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Notes Payable, Related Party Notes Payable and Finance Lease Obligations | 9 Months Ended
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Sep. 30, 2021
Debt Disclosure [Abstract] |
NOTES PAYABLE, RELATED PARTY NOTES PAYABLE AND FINANCE LEASE OBLIGATIONS | Note 5. NOTES PAYABLE, RELATED PARTY NOTES PAYABLE AND FINANCE LEASE OBLIGATIONS Notes payable and finance lease obligations at September 30, 2021 and December 31, 2020 consisted of the following:
|  | September 30, |  |  | December 31, |
|  | 2021 |  |  | 2020 |
Revolving credit note payable to Sterling National Bank ("SNB") |  | $ | 13,463,000 |  |  | $ | 15,649,000 |
Term loan, SNB |  |  | 4,411,000 |  |  |  | 5,558,000 |
Finance lease obligations |  |  | 2,000 |  |  |  | 6,000 |
Loans Payable - financed assets |  |  | 41,000 |  |  |  | 48,000 |
Related party notes payable, net of debt discount |  |  | 6,412,000 |  |  |  | 6,012,000 |
Subtotal |  |  | 24,329,000 |  |  |  | 27,273,000 |
Less: Current portion of notes payable, related party notes payable and finance lease obligations |  |  | (14,285,000 | ) |  |  | (16,475,000 | )
Notes payable, related party notes payable and finance lease obligations, |  |  |  |  |  |  |  |
net of current portion |  | $ | 10,044,000 |  |  | $ | 10,798,000 |
Sterling National Bank (“SNB”) On December 31, 2019, the Company entered into a loan facility (“SNB Facility”) with SNB expiring on December 30, 2022. The loan facility provides for a $16,000,000 revolving loan (“SNB revolving line of credit”) and a term loan (“SNB term loan”). In 2020, the Company entered into the First Amendment to the Loan and Security Agreement (“First Amendment”). The terms of the amendment increase the Term Loan to $5,685,000. The repayment terms of the term loan were amended to provide monthly principal installments in the amount of $67,679 beginning on December 1, 2020, with a final payment of any unpaid balance of principal and interest payable on December 30, 2022. Additionally, the date by which certain subordinated third-party notes need to be extended was changed from September 30, 2020 to November 30, 2020. The Company paid an amendment fee of $20,000. On June 14, 2021, the Company entered into the Second Amendment to the Loan and Security Agreement (“Second Amendment”). The purpose of the Second Amendment was to clarify the definition and calculation of Excess Cash Flow, and to confirm the extension of the due date for the payment of the Excess Cash Flow payment. For so long as the SNB term loan remains outstanding, if Excess Cash Flow (as defined) is a positive number for any fiscal year the Company shall pay to SNB an amount equal to the lesser of (i) twenty-five percent (25%) of the excess Cash flow for such fiscal year and (ii) the outstanding principal balance of the term loan. Such payment shall be made to SNB and applied to the outstanding principal balance of the term loan, on or prior to the close of the fiscal year immediately following such fiscal year. The amount of the Excess Cash Flow payment for the year ended December 31, 2020 was calculated to be $558,750. Per the terms of the Second Amendment, the Excess Cash Flow is payable in three instalments of $186,250 on each of June 15, 2021, June 30, 2021, and September 15, 2021. As of September 30, 2021, the Company paid this in full. Additionally, the Company paid an amendment fee of $10,000. The terms of the SNB Facility require that, among other things, the Company maintain a specified Fixed Charge Coverage Ratio of 1.25 to 1.00 at the end of each Fiscal Quarter beginning with the Fiscal Quarter ending March 31, 2020. In addition, the Company is limited in the amount of Capital Expenditures it can make. As of September 30, 2021, the Company was in compliance with all loan covenants. The SNB Facility also restricts the amount of dividends the Company may pay to its stockholders. Substantially all of the Company’s assets are pledged as collateral under the SNB Facility. The aggregate payments for the term note at September 30, 2021 are as follows:
For the twelve months ending |  | Amount |
December 31, 2021 (remainder of the year) |  | $ | 203,000 |
December 31, 2022 |  |  | 4,247,000 |
SNB Term Loan payable |  |  | 4,450,000 |
Less: debt issuance costs |  |  | (39,000 | )
Total SNB Term Loan payable, net of debt issuance costs |  |  | 4,411,000 |
Less: Current portion of SNB Term Loan payable |  |  | (812,000 | )
Total long-term portion of SNB Term Loan payable |  | $ | 3,599,000 |
