Revolving Credit Facility and Loans |
12 Months Ended | |||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2025 | ||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||
| Revolving Credit Facility and Loans |
During the year ended December 31, 2024, the Company entered into a Revolving Financing and Assignment Agreement (the “RFAA”) which provides a revolving credit facility up to an amount of $2,000,000 (the “Total Credit Facility”) with an interest rate equal to the prime rate plus 3.50% per annum, with a floor rate of 6.00%. This facility is intended to meet the working capital needs and general corporate purposes of the Company.
Under the RFAA, the Company may draw up to 80% of the face amount of eligible accounts receivable. The Company is required to pay a commitment fee of 1.00% of the Total Credit Facility annually, and a collateral management fee of 0.15% is assessed monthly on the Total Credit Facility.
The RFAA will expire under the following conditions: (a) 36 months from the initial funding date, or (b) 30 days following the execution of legal documents if the initial funding has not occurred, or (c) May 31, 2024, if neither condition (a) nor (b) applies. The agreement will automatically renew for additional 36-month periods unless terminated by either party with a minimum of 60 days’ prior written notice.
The RFAA includes financial covenant requiring the Company to maintain net assets, excluding intangible assets and amounts outstanding under the RFAA, in excess of $3.5 million. As of December 31, 2024, the Company was not in compliance with this financial covenant.
The revolving credit facility is secured by a continuing security interest in the Company’s personal property and fixtures, including accounts receivable, inventory, equipment, and intellectual property.
On February 24, 2025, the Company made a payment of $0.1 million to fully repay the Total Credit Facility and formally terminated the RFAA. Following this payment, the Company was released from any further liabilities under the terms of the RFAA.
As of December 31, 2025, the balance of the RFAA was $ (December 31, 2024 – $0.3 million).
On February 5, 2025, the Company, through its Subsidiary, entered into a Loan Agreement with Two Shores (the “2Shores Loan Agreement”), pursuant to which the Subsidiary may borrow up to an aggregate maximum amount of $5.0 million which was amended to $10.0 million, subject to the satisfaction of certain conditions. On December 1, 2025, the Loan Agreement was amended to increase the maximum borrowing capacity to $10.0 million. Advances under the Loan Agreement bear interest at a rate of 13.75% per annum. All present and future obligations of the Subsidiary under the Loan Agreement are secured by a first-priority security interest in all assets of the Company, the Subsidiary, and the Company’s other U.S. subsidiaries. As of December 31, 2025, the outstanding balance under the Loan Agreement, including accrued interest, was approximately $3.02 million. The Company is obligated to provide periodic financial reporting, reporting of its inventory and accounts receivable listings, maintenance of its subsidiaries in good legal standing, maintenance of its insurance policies and payments of its tax obligations.
In connection with the Loan Agreement with Two Shores Capital Corp., the Company issued total 1,000,000 warrants to Two Shores Capital Corp., exercisable at a price of $0.45 per share for a period of three years from the date of issuance. The Company estimated the fair value of the warrants at $65,215 on the issuance date. This amount was recognized as finance costs in the consolidated statements of operations. The valuation of the warrants was performed using the Black-Scholes option pricing model, applying the following weighted-average assumptions:
As of December 31, 2025, the balance of the 2Shores Loan Agreement was $3 million (December 31, 2024 – $). |