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Debt
 6 Months Ended
Jun. 30, 2025
Debt Disclosure [Abstract]  
Debt

Note 3 - Debt

 

On September 30, 2021 (the “Closing Date”), the Company entered into a loan and security agreement (the “Agreement”) with Line Financial (the “Lender”), which provides for a senior secured financing consisting of a revolving credit facility (the “Revolving Credit Facility) in an aggregate principal amount of up to $6 million (the “Maximum Revolver Amount”), subject to borrowing base provisions, and term loan facility (the “Term Loan Facility”) in an aggregate principal amount of $731,250 (“Term Loan Amount” and, together with the Revolving Credit Facility, the “Senior Facilities”). The Senior Facilities are secured by substantially all assets of the Company. The Company believes it has been in compliance with the terms of these Senior Facilities since their inception in September 2021.

 

Interest on the Senior Facilities was set at the prime rate published from time to time published in the Wall Street Journal (7.5% as of June 30, 2025), plus 1.45% per annum, accruing daily and payable monthly. Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed. The Term Loan Facility shall be repaid by the Company to Lender in 48 equal monthly installments of principal and interest, each in the amount of $15,000, commencing on November 1, 2021, and continuing on the first day of each month thereafter until the Term Loan Maturity Date (September 30, 2025). Also, the Company paid the Lender collateral monitoring fees of 4.62% of the eligible accounts receivable, inventory, and equipment supporting the Revolving Credit Facility and the Term Loan.

 

The Senior Facilities matured on September 30, 2023 and were extended with a maturity date of September 30, 2025. The facility automatically extends for successive periods of one year each, unless the Company or the Lender gives the other party notice of termination not less than 90 days prior to the end of such term or renewal term, as applicable. If the Senior Facilities are renewed, the Company shall pay the Lender a renewal fee of 1.25% of the Maximum Revolver Amount and the Term Loan Amount upon each renewal on the anniversary of the Closing Date. The Company has the option to prepay the Term Loan Facility (together with all accrued but unpaid interest and a Term Loan Prepayment Fee (as defined in the Agreement) in whole, but not in part, upon not less than 60 days prior written notice to the Lender.

 

The Senior Facilities require that the Company maintain Tangible Net Worth of at least $4,000,000 or greater (“Minimum Tangible Net Worth”). Minimum Tangible Net Worth may be adjusted downward by the Lender, from time to time, in its sole and absolute discretion, based on the effect of non-cash charges and other factors on the calculation of Tangible Net Worth. Other debt subordinated to Lender is not considered as a reduction of this calculation. The Company believes it was in compliance with this covenant for all relevant months, including as of June 30, 2025 and December 31, 2024, respectively.

 

The Senior Facilities contain certain affirmative and negative covenants that limit the ability of the Company, among other things and subject to certain significant exceptions, to incur debt or liens, make investments, enter into certain mergers, consolidations, and acquisitions, pay dividends and make other restricted payments, or make capital expenditures exceeding $1,000,000 in the aggregate in any fiscal year.

 

As of June 30, 2025 and December 31, 2024, the term loan balance amounted to approximately $0.6 and $0.6 million, which consisted of the principal and interest payable balance of $0.6 and $0.6 million respectively, net of deferred financing costs of approximately $5,000 and $17,000 respectively. The balance of the Revolving Line of Credit as of June 30, 2025 and December 31, 2024 amounted to approximately $4.7 million and $6.6 million, respectively. As of December 31, 2024, the Revolving Line of Credit exceeded $6 million due to upcoming holidays and the bank approved extra funding to continue operations, the excess balance was reduced below the $6 million cap on January 3, 2025.

 

The Term Loan is repaid approximately $15,000 per month, offset by any applicable fees. As June 30, 2025, there was approximately $1.3 million remaining available for borrowing under our Revolving Credit Facility.

 

The Company is party to a note payable to John H. Schwan, Director and former Chairman of the Board, with a loan balance due of $1.3 million as of December 31, 2023 and an interest rate of 6%. The Company repaid $1 million to Mr. Schwan during January 2024. The parties agreed to the payment of the remaining $0.3 million at a future date to be determined. This related party note payable is subordinate to the Senior Facilities.