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Notes Payable, Related Party Notes Payable and Finance Lease Obligations | 12 Months Ended
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Dec. 31, 2021
Debt Disclosure [Abstract] |
NOTES PAYABLE, RELATED PARTY NOTES PAYABLE AND FINANCE LEASE OBLIGATIONS | Note 9. NOTES PAYABLE, RELATED PARTY NOTES PAYABLE AND FINANCE LEASE OBLIGATIONS Notes payable, related party notes payable and finance lease obligations consist of the following:
|  | December 31, |  |  | December 31, |
|  | 2021 |  |  | 2020 |
Revolving credit note payable to Webster Bank (F/K/A Sterling National Bank) (“Webster”) |  | $ | 12,456,000 |  |  | $ | 15,649,000 |
Term loan, Webster |  |  | 4,192,000 |  |  |  | 5,558,000 |
Finance lease obligations |  |  | 263,000 |  |  |  | 6,000 |
Loans Payable - financed assets |  |  | 39,000 |  |  |  | 48,000 |
Related party notes payable |  |  | 6,412,000 |  |  |  | 6,012,000 |
Subtotal |  |  | 23,362,000 |  |  |  | 27,273,000 |
Less: Current portion of notes payable, related party notes payable and finance lease obligations |  |  | (14,112,000 | ) |  |  | (16,475,000 | )
Notes payable, related party notes payable and finance lease obligations, net of current portion |  | $ | 9,250,000 |  |  | $ | 10,798,000 |
Webster Bank (F/K/A Sterling National Bank) (“Webster”) On December 31, 2019, the Company entered into a loan facility (“Webster Facility”) with Webster expiring on December 30, 2022. The loan facility originally provided for a $16,000,000 revolving loan (“Webster revolving line of credit”) and a term loan (“Webster term loan”). In 2020, the Company entered into the First Amendment to the Loan and Security Agreement (“First Amendment”). The terms of the amendment increased 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 Webster term loan remains outstanding, if Excess Cash Flow (as defined) is a positive number for any fiscal year the Company shall pay to Webster 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 Webster 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 was 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 amount of the Excess Cash Flow for the year ended December 31, 2021 was calculated to be $787,000. This is scheduled to be paid on or about April 15, 2022 per the terms of the Webster Facility. On December 7, 2021, the Company entered in the Third Amendment to the Loan and Security Agreement (“Third Amendment”). The purpose of the amendment was to extend the maturity date of both the Webster revolving line of credit and the Webster term loan by three years, from December 30, 2022 to December 30, 2025. Additionally, the Webster revolving line of credit was increased to $20,000,000 from $16,000,000 and the inventory sublimit for the Webster revolving line of credit was increased to $14,000,000 from $11,000,000. Under the terms of the Third Amendment, the Company is now allowed, subject to certain limitations, to begin amortizing a portion of its subordinated debt. The Company paid an amendment fee of $75,000 pursuant to this amendment which is included in Deferred Financing Costs, Net, Deposits and Other Assets, in the accompanying Consolidated Balance Sheets and is amortized over the term of the loan. The terms of the Webster 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 December 31, 2021, and 2020, the Company was in compliance with all loan covenants. The Webster 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 Webster Facility. The aggregate payments for the term note at December 31, 2021 are as follows:
For the year ending |  | Amount |
December 31, 2022 |  | $ | 1,599,000 |
December 31, 2023 |  |  | 812,000 |
December 31, 2024 |  |  | 812,000 |
December 31, 2025 |  |  | 969,000 |
Webster Term Loan payable |  |  | 4,192,000 |
Less: debt issuance costs |  |  | (54,000 | )
Total Webster Term Loan payable, net of debt issuance costs |  |  | 4,138,000 |
Less: Current portion of Webster Term Loan payable |  |  | (1,599,000 | )
Total long-term portion of Webster Term Loan payable |  | $ | 2,539,000 |
