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Bank Debt
 9 Months Ended
Sep. 30, 2023
Bank Debt [Abstract]  
BANK DEBT

10. BANK DEBT

 

Loans #1 and #2: During the first quarter of 2020, we closed on a debt financing with Gorham Savings Bank (GSB) aggregating $8,600,000, which was comprised of a $5,100,000 mortgage note (Loan #1) that bears interest at a fixed rate of 3.50% per annum (with a 10-year term and 25-year amortization schedule and a balloon principal payment of $3,145,888 due during the first quarter of 2030) and a $3,500,000 note (Loan #2) that bears interest at a fixed rate of 3.50% per annum (with a 7-year term and amortization schedule). The proceeds from the 2020 debt refinancing were used to repay all bank debt outstanding at the time of closing and to provide some additional working capital. During the first quarter of 2022, we closed on an additional $2,000,000 in mortgage debt, which bears interest at the fixed rate of 3.58% per annum. This was accomplished through an amendment of the original mortgage note (Loan #1) that increased the then outstanding principal balance from $4,233,957 to $6,233,957 bearing interest at the blended fixed rate of 3.53% per annum. This increased the balloon payment from $3,145,888 to $3,687,446 and extended the due date of the balloon payment from the first quarter of 2030 to the first quarter of 2032.

 

Line of Credit (LOC): Also during the first quarter of 2020, GSB extended a $1,000,000 LOC to us that is available, as needed, through March 11, 2024. Interest on borrowings against the LOC is variable at the National Prime Rate per annum. There was no outstanding balance under this LOC as of September 30, 2023 and December 31, 2022.

 

Loan #3: During the second quarter of 2020, we received a loan from the Maine Technology Institute (MTI) in the aggregate principal amount of $500,000. The first 2.25 years of this loan were interest-free with no interest accrual or required principal payments. Beginning during the fourth quarter of 2022, Loan #3 became subject to quarterly principal and interest payments at a fixed rate of 5% per annum over the final five years of the loan, through the third quarter of 2027 if not repaid before then.

 

Loan #4: During the fourth quarter of 2020, we closed on a $1,500,000 note with GSB that bears interest at a fixed rate of 3.50% per annum (with a 7-year term and amortization schedule). Proceeds of $624,167 were used to prepay a portion of the outstanding principal on our mortgage note (Loan #1), which reduced the outstanding balance to 80% of the most recent appraised value of the property securing the debt, which allowed GSB to release the $1,400,000 that had been held in escrow. The remaining proceeds were available for general working capital purposes.

 

Loan #5: On June 30, 2021, we executed definitive agreements covering a second loan from the MTI in the aggregate principal amount of $400,000, proceeds from which were received in July 2021. The first two years of this loan were interest-free with no interest accrual or required principal payments. Principal and interest payments at a fixed rate of 5% per annum are due quarterly over the final 5.5 years of the loan, beginning during the third quarter of 2023 and continuing through the fourth quarter of 2028 if not repaid before then.

 

Loan #6: During the third quarter of 2023, we closed on a $2,000,000 term loan bearing interest at a fixed rate of 7% per annum from GSB. The Finance Authority of Maine (FAME) provided $1,000,000 of loan insurance to GSB. This loan is repayable under a seven-year amortization schedule with a balloon payment of $1,285,079 due during the third quarter of 2026.

 

Loan #7: Also during the third quarter of 2023, we closed on a $1,000,000 term loan bearing interest at a fixed rate of 8% per annum from FAME. The loan is repayable under a seven-year amortization schedule with a balloon payment of $649,658 due during the third quarter of 2026.

 

