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Bank Debt | 9 Months Ended
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Sep. 30, 2017
Bank Debt [Abstract] |
BANK DEBT |
11. | BANK DEBT
We have in place five credit facilities and a line of credit with TD Bank N.A. The first note (Loan #1) is not to exceed 80% of the appraised value of our corporate headquarters and production and research facility at 56 Evergreen Drive in Portland. Proceeds of $1.0 million were received during the third quarter of 2010 with monthly principal and interest payments due for ten years. Based on a fifteen-year amortization schedule, a balloon principal payment of $451,885 will be due during the third quarter of 2020. As of September 30, 2017, $643,368 was outstanding under this first note. Proceeds from a $2.5 million second mortgage on this first note (Loan #2) were received during the third quarter of 2015 with monthly principal and interest payments due for ten years. Based on a twenty-year amortization schedule, a balloon principal payment of approximately $1.55 million will be due during the third quarter of 2025. As of September 30, 2017, $2,341,144 was outstanding under Loan #2. During the first quarter of 2016, we entered into two additional credit facilities aggregating up to approximately $4.5 million. As a result of loan amendments entered into the during the first quarter of 2017, these two credit facilities were increased to up to $6.5 million, subject to certain restrictions set forth in the agreements. The third note (Loan #3) is comprised of a construction loan of up to $3.94 million and not to exceed 80% of the cost of the equipment to be installed in our commercial-scale Nisin production facility at 33 Caddie Lane in Portland. As amended, interest only will be payable at a variable rate equal to the one-month LIBOR plus a margin of 2.25% (which was equal to 3.485% as of September 30, 2017) through September 2018, at which time the loan converts to a seven-year term loan facility at the same variable interest rate with monthly principal and interest payments due based on a seven-year amortization schedule. As of September 30, 2017, $2,684,343 was outstanding under this third note, and $1,255,657 was available to be drawn generally at the same time as when the remaining project disbursements are made. The fourth note (Loan #4) is comprised of a construction loan of up to $2.56 million and not to exceed 80% (75% prior to the 2017 amendments) of the appraised value of our commercial-scale Nisin production facility. As amended, interest only will be payable at a variable rate equal to the one-month LIBOR plus a margin of 2.25% (which was equal to 3.485% as of September 30, 2017) through March 2018, at which time the loan converts to a term loan facility at the same variable interest rate with monthly principal and interest payments due for ten years. Based on a twenty-year amortization schedule, a balloon principal payment of approximately $1.62 million will be due during the first quarter of 2027. As of September 30, 2017, there were no proceeds outstanding under this fourth note, and $2.56 million was available to be drawn generally at the same time as when the remaining project disbursements are made. The fifth note (Loan #5) is a mortgage that is secured by the 4,114 square foot warehouse and storage facility we acquired adjacent to our Nisin production facility. Proceeds of $340,000 were received during the first quarter of 2017. This note bears interest at a variable rate equal to the one-month LIBOR plus a margin of 2.25% (which was equal to 3.485% as of September 30, 2017) with monthly principal and interest payments due for ten years. Based on a twenty-year amortization schedule, a balloon principal payment of approximately $199,000 will be due during the first quarter of 2027. As of September 30, 2017, $334,216 was outstanding under this fifth note. We hedged our interest rate exposures on Loan #1 and Loan #2 with interest rate swap agreements that effectively converted floating interest rates based on the one-month LIBOR plus a margin of 3.25% and 2.25% to the fixed rates of 6.04% and 4.38%, respectively. As of September 30, 2017, the variable rates on these two mortgage notes were 4.49% and 3.49%, respectively. All derivatives are recognized on the balance sheet at their fair value. At the time of the closings and thereafter, the agreements were determined to be highly effective in hedging the variability of the identified cash flows and have been designated as cash flow hedges of the variability in the hedged interest payments. Changes in the fair value of the interest rate swap agreements are recorded in other comprehensive (loss) income, net of taxes. The original notional amounts of the interest rate swap agreements of $1,000,000 and $2,500,000 amortize in accordance with the amortization of the mortgage notes. The notional amount of the interest rate swaps was $2,984,512 as of September 30, 2017. The fair values of the interest rate swaps have been determined using observable market-based inputs or unobservable inputs that are corroborated by market data. Accordingly, the interest rate swaps are classified as level 2 within the fair value hierarchy provided in Codification Topic 820, Fair Value Measurements and Disclosures.