Under the terms of the Webster Facility, both the Webster revolving line of credit and the Webster term loan bear interest at a rate equal to the sum of a Base Rate plus an Applicable Margin. The Base rate is the greater of (a) 3.5% and (b) the rate per annum published from time to time in the “Money Rates” table of the Wall Street Journal as the base or prime rate for corporate loans. The Webster credit agreement provides for several alternative rates if in the future the Wall Street Journal no longer publishes a base or prime rate. The Applicable Margin is minus 0.65%. In both 2021 and 2020 the average interest paid was 3.5%. As of December 31, 2021, the Company’s debt to Webster in the amount of $16,648,000 consisted of the Webster revolving line of credit note in the amount of $12,456,000 and the Webster term loan in the amount of $4,192,000. Interest expense for the year ending December 31, 2021 amounted to $704,000 for this credit facility. As of December 31, 2020, the Company’s debt to Webster in the amount of $21,207,000 consisted of the Webster revolving line of credit note in the amount of $15,649,000 and the Webster term loan in the amount of $5,558,000. Interest expense for the year ending December 31, 2020 amounted to $586,000 for the Webster facility. Finance Lease Obligations The Company entered into a Finance lease in December of 2021 for the purchase of new manufacturing equipment. The obligation for the Finance lease as of December 31, 2021 is $262,000. The lease has an imputed interest rate of 4.2% per annum and is payable monthly with the final payment due on December 17, 2026. As of December 31, 2021, the aggregate future minimum finance lease payments, including imputed interest are as follows:
For the year ending |  | Amount |
December 31, 2022 |  | $ | 58,000 |
December 31, 2023 |  |  | 58,000 |
December 31, 2024 |  |  | 58,000 |
December 31, 2025 |  |  | 58,000 |
December 31, 2026 |  |  | 59,000 |
Total future minimum finance lease payments |  |  | 291,000 |
Less: imputed interest |  |  | (29,000 | )
Less: Current portion |  |  | (48,000 | )
Long-term portion |  | $ | 214,000 |
Loans Payable – Financed Assets The Company financed the purchase a delivery vehicle in July 2020. The loan obligation totaled $39,000 and $48,000 as of December 31, 2021 and 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 year ending |  | Amount |
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 |  |  | 39,000 |
Less: Current portion |  |  | (9,000 | )
Long-term portion |  | $ | 30,000 |
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. At December 31, 2020, related party notes payable totaled $6,012,000 and accrued interest totaled $400,000. 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 Webster Facility, these notes remain subordinate to the Webster Facility and are due on July 1, 2026. 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 $1.50 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 $0.93 per share. There are no principal payments due on these notes. Under the terms of the Third Amendment to the Webster Facility, the Company is now allowed, subject to certain limitations, to begin amortizing a portion of this subordinated debt. 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 |
The interest rate on the Convertible Subordinated Notes in the principal amount of $2,732,000 bear interest at a rate of 6%, and in the principal amount of $2,080,000 bear interest at a rate of 7%. The Subordinated Notes in the amount of $1,600,000 bear interest at the rate of 12%. For the years ended December 31, 2021 and 2020, no principal payments have been made on these notes and the principal balances remain unchanged from the table above. Interest expense for the years ended December 31, 2021 and 2020 on all related party notes payable was $460,000 and $781,000, respectively. SBA Loans In May 2020, AIM, NTW and Sterling entered into SBA Loans with Webster as the lender in an aggregate principal amount of $2,414,000, which was forgiven by the SBA in December of 2020. Each SBA Loan was evidenced by a Note. Subject to the terms of the Note, the SBA Loans bore interest at a fixed rate of one percent (1%) per annum, with the first six months of interest deferred, had an initial term of two years, and was unsecured and guaranteed by the SBA. At least 60% of the proceeds of each Loan must be used for payroll and payroll-related costs, in accordance with the applicable provisions of the federal statute authorizing the loan program administered by the SBA and the rules promulgated thereunder (the “Loan Program”). In December 2020, the Company was notified that the loans and all interest accrued thereon had been forgiven. The Company elected to treat the SBA Loans as debt under FASB ASC 470. As such, the Company derecognized the liability when the loans were forgiven and the Company was legally released from the loans.

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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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