Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. Track Group, Inc. (1045942) 10-Q published on Feb 10, 2021 at 3:20 pm
Reporting Period: Dec 30, 2020
On October 21, 2020, the Company requested, in writing, an additional extension to the maturity date of the Amended Facility Agreement. On November 25, 2020, the Noteholders held a meeting to address the Company’s request and approved a new maturity date of July 1, 2024. On December 21, 2020, Conrent and the Company signed an amendment to the Amended Facility Agreement which extends the maturity date of the Amended Facility Agreement to July 1, 2024 (“Amended Facility”), capitalizes the accrued and unpaid interest increasing the outstanding principal amount and reduces the interest rate of the Amended Facility from 8% to 4%. Conrent is currently working on documentation and the updated registration process to implement these changes. We currently anticipate restructuring the Amended Facility in the second fiscal quarter of 2021, with the expectation that all outstanding accrued interest will be capitalized and the interest rate will be reduced to 4%. As a result, we anticipate that we will begin amortizing deferred financing fees on July 1, 2021. As of December 31, 2020, approximately $30.4 million of principal and $12.1 million of interest was owed to Conrent.
As of February 10, 2021, the COVID-19 pandemic has adversely impacted both the Company’s revenue and costs by disrupting its operations in Chile, causing shortages within the supply chain and postponing sales opportunities as some government agencies delay new RFP (Request for Proposal) processes. Notwithstanding the challenges, the monitoring being performed by the Company’s significant customers across the globe have remained operational as have key business partners providing manufacturing and call center services. Furthermore, at this time, the Company has not experienced unusual payment interruptions from any large customers and the majority of Company employees are effectively working from home to mitigate the challenges created by COVID-19. However, the Company is operating in a rapidly changing environment so the extent to which COVID-19 impacts its business, operations and financial results from this point forward will depend on numerous evolving factors that the Company cannot accurately predict. Those factors include the following: the duration and scope of the pandemic; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; the development of widespread testing or a vaccine; the ability of our supply chain to meet the Company’s need for equipment; the ability to sell and provide services and solutions if shelter in place restrictions and people working from home are extended to ensure employee safety; the volatility of foreign currency exchange rates and the subsequent effect on international transactions; and any closures of clients’ offices or the courts on which they rely.
For the three months ended December 31, 2020, the Company recognized total revenue from operations of $9,401,905 compared to $8,420,831 for the three months ended December 31, 2019, an increase of $981,074 or approximately 12%. The $981,074 increase in total revenue was the result of an increase in domestic monitoring revenue and other related services, partially offset by lower revenue from our international customers. For the three months ended December 31, 2020, the Company recognized revenue from monitoring and other related services of $9,271,729 compared to $8,268,423 for the three months ended December 31, 2019, an increase of $1,003,306 or approximately 12%. This growth in monitoring and other related services revenue is more predictable than product sales. Monitoring and other related service revenue, which comprises the substantial majority of total revenue, increased due to growth in North America largely by clients in Illinois, Michigan, Puerto Rico, Bahamas and Ohio, partially offset by a decrease in revenue in Chile due a reduction in the number of offenders monitored caused by the impact of COVID-19, when compared to the first fiscal quarter of 2019.
The Company is currently self-funded through net cash provided by operating activities. As of December 31, 2020, approximately $30.4 million of principal and $12.1 million of interest was owed to Conrent Invest S.A. (“Conrent”) under a loan (the “Conrent Facility Agreement”) that matures on July 1, 2024. Pursuant to an amendment to the Conrent Facility Agreement dated December 21, 2020, previously accrued interest will be capitalized and added to the original principal of $30.4 million after Conrent updates agreement with its bondholders, which we estimate will occur in the 2nd fiscal quarter of 2021. See Note 19 to the Consolidated Financial Statements.
In addition, we received proceeds of approximately $933,200 from a potentially forgivable loan from the U.S. Small Business Administration ("SBA") pursuant to the Paycheck Protection Program ("PPP") enacted by Congress under the of the Coronavirus Aid, Relief, and Economic Security Act (15 U.S.C. 636(a)(36)) (the "CARES Act") administered by the SBA (the "PPP Loan"). On December 8, 2020, the Company filed the application for forgiveness, and on January 8, 2021, the Company received a notification from the Lender that the SBA remitted funds to fully repay the PPP Loan, and that the funds were utilized to pay-off and close the PPP Loan and that the PPP Loan was fully forgiven. See Note 24 to the Consolidated Financial Statements.
On December 4, 2019, the Company requested that Conrent extend the maturity of the Amended Facility Agreement from April 1, 2020 to July 1, 2021. On January 6, 2020, the investors who owned the securities from Conrent used to finance the debt (the “Noteholders”) held a meeting to address the Company’s request. On January 7, 2020, Conrent notified the Company in writing that the Noteholders agreed to extend the maturity of the Amended Facility Agreement from April 1, 2020 to July 1, 2021. On January 10, 2020, the Company and Conrent entered into an amendment to the Amended Facility Agreement which extends the maturity of the Amended Facility Agreement to July 1, 2021. On October 21, 2020, the Company requested, in writing, an additional extension to the maturity date of the Amended Facility Agreement. On November 25, 2020, the Noteholders held a meeting to address the Company’s request and approved a new maturity date of July 1, 2024. On December 21, 2020, Conrent and the Company signed an Amendment to the Amended Facility Agreement which extends the maturity date of the Amended Facility Agreement to July 1, 2024 (“Amended Facility”). Pursuant to the Amended Facility, previously accrued interest will be capitalized and added to the original principal of $30.4 million after Conrent updates an agreement with its bondholders, which we currently expect to occur in the second fiscal quarter of 2021, and reduces the interest rate of the Amended Facility from 8% to 4%. At December 31, 2020, accrued and unpaid interest is approximately $12.1 million. See Note 19 to the Consolidated Financial Statements.