|  | For the Three-Month Periods Ended September 30, |
|  | 2017 |  |  | 2016 |
Payments required by interest rate swaps |  | $ | 8,115 |  |  | $ | 14,470 |
Other comprehensive income, net of taxes |  | $ | 1,824 |  |  | $ | 15,523 |
|  | For the Nine-Month Periods Ended September 30, |
|  | 2017 |  |  | 2016 |
Payments required by interest rate swaps |  | $ | 29,834 |  |  | $ | 44,653 |
Other comprehensive income (loss), net of taxes |  | $ | 3,419 |  |  | ($ | 79,767 | )
In connection with the credit facilities entered into during the third quarters of 2010 and 2015, we incurred debt issue costs of $26,489 and $34,125, respectively. In connection with the credit facilities entered into during the first quarters of 2016 and 2017, we incurred debt issue costs of $46,734 and $63,358, respectively. The 2017 amendments to the 2016 agreements were accounted for as modifications. All debt issuance costs are being recorded as a component of other expenses and are being amortized over the terms of the respective credit facilities. These five credit facilities are secured by substantially all of our assets and are subject to certain restrictions and financial covenants. Principal payments (net of debt issuance costs) due under bank loans outstanding as of September 30, 2017 (excluding our $500,000 line of credit) are reflected in the following table by the year that payments are due:
|  | Three-month period ending 12/31/2017 |  |  | Year ending 12/31/2018 |  |  | Year ending 12/31/2019 |  |  | Year ending 12/31/2020 |  |  | Year ending 12/31/2021 |  |  | After 12/31/2021 |  |  | Total |
Loan #1 |  | $ | 15,888 |  |  | $ | 64,876 |  |  | $ | 68,908 |  |  | $ | 493,696 |  |  |  | - |  |  |  | - |  |  | $ | 643,368 |
Loan #2 |  |  | 21,279 |  |  |  | 86,097 |  |  |  | 89,997 |  |  |  | 94,005 |  |  |  | 98,538 |  |  |  | 1,951,228 |  |  |  | 2,341,144 |
Loan #3(1) |  |  | - |  |  |  | 85,036 |  |  |  | 347,638 |  |  |  | 359,949 |  |  |  | 372,695 |  |  |  | 1,519,025 |  |  |  | 2,684,343 |
Loan #4 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Loan #5(1) |  |  | 3,005 |  |  |  | 12,283 |  |  |  | 12,718 |  |  |  | 13,169 |  |  |  | 13,635 |  |  |  | 279,406 |  |  |  | 334,216 |
Debt Issuance Costs |  |  | (4,122 | ) |  |  | (16,489 | ) |  |  | (16,489 | ) |  |  | (15,855 | ) |  |  | (14,841 | ) |  |  | (63,077 | ) |  |  | (130,873 | )
|  | $ | 36,050 |  |  | $ | 231,803 |  |  | $ | 502,772 |  |  | $ | 944,964 |  |  | $ | 470,027 |  |  | $ | 3,686,582 |  |  | $ | 5,872,198 |
(1) These notes bear interest at a variable rate equal to the one-month LIBOR plus a margin of 2.25%. Figures in this table are estimated using an interest rate of approximately 3.485%. The actual interest rate and principal payments will be different. During the third quarter of 2010, we entered into a $500,000 line of credit with TD Bank N.A., which is secured by substantially all of our assets and is subject to certain restrictions and financial covenants. This line of credit has been renewed approximately annually since then and is available as needed and has been extended through May 31, 2018. There was no outstanding balance under this line of credit as of September 30, 2017 or December 31, 2016. Interest on borrowings against the line of credit are variable at the higher of 4.25% per annum or the one-month LIBOR plus 3.5% per annum.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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