Under the terms of the SNB Facility, both the SNB revolving line of credit and the SNB term loan bear an interest rate equal to 30-day LIBOR (with a 1% floor) plus 2.5%. The average interest rate charged during the period ended September 30, 2021 was 3.5%. As of September 30, 2021, the debt to SNB in the amount of $17,874,000 consisted of the SNB revolving line of credit note in the amount of $13,463,000 and the SNB term loan in the amount of $4,411,000. As of December 31, 2020, the debt to SNB in the amount of $21,207,000 consisted of the SNB revolving line of credit note in the amount of $15,649,000 and the SNB term loan in the amount of $5,558,000. Interest expense related to the SNB Facility amounted to approximately $181,000 and $147,000 for the three months ended September 30, 2021 and 2020, respectively, and $542,000 and $420,000 for the nine months ended September 30, 2021 and 2021, respectively. Loans Payable – Financed Assets The Company financed the purchase of a delivery vehicle in July 2020. The loan obligation totaled $41,000 and $48,000 as of September 30, 2021 and December 31, 2020, respectively. The loan bears no interest and a final payment is due and payable for all unpaid principal on July 20, 2026. Annual maturities of this loan are as follows:
For the twelve months ending |  | Amount |
December 31, 2021 (remainder of the year) |  | $ | 2,000 |
December 31, 2022 |  |  | 9,000 |
December 31, 2023 |  |  | 9,000 |
December 31, 2024 |  |  | 9,000 |
December 31, 2025 |  |  | 9,000 |
Thereafter |  |  | 3,000 |
Loans Payable - financed assets |  |  | 41,000 |
Less: Current portion |  |  | (9,000 | )
Long-term portion |  | $ | 32,000 |
Related Party Notes Payable Taglich Brothers, Inc. is a corporation co-founded by two directors of the Company, Michael and Robert Taglich. Taglich Brothers, Inc. has acted as placement agent for various debt and equity financing transactions and has received cash and equity compensation for their services. From 2016 through 2020, the Company entered into various subordinated notes payable and convertible subordinated notes payable with Michael and Robert Taglich. These notes resulted in proceeds to the Company totaling $6,550,000. In connection with these notes, Michael and Robert were issued a total of 355,082 shares of common stock and Taglich Brothers Inc. was issued promissory notes totaling $554,000 for placement agency fees. On January 1, 2021, the related party subordinated notes due to Michael and Robert Taglich and Taglich Brothers, Inc., were amended to include all accrued interest through December 31, 2020 in the principal balance of the notes. Per the terms of the SNB Facility, these notes remain subordinate to the SNB Facility and are due on July 1, 2023. Approximately $2,732,000 of the related party subordinated notes can be converted at the option of the holder into Common Stock of the Company at $0.93 per share, while the remaining $2,080,000 of the related party subordinated notes can be converted at the option of the holder into Common Stock of the Company at $1.50 per share. There are no principal payments due on these notes until such time. The note holders and the principal balance of the notes as amended on January 1, 2021 are shown below:
|  | Michael Taglich, |  |  | Robert Taglich, |  |  | Taglich Brothers, |  |  |  |
|  | Chairman |  |  | Director |  |  | Inc. |  |  | Total |
Convertible Subordinated Notes |  | $ | 2,666,000 |  |  | $ | 1,905,000 |  |  | $ | 241,000 |  |  | $ | 4,812,000 |
Subordinated Notes |  |  | 1,250,000 |  |  |  | 350,000 |  |  |  | - |  |  |  | 1,600,000 |
Total |  | $ | 3,916,000 |  |  | $ | 2,255,000 |  |  | $ | 241,000 |  |  | $ | 6,412,000 |
For the three and nine months ended September 30, 2021, no principal payments have been made on these notes and the principal balances remain unchanged from the table above. Interest expense for the three months ended September 30, 2021 and 2020 on all related party notes payable was $126,000 and $125,000, respectively, and $376,000 and $378,000 for the nine months ended September 30, 2021 and 2020, respectively. Convertible Notes Payable – Third Parties As of both September 30, 2021 and December 31, 2020, the notes payable to third parties totaled $0 as the notes were converted into shares of common stock in 2020. Interest incurred on these notes amounted to approximately $38,000 and $118,000 for the three and nine months ended September 30, 2020, respectively. Amortization of debt discount on these notes amounted to approximately $0 and $7,000 for the three and nine months ended September 30, 2020, respectively. These costs are included in interest and financing costs in the Condensed Consolidated Statement of Operations.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -Subparagraph (h) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1C -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1I -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1I -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(c)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -Subparagraph (g) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1C -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1C -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1E -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495348-112611 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1I -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -Subparagraph (i) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 + Details
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