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Debt
 12 Months Ended
Dec. 31, 2024
Debt [Abstract]  
DEBT

Note 8. Debt

 

Indebtedness to third parties consists of the following:

 

   December 31,   December 31, 
   2024   2023 
         
Revolving loan to Webster Bank (“Webster”)  $12,905,000   $10,804,000 
Term loan, Webster   5,225,000    5,045,000 
CT Green Bank Loan   970,000    393,000 
Finance lease obligations   1,007,000    884,000 
Loans Payable - financed assets   14,000    22,000 
Subtotal   20,121,000    17,148,000 
Less: Current portion   (18,362,000)   (16,036,000)
Long Term Portion  $1,759,000   $1,112,000 

 

Current Credit Facility

 

The Company has a credit facility (“Current Credit Facility”) with Webster Bank that expires on December 30, 2025. This facility, which was entered into on December 31, 2019, was amended several times, and now provides for a $20,000,000 revolving loan (“Revolving Line of Credit”), a $5,700,000 term loan and a $1,640,000 term loan (“Term Loans”). The loan is secured by a lien on substantially all of the assets of the Company.

 

As of December 31, 2024, there is $12,905,000 outstanding under the Revolving Line of Credit and $5,225,000 under the Term Loans.

 

As discussed in Note 1, the Current Credit Facility expires on December 30, 2025. Therefore, the entire Term Loan is classified as short term as of December 31, 2024.

The below table shows the timing of payments due under the Term Loans:

 

For the year ending  Amount 
December 31, 2025  $5,225,000 
Term Loan payable   5,225,000 
Less: Current portion of Term Loan payable   (5,225,000)
Total long-term portion of Term Loan payable  $
-
 

 

Interest expense related to the Current Credit Facility amounted to approximately $1,304,000 and $1,391,000 for the years ended December 31, 2024 and 2023, respectively. Interest expense includes the amortization of deferred finance costs of $68,000 and $68,000 in 2024 and 2023, respectively.

 

As of December 31, 2024, the Company was in full compliance with all financial covenants. The below summarizes various terms of the Current Credit Facility:

 

  ● The Company is required to achieve a defined EBITDA (Non-GAAP measure) amount at the end of each Fiscal Quarter on a rolling basis. As of December 31, 2024, the Company achieved and exceeded the required EBITDA for the cumulative twelve months period ending December 31, 2024. Beginning with the Fiscal Quarter ending March 31, 2025, the Company is required to meet a Fixed Charge Coverage Ratio (as defined) that is determined at the end of each fiscal quarter on a rolling twelve month basis of 1.05x and beginning with the fiscal quarter ending September 30, 2025 the Company is required to meet a Fixed Coverage Charge Ratio of 1.25x .

 

  ● For so long as the Term Loan remains outstanding, if Excess Cash Flow (as defined) is a positive number for any fiscal year the Company shall pay 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 applied to the outstanding principal balance of the Term Loan, on or prior to the April 15 immediately following such fiscal year. For the fiscal year ended December 31, 2024, based on the calculation there is a $43,500 Excess Cash Flow payment required.

 

  ● Both the Revolving Line of Credit and the Term Loan will bear an interest rate equal to the greater of (i) 3.50% and (ii) a rate per annum equal to the rate per annum published from time to time in the “Money Rates” table of the Wall Street Journal (or such other presentation within The Wall Street Journal as may be adopted hereafter for such information) as the base or prime rate for corporate loans at the nation’s largest commercial bank, less sixty-five hundredths (-0.65%) of one percent per annum. The average interest rate charged was 7.66% and 7.55% for the years ended December 31, 2024 and 2023, respectively.

 

  ● The Current Credit Facility limits the amount of capital expenditures and dividends the Company can pay to its stockholders. Substantially all of the Company’s assets are pledged as collateral.

 

The below summarizes historical amendments to the Current Credit Facility 

 

  ● On August 4, 2023, we entered into a Fifth Amendment that waived a default caused by our failure to meet the required Fixed Coverage Charge Ratio for the fiscal quarter ended March 31, 2023. Additionally, the amendment provided for a revised Fixed Coverage Charge Ratio for the fiscal quarters ending June 30, 2023 and September 30, 2023 and increased the amount of purchase money secured debt (or finance leases) we are allowed to have outstanding at any time to $2,000,000. In connection with this amendment, we paid a fee of $10,000.
                
