v3.25.1
Note 8 - Debt
 3 Months Ended
Mar. 31, 2025
Notes to Financial Statements  
Debt Disclosure [Text Block]

NOTE 8: DEBT

 

Debt for the Company consists of the following:

 

           

March 31,

    

December 31,

          

Debt Instrument

  

Issuance Date

  

Maturity Date

  

2025

    

2024

    

Interest Rate Information

  

Revolving Credit Facility

  

5/23/2024

  

5/23/2027

   $ 19,238     $ 13,044    

See below

  

Promissory Note

  

3/14/2025

  

9/14/2027

     4,000       -       14 %
                                 

Total debt, gross

     23,238       13,044          

Less: Deferred financing costs

     217       243          

Total debt, net

     23,021       12,801          

Less: Current portion

     387       -          

Total long-term debt, net

   $ 22,634     $ 12,801          

 

Revolving Credit Facility

 

On May 23, 2024, the Company entered into a Credit Agreement (the “Credit Agreement”) with First Merchants Bank (the “Bank”). The Credit Agreement provides the Company with a $22,100 secured revolving credit facility, with an uncommitted accordion feature that provides for additional borrowing capacity of up to $5,000, subject to the Bank’s approval and other customary terms and conditions set forth in the Credit Agreement. The revolving credit facility matures on May 23, 2027, subject to any earlier default under the Credit Agreement. The Credit Agreement requires the Company to pay the entire unpaid principal balance of the revolving credit facility on the maturity date, subject to any earlier default under the Credit Agreement. The Credit Agreement includes, among other things, the occurrence of any event which could reasonably be anticipated to cause or result in a “Material Adverse Effect” (as defined in the Credit Agreement) as an event of default under which the outstanding balance could become due and payable to the Bank. The Company has determined that the risk of such event is not probable and therefore has classified the outstanding balance in long-term liabilities in the Condensed Consolidated Balance Sheets based on the maturity date.

 

Effective March 31, 2025, the Company entered into an amendment to the Credit Agreement, modifying the financial covenant related to the Senior Funded to EBITDA ratio. Pursuant to the amendment, the Company is required to maintain a Senior Funded Debt to EBITDA ratio of less than 4 to 1 through June 30, 2025, and less than 3.75 to 1 beginning with the quarter ending September 30, 2025 and thereafter.  

 

The revolving credit facility accrues interest at a floating rate equal to the 1-month SOFR, plus 0.11%, plus a floating margin ranging from 2.00% to 3.50% that adjusts quarterly, depending upon the Company’s Senior Funded Debt to EBITDA Ratio. The floating margin is determined as follows:

 

Senior Funded Debt to EBITDA Ratio

  

Floating Margin

  

< 1.00 to 1

     2.00 %

≥ 1.00 to 1.00 but < 2.00 to 1.00

     2.50 %

≥ 2.00 to 1.00 but < 3.00 to 1.00

     3.00 %

≥ 3.00 to 1.00

     3.50 %

 

The effective interest rate at March 31, 2025 was 7.43%. The Company pays accrued interest monthly on the first day of each successive calendar month.

 

The Company incurred $306 of deferred financing costs that were capitalized and recorded as other non-current assets within the Condensed Consolidated Balance Sheets. Deferred financing costs are being amortized as interest expense over the respective debt instrument period, 36 months. 

 

The Company had $19,238 in outstanding borrowings under the revolving credit facility as of March 31, 2025. Total availability under the revolving facility was $2,862.

 

As of March 31, 2025, the Company was in compliance with all applicable debt covenants.

 

Promissory Note

 

The Promissory Note was issued on March 14, 2025 as part of the Settlement Agreement to resolve the contingent consideration liability. It is an unsecured obligation of the Company. The Promissory Note bears interest at a fixed annual rate of 14.0%. In the event of a default (as defined in the Promissory Note), or during any period of non-payment caused by restrictions under the Subordination Agreement (as defined below), the interest rate increases to 17.0% per annum (the “Interest Rate”). The Promissory Note requires monthly payments of interest only commencing April 14, 2025 and continuing through September 14, 2025. Commencing October 14, 2025, the Company is required to pay principal and interest in accordance with an amortization schedule that requires equal monthly payments of $109 on the 14th day of each calendar month through maturity on September 14, 2027. On the maturity date, the Company is required to make a final balloon payment of $2,277, representing the remaining principal and accrued but unpaid interest outstanding at maturity.

 

The principal balance of the Promissory Note (together with accrued but unpaid interest on such amounts) may be prepaid in whole or in part at any time prior to maturity, subject to the Company’s payment of a make-whole payment with such prepayment. The make-whole payment is equal to the aggregate monthly payments of interest on the prepayment amount that would be due after the prepayment date and through the maturity date, using the percentage, if any, by which the Interest Rate exceeds a prescribed “yield maintenance treasury rate.” 

 

The Stockholders’ Representative’s rights under the Promissory Note are subject to a Subordination Agreement dated of March 14, 2025 by and among the Company, Reflect, First Merchants Bank and the Stockholders’ Representative (the “Subordination Agreement”). Under the terms of the Subordination Agreement, during any period in which an event of default exists under the senior debt facilities, the Company is prohibited from making any payments on the Promissory Note unless First Merchants Bank provides prior written consent, and the Stockholders' Representative is prohibited from accepting or enforcing any payments during the subordination period. The Promissory Note includes a default interest provision that increases the stated interest rate to 17% in the event of nonpayment or other specified defaults.