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LINE OF CREDIT AND LONG-TERM DEBT

9 Months Ended

Sep. 30, 2025

7.	LINE OF CREDIT AND LONG-TERM DEBT

On March 24, 2016, the Company entered into the Amended and Restated Credit Agreement with the lenders named therein and BankUnited N.A. as Sole Arranger, Agent and Collateral Agent (as amended from time to time, the “Credit Agreement” or the “BankUnited Facility”). The BankUnited Facility originally provided for a revolving credit loan commitment of $30 million (the “Revolving Credit Loans”) and a $10 million term loan (“Term Loan”). The Term Loan has been repaid. The Revolving Credit Loans bear interest at a rate based upon a pricing grid, as defined in the Credit Agreement.

On February 20, 2024, the Company entered into a Thirteenth Amendment to the Credit Agreement (the “Thirteenth Amendment”). Under the Thirteenth Amendment, the parties amended the Credit Agreement by (a) extending the maturity date of the Company’s Revolving Credit Loans to August 31, 2025; and (b) setting the aggregate maximum principal amount of all revolving line of credit loans to $19,800,000 from January 1, 2024 through March 31, 2024, $19,080,000 from April 1, 2024 through June 30, 2024, $18,360,000 from July 1, 2024 through September 30, 2024, $17,640,000 from October 1, 2024 through December 31, 2024, $16,920,000 from January 1, 2025 through March 31, 2025, $16,200,000 from April 1, 2025 through June 30, 2025 and $15,480,000 from July 1, 2025 onward, and for payments to be made by the Company to comply therewith (if any such payments are necessary), on the first day of each such period.

On November 13, 2024, the Company entered into a Fourteenth Amendment to the Credit Agreement (the “Fourteenth Amendment”). Under the Fourteenth Amendment, the parties amended the Credit Agreement by: (i) extending the maturity date of the Company’s Revolving Credit Loans to August 31, 2026; (ii) reducing the Base Rate Margin (as defined in the Credit Agreement) from 3.50% to 2.0%; (iii) resetting the aggregate maximum principal amount of all Revolving Credit Loans to $16,890,000 from January 1, 2025 through March 31, 2025, $16,140,000 from April 1, 2025 through June 30, 2025, $15,390,000 from July 1, 2025 through September 30, 2025, $14,640,000 from October 1, 2025 through December 31, 2025, $13,890,000 from January 1, 2026 through March 31, 2026, $13,140,000 from April 1, 2026 through June 30, 2026, and $12,390,000 from July 1, 2026 onward and for payments to be made by the Company to comply therewith (if any such payments are necessary), on the first day of each such period; and (iv) requiring the Company, if it does not deliver to BankUnited, N.A. by December 31, 2025, a commitment letter with banks and terms and conditions reasonably acceptable to the Lenders for refinancing the obligations under the Credit Agreement, to make a payment by January 31, 2026, equal to 2% of the aggregate outstanding principal amount of the Revolving Credit Loans as of December 31, 2025, with 50% of such payment applied to reduce the aggregate outstanding principal and the remaining 50% retained by the Lenders as an amendment fee with respect to the Fourteenth Amendment (the “Additional Payment Obligation”).

As of March 31, 2025, the Company was not in compliance with the Credit Agreement’s minimum debt service coverage ratio, minimum fiscal quarter net income after taxes, and minimum quarterly adjusted EBITDA financial covenants and the Company obtained a written waiver from the Lenders waiving the specified covenant non-compliance for the fiscal quarter ended March 31, 2025.

As of June 30, 2025, the Company was not in compliance with all the Credit Agreement’s financial covenants. In addition, the Company did not satisfy the July 1, 2025 mandatory repayment requirement under the Credit Agreement (the “July 2025 Payment Obligation”). On August 14, 2025, the Company obtained a written waiver from the Lenders pursuant to which the Lenders (i) waived the financial covenant non-compliance for the fiscal quarter ended June 30, 2025 and (ii) temporarily waived non-compliance with the July 2025 Payment Obligation until September 30, 2025.

On August 19, 2025, the Company executed a Fifteenth Amendment to the Credit Agreement (the “Fifteenth Amendment”). The amendment revised certain financial covenants to reflect specified adjustments for the quarters ended March 31, 2025 and June 30, 2025. These covenant-based adjustments were designed to offset the effect of the termination of the Company’s Boeing A-10 Program on covenant compliance.

As of September 30, 2025, the Company was not in compliance with the aggregate principal amount of all Revolving Credit Loans and the Company obtained a Waiver and Sixteenth Amendment to the Credit Agreement (the “Sixteenth Amendment”). The Sixteenth Amendment reset the aggregate maximum principal amount of all Revolving Credit Loans to $15,890,000 from July 1, 2025 through March 31, 2026, $15,140,000 from April 1, 2026 through June 30, 2026, $14,390,000 from July 1, 2026 through September 30, 2026, and $13,640,000 onward, and for payments to be made by the Company to comply therewith (if any such payments are necessary), on the first day of each such period, and waived the Company’s failure to make the July 2025 Payment Obligation on September 30, 2025. The Sixteenth Amendment also extended the maturity date of the Revolving Credit Loans to November 30, 2026, and waived the Additional Payment Obligation.

The Credit Agreement, as amended, requires us to maintain the following financial covenants: (a) minimum debt service coverage ratio of no less than 1.5 to 1.0 for trailing four fiscal quarter periods; (b) maximum leverage ratio of no less than 4.0 to 1.0 for trailing four fiscal quarter periods; (c) minimum net income after taxes as of the end of each fiscal quarter being no less than $1.00; and (d) a minimum adjusted EBITDA at the end of each fiscal quarter of no less than $1.0 million (collectively, the “Financial Covenants”). In accordance with ASC 470, the Company has determined that it is reasonably possible it will meet its covenants within the next 12 months.

Although waivers and Credit Agreement amendments cured the events of defaults described above, the Company’s failure to comply with the Financial Covenants in future periods or make mandatory repayments could result in additional events of default, and unless further waivers or amendments are obtained, of which there is no assurance, future non-compliance could permit the Lenders to accelerate the Company’s outstanding obligations under the Credit Agreement and exercise other remedies available under the loan documents.

The BankUnited Facility is secured by all the Company’s assets and the Revolving Credit Loans bore interest at the Prime Rate + 2.0%. The Prime Rate was 7.25% as of September 30, 2025 and as such, the Company’s interest rate on the Revolving Credit Loans was 9.5% as of September 30, 2025.

As of September 30, 2025 and December 31, 2024, the Company had $15,890,000 and $17,390,000 outstanding under the Revolving Credit Loans, respectively. $1,500,000 of the Revolving Credit Loans is payable by September 30, 2026 and the remaining balance of $14,390,000 of the Revolving Credit Loans matures and is payable by November 30, 2026, as amended November 13, 2025.

The Company has cumulatively paid approximately $962,000 of total debt issuance costs in connection with the BankUnited Facility, of which approximately $20,000 and $36,000 is unamortized and is included in other assets at September 30, 2025 and December 31, 2024, respectively.

Also included in short-term debt is financing leases of $5,449 and $26,483 at September 30, 2025 and December 31, 2024, respectively, included as current liabilities.