,532, which were deferred over the life of the credit facility. Upon closing the amendment to the Agreement, the Company paid a .1% loan origination fee of $2,500 and an extension fee of $3,125 plus legal and recording expenses totaling $12,266, which were also deferred over the life of the credit facility.

Amounts borrowed under the Agreement are collateralized by the common stock of the Company’s wholly owned subsidiaries and substantially all of the Company’s oil and gas properties.

The Agreement contains customary covenants for credit facilities of this type including limitations on change in control, disposition of assets, mergers and reorganizations. The Company is also obligated to meet certain financial covenants under the Agreement and requires senior debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratios (Senior Debt/EBITDA) less than or equal to 4.00 to 1.00 measured with respect to the four trailing fiscal quarters and minimum interest coverage ratios (EBITDA/Interest Expense) of 2.00 to 1.00 for each quarter. The Company is in compliance with all covenants as of March 31, 2020 and believes it will remain in compliance for the next fiscal year.

In addition, the Agreement prohibits the Company from paying cash dividends on its common stock without prior written permission of WTNB. The Agreement does not permit the Company to enter into hedge agreements covering crude oil and natural gas prices without prior WTNB approval.

The balance outstanding on the line of credit as of March 31, 2020 was $795,000. The following table is a summary of activity on the WTNB line of credit for the year ended March 31, 2020:

	Principal
Balance at April 1, 2019:	$	-
Borrowings		1,285,000
Repayments		490,000
Balance at March 31, 2020:	$	795,000

Subsequently, on April 6, 2020, the Company borrowed $25,000 on the line of credit; on April 17, 2020, made a payment of $100,000; on May 11, 2020, borrowed $160,000 on the line of credit; and on June 10, 2020, borrowed $50,000 on the line of credit, leaving a balance of $930,000 as of June 26, 2020.

The Company also maintained a Certificate of Deposit Account at WTNB to collateralize one outstanding letter of credit for $25,000 in lieu of a plugging bond with the Texas Railroad Commission covering the properties the Company operates. This operated property was sold effective December 1, 2019 and the letter of credit was cancelled. Subsequently, on April 10, 2020, the Certificate of Deposit Account was terminated and the funds deposited into the Company’s operating account.