| SHORT-TERM AND LONG-TERM DEBT |
12. SHORT-TERM AND LONG-TERM DEBT Operating Line of Credit In July 2025, the Company renewed its $30.0 million line of credit effective June 28, 2025 with a maturity date of June 28, 2027. The interest rate on the line of credit is the “Wall Street Journal” Prime Rate (the index) with a floor of 4.99%. The line of credit is limited to a borrowing base calculation as summarized below: | | | | | | | | | | June 30, 2025 | | September 30, 2024 | | Eligible borrowing base | | $ | 23,878,282 | | $ | 25,089,446 | | | | | | | | | | Borrowed on line of credit | | | 11,573,976 | | | 4,500,000 | | | | | | | | | | Line of credit balance available | | $ | 12,304,306 | | $ | 20,589,446 | | | | | | | | | | Interest rate | | | 7.5 | % | | 8.0 | % |
The Company’s $11.6 million and $4.5 million line of credit borrowings are recorded as a long-term debt as of June 30, 2025 and September 30, 2024, respectively. The financial covenants required by the Company’s lender are below: | ● | Minimum tangible net worth of $28.0 million, |
| ● | Minimum traditional debt service coverage of 1.50x on a rolling twelve- month basis, |
| ● | Minimum current ratio of 1.20x, |
| ● | Maximum debt to tangible net worth ratio (“TNW”) of 2.75x, |
| ● | Each ratio and covenant shall be determined, tested, and measured as of each calendar quarter beginning June 30, 2023, |
| ● | The Company shall maintain a ratio of Maximum Senior Funded Debt (“SFD”) to Earnings before Interest, Taxes, Depreciation and Amortization (“EBDITA”) equal to or less than 3.5:1. SFD shall mean any funded debt or lease of the Company, other than subordinated debt. The covenant shall be tested quarterly, at the end of each fiscal quarter, with EBITDA based on the preceding four quarters. |
The Company’s lender has agreed to omit the effect of the PPP loan restatement from the Company’s covenant compliance calculations while a final decision on PPP loan forgiveness remains in question. The Company was not in compliance with all covenants at June 30, 2025 and received a waiver from its lender. The Company projects to meet all covenant requirements for the next twelve months. Paycheck Protection Program Loans Due to the economic uncertainties created by COVID-19 and limited operating funds available, the Company applied for loans under the PPP. On April 15, 2020, the Company and its subsidiaries, C.J. Hughes, Contractors Rental and Nitro, entered into separate PPP notes effective April 7, 2020, with its Lender in an aggregate principal amount of $13.1 million pursuant to the PPP Loans. In a special meeting held on April 27, 2020, the Board of Directors of the Company unanimously voted to return $3.3 million of the PPP Loans after discussing the financing needs of the Company and subsidiaries. That left the Company and subsidiaries with $9.8 million in PPP Loans to fund operations. During fiscal year 2021, the Company received notice that the SBA had granted forgiveness of the $9.8 million of PPP Loans and the SBA repaid the Lender in full. The forgiveness was recorded as other income for the fiscal year ended September 30, 2021. During April 2023, management received notification from the SBA that one of the Company’s forgiveness applications related to the PPP Loans was under review. As part of the review, the SBA requested additional payroll information. Additionally, the SBA requested information regarding the ability of the Company’s affiliates to meet SBA size standards and/or PPP corporate maximum limits. The requested information was subsequently provided to the SBA through the Lender. The Company recognizes that there is a possibility that the SBA could reverse its previous determination on the forgiveness of the PPP Loans. As a result of this uncertainty, the Company restated the previously audited financial statements of the Company for the fiscal years 2022 and 2021. The Company has recorded a short-term borrowing due to the SBA inquiry for the full $9.8 million, plus accrued interest. During July 2023, management received notification from the SBA that two additional forgiveness applications related to the PPP Loans were under review. As part of the review, the SBA requested information regarding the ability of the Company’s affiliates to meet SBA size standards and/or PPP corporate maximum limits. The requested information was subsequently provided to the SBA through the Lender. Borrowers must retain PPP documentation for at least six years after the