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v3.25.1

Debt | 3 Months Ended
--- | ---
Mar. 31, 2025
Debt [Abstract] |
DEBT | Note 5. DEBT Total debt outstanding as of March 31, 2025 is $24,652,000 and was $26,283,000 at December 31, 2024. Indebtedness to third parties consists of the following:
|  | March 31, |  |  | December 31, |
|  | 2025 |  |  | 2024 |
Current Credit Facility - Revolver |  | $ | 11,204,000 |  |  | $ | 12,905,000 |
Current Credit Facility - Term Loan |  |  | 6,642,000 |  |  |  | 5,225,000 |
Solar Credit Facility |  |  | 970,000 |  |  |  | 970,000 |
Finance lease obligations |  |  | 953,000 |  |  |  | 1,007,000 |
Loans Payable - financed assets |  |  | 12,000 |  |  |  | 14,000 |
Subtotal |  |  | 19,781,000 |  |  |  | 20,121,000 |
Less: Current portion |  |  | (18,096,000 | ) |  |  | (18,362,000 | )
Long-Term Portion |  | $ | 1,685,000 |  |  | $ | 1,759,000 |
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 March 31, 2025, there is $11,204,000 outstanding under the Revolving Line of Credit and $6,642,000 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 March 31, 2025. The below table shows the timing of payments due under the Term Loan:
For the year ending |  | Amount |
December 31, 2025 |  | $ | 6,642,000 |
Term Loan payable |  |  | 6,642,000 |
Less: Current portion of Term Loan payable |  |  | (6,642,000 | )
Total long-term portion of Term Loan payable |  | $ | - |
Interest expense related to the Current Credit Facility amounted to approximately $315,000 and $321,000 for the three months ended March 31, 2025 and 2024, respectively. Interest expense includes the amortization of deferred finance costs of $17,000 and $17,000 for the three months ending March 31, 2025 and 2024, respectively. The below summarizes various terms of the Current Credit Facility:
| ● | 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. As of both March 31, 2025 and December 31, 2024, the Company was in full compliance with its covenants.
| ● | 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 was no 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 6.85% and 7.85% for the three months ended March 31, 2025 and 2024, 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 certain historical amendments to the Current Credit Facility
| ● | 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 condensed consolidated balance sheets and are amortized over the term of the loan. As of March 31, 2025, the Company has borrowing capacity of approximately $8,796,000 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. Advances are 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 March 31, 2025, the amount classified as short term is $13,000 and the amount classified as long term is $957,000. Interest expense related to the Solar Credit Facility amounted to approximately $11,000 and $1,000 for the three months ended March 31, 2025 and 2024, respectively. Finance Lease Obligations The Company has entered into finance leases for the purchase of additional manufacturing equipment. The obligations for the finance leases totaled $953,000 and $1,007,000 as of March 31, 2025 and December 31, 2024, 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.
|  | Three Months Ended |
|  | March 31, |  |  | March 31, |
|  | 2025 |  |  | 2024 |
Finance Lease cost: |  |  |  |  |  |
Amortization of ROU assets |  | $ | 49,000 |  |  | $ | 38,000 |
Interest on lease liabilities |  |  | 18,000 |  |  |  | 16,000 |
Total lease Costs |  | $ | 67,000 |  |  | $ | 54,000 |
Other Information: |  |  |  |  |  |  |  |
Cash Paid for amounts included in the measurement lease liabilities: |  |  |  |  |  |  |  |
Financing cash flow from finance lease obligations |  | $ | 54,000 |  |  | $ | 41,000 |
Supplemental disclosure of non-cash activity |  |  |  |  |  |  |  |
Acquisition of finance lease asset |  | $ | - |  |  | $ | - |
|  | March 31, |  |  | December 31, |
|  | 2025 |  |  | 2024 |
Weighted Average Remaining Lease Term - in years |  |  | 4.6 |  |  |  | 4.8 |
Weighted Average Discount rate - % |  |  | 7.44 | % |  |  | 7.44 | %
As of March 31, 2025, the aggregate future minimum finance lease payments, including imputed interest are as follows:
For the year ending |  | Amount |
December 31, 2025 (remainder of year) |  | $ | 218,000 |
December 31, 2026 |  |  | 266,000 |
December 31, 2027 |  |  | 190,000 |
December 31, 2028 |  |  | 190,000 |
December 31, 2029 |  |  | 190,000 |
Thereafter |  |  | 75,000 |
Total future minimum finance lease payments |  |  | 1,129,000 |
Less: imputed interest |  |  | (176,000 | )
Less: Current portion |  |  | (227,000 | )
Long-term portion |  | $ | 726,000 |
Loan Payable – Financed Assets The Company financed the purchase of a delivery vehicle in July 2020. The loan obligation totaled $12,000 and $14,000 as of March 31, 2025 and December 31, 2024, 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 (remainder of year |  | $ | 7,000 |
December 31, 2026 |  |  | 5,000 |
Loans Payable - financed assets |  |  | 12,000 |
Less: Current portion |  |  | (9,000 | )
Long-term portion |  | $ | 3,000 |
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. Under the Eighth Amendment to the Current Credit Facility, the Company is allowed to make principal payments of up to $4,800,000 with funds raised in the Company’s At the Market offering. For the three month period ended March 31, 2025, the Company paid a total of $1,291,000 of principal payments. Of the $1,291,000 paid, $1,050,000 was paid to Michael Taglich and $241,000 was paid to Taglich Brothers, Inc. The Related Party Notes outstanding as of March 31, 2025 consist of:
|  | Michael Taglich, |  |  | Robert Taglich, |  |  | Taglich Brothers, |  |  |  |
|  | Director |  |  | Director |  |  | Inc. |  |  | Total |
Convertible Subordinated Notes |  | $ | 2,416,000 |  |  | $ | 1,905,000 |  |  | $ | - |  |  | $ | 4,321,000 |
Subordinated Notes |  |  | - |  |  |  | 550,000 |  |  |  | - |  |  |  | 550,000 |
Total |  | $ | 2,416,000 |  |  | $ | 2,455,000 |  |  | $ | - |  |  | $ | 4,871,000 |
The Related Party Notes outstanding as of December 31, 2024 consist 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 |  |  | 800,000 |  |  |  | 550,000 |  |  |  | - |  |  |  | 1,350,000 |
Total |  | $ | 3,466,000 |  |  | $ | 2,455,000 |  |  | $ | 241,000 |  |  | $ | 6,162,000 |
Of the $4,871,000, approximately $2,519,000 bears an annual rate of interest of 6%, $1,802,000 bears an annual rate of 7% and $550,000 bears an annual interest rate of 12%. Interest expense for the three months ended March 31, 2025 and 2024 on all related party notes payable was $99,000 and $118,000, respectively. Approximately $2,519,000 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 $1,802,000 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. There are no principal payments due 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. The Company is currently negotiating with the holders of these Related Party Notes to extend and/or modify the terms of these notes.

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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://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 8A -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-8A Reference 2: http://www.xbrl.org/2003/role/disclosureRef 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