Loans #1, #2, #4, #6 and #7 are secured by liens on substantially all of our assets and are subject to certain restrictions and financial covenants. Loan #7 is subordinated to Loans #1, #2, #4 and #6. Given the funds we raised through an equity issuance in April 2021, GSB waived the minimum debt service coverage (DSC) ratio requirement of 1.35 for the year ended December 31, 2021. By negotiation with GSB in connection with the mortgage debt financing during the first quarter of 2022, the required minimum DSC ratio was reduced to 1.0 for the year ending December 31, 2022. By subsequent negotiation with GSB, compliance with the required minimum DSC ratio was waived for the year ended December 31, 2022. During the first quarter of 2023, the DSC ratio covenant for the year ending December 31, 2023 was waived by GSB. Instead, we are required to meet a minimum DSC ratio requirement of 1.35 for the twelve-month periods ending June 30, 2024, September 30, 2024 and December 31, 2024 and then again annually after that. In connection with these credit facilities, we incurred aggregate debt issuance and debt discount costs of $168,268 ($98,098 and $19,306 of which was incurred during the nine-month period ended September 30, 2023 and the year ended December 31, 2022, respectively). The amortization of these debt issuance and debt discount costs is being recorded as a component of interest expense, included in other expenses, net, and is being amortized on a straight-line basis over the underlying terms of the notes. Loans #3 and #5 are unsecured and subordinated to our indebtedness to GSB and FAME. Failure to make timely payments of principal and interest, or otherwise to comply with the terms of the agreements of Loans #3 and #5, would entitle the MTI to accelerate the maturity of such debt and demand repayment in full. These loans may be prepaid without penalty at any time.

 

Debt proceeds received and principal repayments made (excluding our $1,000,000 line of credit) during the three-month periods ended September 30, 2023 and 2022 are reflected in the following table by period and by loan:

 

  

During the Three-Month

Period Ended September 30, 2023

  

During the Three-Month

Period Ended September 30, 2022

 
   Proceeds from
Debt Issuance		   Debt Principal
Repayments		  

Proceeds from

Debt Issuance

   Debt Principal
Repayments		 
Loan #1  $
         —
   $(55,619)  $
            —
   $( 53,634)
Loan #2   
—
    (124,020)   
—
    (119,658)
Loan #3   
—
    (23,002)   
—
    
—
 
Loan #4   
—
    (51,622)   
—
    (49,810)
Loan #5   
—
    (15,909)   
—
    
—
 
Loan #6   2,000,000    (36,582)   
—
    
—
 
Loan #7   1,000,000    (18,983)   
—
    
—
 
Total  $3,000,000   $(325,737)  $
—
   $(223,102)

 

Debt proceeds received and principal repayments made (excluding our $1,000,000 line of credit) during the nine-month periods ended September 30, 2023 and 2022 are reflected in the following table by period and by loan:

 

  

During the Nine-Month

Period Ended September 30, 2023

  

During the Nine-Month

Period Ended September 30, 2022

 
   Proceeds from
Debt Issuance		   Debt Principal
Repayments		  

Proceeds from

Debt Issuance

   Debt Principal
Repayments		 
Loan #1  $
   —
   $(166,527)  $2,000,000   $(144,293)
Loan #2   
—
    (369,154)   
—
    (356,278)
Loan #3   
—
    (68,156)   
—
    
—
 
Loan #4   
—
    (153,704)   
—
    (148,347)
Loan #5   
—
    (15,909)   
—
    
—
 
Loan #6   2,000,000    (36,582)   
—
    
—
 
Loan #7   1,000,000    (18,983)   
—
    
—
 
Total  $3,000,000   $(829,015)  $2,000,000   $(648,918)

 

Principal payments (net of debt issuance and debt discount costs) due under bank loans outstanding as of September 30, 2023 (excluding our $1,000,000 line of credit) are reflected in the following table by the year that payments are due:

 

   During the
Three-Month
Period Ending
December 31,		  

 

 

During the Years Ending December 31,

         
   2023   2024   2025   2026   2027   Thereafter   Total 
Loan #1  $56,717   $230,891   $239,876   $248,604   $257,649   $4,864,864   $5,898,601 
Loan #2   125,297    512,102    530,738    549,881    140,464    
—
    1,858,482 
Loan #3   23,289    96,104    101,001    106,146    83,143    
—
    409,683 
Loan #4   52,177    213,217    220,994    228,965    240,455    
—
    955,808 
Loan #5   16,108    66,470    69,856    73,415    77,156    81,086    384,091 
Loan #6   56,472    235,361    253,003    1,418,582    
—
    
—
    1,963,418 
Loan #7   27,320    114,891    124,426    714,380    
—
    
—
    981,017 
Subtotal   357,380    1,469,036    1,539,894    3,339,973    798,867    4,945,950    12,451,100 
Debt issuance cost   (4,871)   (19,076)   (18,976)   (13,580)   (5,420)   (14,860)   (76,783)
Debt discount cost   (5,223)   (20,891)   (20,891)   (11,344)   
—
    
—
    (58,349)
Total  $347,286   $1,429,069   $1,500,027   $3,315,049   $793,447   $4,931,090   $12,315,968