  ●

On November 20, 2023, we entered into a Sixth Amendment that waived defaults caused by the failure by us to achieve the Fixed Charge Coverage Ratio of the Fifth Amendment and because we purchased capital expenditures (as defined) in excess of permitted amounts. This amendment further revised the Fixed Charge Coverage Ratio by requiring it to be calculated on a rolling period basis and not be less than, (a) 1.10x (as calculated on a six-months basis) for the fiscal quarter ending March 31, 2024, (b) 1.20x (as calculated on a nine-months basis) for the fiscal quarter ending June 30, 2024, and (c) 1.25 (as calculated on a twelve-months basis) for all fiscal quarters beginning with September 30, 2024, until the Current Credit Facility expires. This amendment also increased our ability to make additional capital expenditures up to a limit of $2,500,000 in any fiscal year. In connection with this amendment, we paid a fee of $20,000.

     
  ● On May 31, 2024, we entered into a Seventh Amendment that waived the default caused by our failure to achieve the required Fixed Charge Coverage Ratio of the Sixth Amendment. This amendment further revised our Financial Covenants. For the six months ending June 30, 2024 our EBITDA shall not be less than $740,000; for the nine months ending September 30, 2024 our EBITDA shall not be less than $1,500,000; for the twelve months ending December 31, 2024 our EBITDA shall not be less than $2,800,000. For the rolling twelve-month period ending March 31, 2025, we are required to achieve a Fixed Charge Coverage Ratio of 1.05x. Beginning with the rolling twelve-month period ending June 30, 2025 and going forward the Company is required to achieve a Fixed Charge Coverage Ratio of 1.25x. All other covenants remain unchanged. Additionally, this amendment increased the Term Loan by approximately $1,000,000 to $5,700,000, with monthly principal installments in the amount of $68,000. In connection with these changes, the Company paid an amendment fee of $20,000.

 

  ● On January 30, 2025, we entered into an Eighth Amendment to provide for an additional Term Loan in the amount of $1,640,000 for the acquisition of additional equipment. The monthly principal installments on this additional Term Loan are $19,524. This amendment further revised our Financial Covenants. For the rolling twelve-month period ending March 31, 2025 and June 30, 2025, we are required to achieve a Fixed Charge Coverage Ratio of 1.05x. Beginning with the rolling twelve-month period ending September 30, 2025 and going forward the Company is required to achieve a Fixed Charge Coverage Ratio of 1.25x. Additionally, the Company is allowed to pay off up to $4,800,000 of related party notes with funds raised in the Company’s At The Market debt offering.  All other covenants remain unchanged. In connection with these changes, the Company paid an amendment fee of $20,000.

 

All amendment fees paid in connection with the Current Credit Facility that are for a future benefit of the Company are included in Deferred Financing Costs, Net, Deposits and Other Assets, in the accompanying consolidated balance sheets and are amortized over the term of the loan.

 

As of December 31, 2024, the Company has borrowing capacity of approximately $7,095,000 under the Revolving Loan.

 

Solar Credit Facility

 

On August 16, 2023, the Company entered into a financing agreement (“Solar Credit Facility”) with CT Green Bank, a quasi-public agency of the State of Connecticut, for the installation of solar energy systems including replacing the existing roof (“Project”) at its Sterling facility. The Solar Credit Facility provided for advances to be made by CT Green Bank upon its approval of costs incurred on the Project up to $934,000. As of October 1, 2024, cumulative advances totaling $934,000 had been made including the payment of CT Green Bank’s closing costs of $25,000. Total interest accrued on the advances at the rate of 5% was $36,000.

 

On October 1, 2024, the total cumulative advances of $934,000 along with the total accrued interest of $36,000 was converted by CT Green Bank, in accordance with the financing agreement, to a 20-year level payment term loan in the amount of $970,000 with interest accruing at the rate of 5.75%. Semi-annual payments in the amount of $42,000 are due commencing on July 1, 2025. The first semi-annual payment will be for interest only, subsequent semi-annual payments beginning with the payment due on January 1, 2026 will include both principal and interest. As of December 31, 2024, the amount classified as long term is $970,000 and the amount classified as current is $0.