date the loan is forgiven or paid in full, and the SBA and SBA Inspector General must be granted these files upon request. The SBA could revisit its forgiveness decision and determine that the Company does not qualify as a whole or in part for loan forgiveness and demand repayment of the loans. In addition, it is unknown what type of penalties could be assessed against the Company if the SBA disagrees with the Company’s certification. Any penalties in addition to the potential repayment of the PPP Loans could negatively impact the Company’s business, financial condition and results of operations and prospects. Short and Long - Term Debt A summary of short-term and long-term debt as of June 30, 2025 and September 30, 2024 is as follows: | | | | | | | | | June 30, 2025 | | September 30, 2024 | Line of credit payable to bank, monthly interest at 7.5%, final payment due by June 28, 2026, guaranteed by certain directors of the Company. | | $ | 11,573,976 | | $ | 4,500,000 | | | | | | | | Equipment line of credit with a total of $9.3 million with payments of $202,809 due in monthly installments, including fixed interest at 7.25% and final payment due February 2028, secured by equipment, guaranteed by certain directors of the Company. | | | 6,371,527 | | $ | 7,802,313 | | | | | | | | Paycheck Protection Program loans from Small Business Administration, 1.0% simple interest, initially forgiven in the fiscal year ended September 30, 2021. Final forgiveness decision has not been determined. | | | 10,367,394 | | | 10,292,676 | | | | | | | | Term note payable to United Bank, WV Pipeline acquisition, due in monthly installments of $64,853, including fixed interest at 4.25%, final payment due by March 25, 2026, secured by receivables and equipment, guaranteed by certain directors of the Company. | | | 579,100 | | | 1,134,185 | | | | | | | | Notes payable to finance companies, due in monthly installments totaling $219,000 at June 30, 2025 and $76,000 at September 30, 2024, including interest ranging from 0.00% to 6.0%, final payments due July 2025 through September 2028, secured by equipment. | | | 5,465,337 | | | 1,787,009 | | | | | | | | Notes payable to United Bank, Tribute acquisition finance, due in monthly installments totaling $272,016, including fixed interest at 6.9%, final payment due December 2030 secured by receivables and equipment, guaranteed by certain directors of the Company. | | | 14,723,984 | | | — | | | | | | | | Notes payable to bank, due in monthly installments totaling $7,848, including interest at 4.82%, final payment due November 2034 secured by building and property. | | | 723,930 | | | 762,670 | | | | | | | | Notes payable to bank, due in monthly installments totaling $59,932, including fixed interest at 6.0%, final payment due October 2027 secured by receivables and equipment, guaranteed by certain directors of the Company. | | | 1,568,442 | | | 2,024,847 | | | | | | | | Equipment line of credit with a total of $5.0 million borrowings available, including fixed interest at 8.5% for purchases made in the first twelve months. After twelve months the borrowings will be converted to a forty-eight month term note agreement with a fixed interest rate equal to the “U.S. Treasury Rate” plus 2.75% per annum. As of June 30, 2025, the Company had borrowed $3.7 million against this line of credit and made no principal payments. The agreement is guaranteed by certain directors of the Company. | | | 3,676,024 | | | — | | | | | | | | Notes payable to David Bolton and Daniel Bolton, due in annual installments totaling $500,000, including interest at 3.25%, final payment due December 31, 2025, unsecured. | | | 485,000 | | | 940,000 | | | | | | | | Note payable to United Bank, Tri-State Paving acquisition, due in monthly installments of $129,910, including fixed interest at 4.50%, final payment due by June 1, 2027, secured by receivables and equipment, guaranteed by certain directors of the Company. | | | 3,316,236 | | | 4,359,883 | | | | | | | | Notes payable to Corns Enterprises, $1,000,000 with fair value of $936,000, due in annual installments totaling $250,000, including interest at 3.50%, final payment due April 29, 2026, unsecured. | | | 250,000 | | | 250,000 | | | | | | | | Total debt | | $ | 59,100,950 | | $ | 33,853,583 | | | | | | | | Less current maturities | | | 21,500,764 | | | 16,665,591 | | | | | | | | Total long term debt | | $ | 37,600,186 | | $ | 17,187,992 |
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