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Debt
 9 Months Ended
Sep. 30, 2025
Debt [Abstract]  
DEBT

Note 5. DEBT

 

Total debt outstanding as of September 30, 2025 is $28,645,000 and was $26,283,000 at December 31, 2024.

 

Current credit facilities and finance lease obligations consist of the following:

 

   September 30,
2025		   December 31,
2024		 
         
Current Credit Facility – Revolver  $15,838,000   $12,905,000 
Current Credit Facility – Term Loan   6,118,000    5,225,000 
Solar Credit Facility   970,000    970,000 
Finance lease obligations   841,000    1,007,000 
Loans Payable - financed assets   7,000    14,000 
Subtotal   23,774,000    20,121,000 
Less: Current portion   (22,227,000)   (18,362,000)
Long-Term Portion  $1,547,000   $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 (see summary of amendments below), and now provides for a $20,000,000 revolving loan (“Revolving Line of Credit”) and a $5,700,000 term loan (“Term Loan”). An additional advance under the term loan was made during the first quarter of 2025 in the amount of $1,640,000 and reference herein to the “Term Loan” for periods after the date of such advance include the $1,640,000. The loan is secured by a lien on substantially all of the assets of the Company.

 

As of September 30, 2025, there is $15,838,000 outstanding under the Revolving Line of Credit and $6,118,000 under the Term Loan.

 

As discussed in Note 1, the Current Credit Facility expires on December 30, 2025 and the Company has not received waivers for defaults of certain covenants that it failed to meet. Therefore, amounts owed under the agreement are classified as short term as of September 30, 2025.

Interest expense related to the Current Credit Facility amounted to approximately $347,000 and $332,000 for the three months ended September 30, 2025 and 2024, respectively, and $988,000 and $980,000 for the nine months ended September 30, 2025 and 2024, respectively. Interest expense includes the amortization of deferred finance costs of $17,000 and $17,000 for the three months ending September 30, 2025 and 2024, respectively, and $51,000 and $51,000 for the nine months ending September 30, 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. At December 31, 2024, the Company was in full compliance with its covenants. The Company achieved the required FCCR for the period ended September 30, 2025, but did not meet the required FCCR for the period ended June 30, 2025, having attained a ratio of only 0.76x.

 

●The Current Credit Facility limits the amount of capital expenditures and dividends the Company can pay to its stockholders. As of September 30, 2025, the Company had exceeded the limitation on capital expenditures for the year ended December 31, 2025.

 

●Substantially all of the Company’s assets are pledged as collateral.

 

●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 6.81% and 7.78% for the three months ended September 30, 2025 and 2024, respectively, and 6.84% and 7.83% for the nine months ended September 30, 2025 and 2024, respectively.

 

The below summarizes certain historical amendments to the Current Credit Facility:

 

●On May 31, 2024, the Company entered into a Seventh Amendment that waived the default caused by the Company’s failure to achieve the Fixed Charge Coverage Ratio required by the Sixth Amendment. This amendment further revised the Financial Covenants. For the six months ending June 30, 2025 EBITDA shall not be less than $740,000; for the nine months ending September 30, 2024 EBITDA shall not be less than $1,500,000; for the twelve months ending December 31, 2024 EBITDA shall not be less than $2,800,000. For the rolling twelve-month period ending March 31, 2025, the Company is required to achieve a Fixed Charge Coverage Ratio of 1.05x. Beginning with the rolling twelve-month period ending June 30, 2025 and 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, the Company entered into an Eighth Amendment to provide for an additional Term Loan in the amount of $1,640,000 for the acquisition of 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 prior to June 30, 2025, 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.
●

On September 10, 2025, the Company entered into a Ninth Amendment where it agreed that the $3,930,000 of the proceeds from its ATM Offering would be maintained in an interest bearing account. The funds in this account serve as additional security for its obligations under the Current Credit Facility.

 

Currently, at any time, Webster Bank could choose to exercise additional rights, that it has as a result of the Company’s defaults under the Current Credit Facility. For example, it could increase the rate of interest or refuse to make loans under the revolving portion of the Current Credit Facility and keep the funds remitted to the collection account. If the lender were to cease making new loans under the revolving facility or limit the amount of loans under the revolving facility, the Company would lack the funds to continue or, possibly, expand operations. To date, the lender has chosen not to exercise any of its remedies, though we agreed to put $3,930,000 of ATM proceeds in an interest bearing account to serve as additional security for the Company’s obligations under the Current Credit Facility. We remain in constructive discussions with Webster Bank regarding potential refinancing or extension of these obligations but there can be no assurance that an agreement will be reached.

 

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 September 30, 2025, the Company has borrowing capacity of approximately $4,162,000 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 were 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%. Semiannual payments in the amount of $42,000 are due commencing on July 1, 2025. The first semi-annual payment was paid for interest only, subsequent semiannual payments beginning with the payment due on January 1, 2026 will include both principal and interest. As of September 30, 2025, the amount classified as short term is $28,000 and the amount classified as long term is $942,000.

 

Interest expense related to the Solar Credit Facility amounted to approximately $14,000 and $11,000 for the three months ended September 30, 2025 and 2024, respectively, and $42,000 and $30,000 for the nine months ended September 30, 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 $841,000 and $1,007,000 as of September 30, 2025 and December 31, 2024, respectively. The leases have an average imputed interest rate of 7.43% per annum and are payable monthly with the final payments due between September of 2026 and May of 2030.

   Three Months Ended   Nine Months Ended 
   September 30,
2025		   September 30,
2024		   September 30,
2025		   September 30,
2024		 
Finance Lease cost:                
Amortization of ROU assets  $49,000   $49,000   $147,000   $128,000 
Interest on lease liabilities   16,000    20,000    52,000    53,000 
Total lease Costs  $65,000   $69,000   $199,000   $181,000 
                     
Other Information:                    
Cash Paid for amounts included in the measurement lease liabilities:                    
Financing cash flow from finance lease obligations  $57,000   $51,000   $166,000   $143,000 
                     
Supplemental disclosure of non-cash activity                    
Acquisition of finance lease asset  $
-
   $
-
   $
-
   $319,000 

 

   September 30,
2025		   December 31,
2024		 
         
Weighted  Average Remaining Lease Term - in years   4.6    4.8 
Weighted Average Discount rate - %   7.43%   7.44%

 

As of September 30, 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)  $73,000 
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   983,000 
Less: imputed interest   (142,000)
Less: Current portion   (236,000)
Long-term portion  $605,000 

 

Loan Payable – Financed Asset

 

The Company financed the purchase of a delivery vehicle in July 2020. The loan obligation totaled $7,000 and $14,000 as of September 30, 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.

 

The future minimum loan payments are as follows:

 

For the year ending  Amount 
December 31, 2025 (remainder of year  $2,000 
December 31, 2026   5,000 
Loans Payable - financed assets   7,000 
Less: Current portion   (7,000)
Long-term portion  $
-
 

Related Party Subordinated 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 (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 these notes, Michael and Robert 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 was allowed to make principal payments of up to $4,800,000 prior to June 30, 2025, with funds raised in the Company’s ATM Offering. For the three and nine month periods ended September 30, 2025, the Company paid a total of $0 and $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 September 30, 2025 consist of:

 

   Michael Taglich,
Director		   Robert Taglich,
Director		   Taglich Brothers,
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,
Director		   Robert Taglich,
Director		   Taglich Brothers,
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 September 30, 2025 and 2024 on all related party subordinated notes payable was $86,000 and $118,000, respectively, and $271,000 and $354,000 for the nine months ended September 30, 2025 and 2024, 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. The remaining $550,000 is not convertible. 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.