 

Interest expense related to the Solar Credit Facility amounted to approximately $44,000 and $6,000 for the years ended December 31, 2024 and 2023, respectively.

Finance Lease Obligations

 

The Company has entered into finance leases for the purchase of manufacturing equipment. The obligations for the finance leases totaled $1,007,000 and $884,000 as of December 31, 2024 and 2023, respectively. The leases have an average imputed interest rate of 7.31% per annum and are payable monthly with the final payments due between September of 2026 and May of 2030. Interest expense related to the finance leases amounted to approximately $73,000 and $50,000 for the years ended December 31, 2024 and 2023, respectively

 

   Year Ended 
   December 31,   December 31, 
   2024   2023 
Finance Lease cost:        
Amortization of ROU assets  $176,000   $84,000 
Interest on lease liabilities   73,000    50,000 
Total lease Costs  $249,000   $134,000 
           
Other Information:          
Cash Paid for amounts included in the measurement lease liabilities:          
Financing cash flow from finance lease obligations  $196,000   $123,000 
           
Supplemental disclosure of non-cash activity          
Acquisition of finance lease asset  $319,000   $679,000 

 

   December 31,   December 31, 
   2024   2023 
         
Weighted  Average Remaining Lease Term - in years   4.8    5.4 
Weighted Average Discount rate - %   7.44%   7.31%

 

As of December 31, 2024, the aggregate future minimum finance lease payment, including imputed interest are as follows:

 

For the year ending  Amount 
December 31, 2025  $291,000 
December 31, 2026   266,000 
December 31, 2027   190,000 
December 31, 2028   190,000 
December 31, 2029   190,000 
Thereafter   74,000 
Total future minimum finance lease payments   1,201,000 
Less: imputed interest   (194,000)
Less: Current portion   (223,000)
Long-term portion  $784,000 

Loans Payable – Financed Assets

 

The Company financed the purchase of a delivery vehicle in July 2020. The loan obligation totaled $14,000 and $22,000 as of December 31, 2024 and 2023, 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, 2025  $9,000 
December 31, 2026   5,000 
Loans Payable - financed assets   14,000 
Less: Current portion   (9,000)
Long-term portion  $5,000 

  

Related Party Indebtedness

 

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 (together referred to as “Related Party Notes”) with Michael and Robert Taglich which generated proceeds to the Company totaling $6,550,000. In connection with the issuance of the Related Party Notes, Michael and Robert Taglich were issued a total of 35,508 shares of common stock and Taglich Brothers, Inc. was issued promissory notes totaling $554,000 for placement agency fees.

 

The Related Party Notes outstanding as of December 31, 2024 consists of:

 

   Michael Taglich, Robert Taglich, Taglich Brothers,     
   Director   Director   Inc.   Total 
Convertible Subordinated Notes  $2,666,000   $1,905,000   $241,000   $4,812,000 
Subordinated Notes   1,000,000    350,000    
-
    1,350,000 
Total  $3,666,000   $2,255,000   $241,000   $6,162,000 

 

Of the $6,162,000, approximately $2,732,000 bears an annual rate of interest of 6%, $2,080,000 bears an annual rate of 7% and $1,350,000 bears an annual interest rate of 12%. Interest expense for the years ended December 31, 2024 and 2023 was $472,000 and $472,000, respectively.

 

Approximately $2,732,000 of the convertible subordinated notes can be converted at the option of the holder into Common Stock of the Company at $15.00 per share, while the remaining $2,080,000 of the convertible subordinated notes can be converted at the option of the holder into common stock of the Company at $9.30 per share. The remaining $1,350,000 is not convertible. There are no principal payments due on these notes prior to July 1, 2026.

 

The Related Party Notes are subordinate to outstanding debt pursuant to the Current Credit Facility and mature on July 1, 2026.

 

Under the Eighth Amendment to the Current Credit Facility, the Company is allowed to make principal payments of up to $4,800,000. During the first quarter of 2025, the Company paid a total of $1,291,000 of principal payments to reduce the outstanding Related Party Notes payable. Of the $1,291,000 paid, $1,050,000 was paid to Michael Taglich and $241,000 was paid to Taglich Brothers, Inc.