v3.26.1
Debt
 3 Months Ended
Mar. 31, 2026
Debt [Abstract]  
DEBT

Note 5. DEBT

 

Total debt outstanding as of March 31, 2026 is $26,562,000 and was $25,233,000 at December 31, 2025.

 

Indebtedness to third parties consists of the following:

 

   March 31,   December 31, 
   2026   2025 
Current Credit Facility - Revolver  $19,283,000   $     17,618,000 
Current Credit Facility - Term Loan   5,593,000    5,855,000 
Solar Credit Facility   957,000    971,000 
Finance lease obligations   726,000    784,000 
Loans Payable - financed assets   3,000    5,000 
Subtotal   26,562,000    25,233,000 
Less: Current portion   (25,102,000)   (23,721,000)
Long-Term Portion  $1,460,000   $1,512,000 

Current Credit Facility

 

The Company has a credit facility (“Current Credit Facility”) with Webster Bank that expires on September 30, 2026. 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, 2026, there is $19,283,000 outstanding under the Revolving Line of Credit and $5,593,000 under the Term Loans.

 

As discussed in Note 1, the Company was in default of its minimum Fixed Charge Coverage Ratio (“FCCR”) of 1.10x as of March 31, 2026, and the Current Credit Facility expires on September 30, 2026. Therefore, the entire Term Loan and all amounts due under the Revolving Line of Credit are classified as short term as of March 31, 2026.

 

The below table shows the timing of payments due under the Term Loan:

 

For the year ending  Amount 
December 31, 2026 (remainder of year)  $5,593,000 
Term Loan payable   5,593,000 
Less: Current portion of Term Loan payable   (5,593,000)
Total long-term portion of Term Loan payable  $
-
 

 

Interest expense related to the Current Credit Facility amounted to approximately $379,000 and $315,000 for the three months ended March 31, 2026 and 2025, respectively. Interest expense includes the amortization of deferred finance costs of $0 and $17,000 for the three months ending March 31, 2026 and 2025, 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 of 1.10x. As of March 31,2026, the Company was in default with this ratio having attained a ratio of only 0.93. At December 31, 2025, the Company was in full compliance with its covenants.

 

The Current Credit Facility limits the amount of capital expenditures and dividends the Company can pay to its stockholders. As of March 31, 2026, the Company was in compliance with this Covenant.

 

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, 2025, 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 6.10% and 6.85% for the three months ended March 31, 2026 and 2025, respectively.

 

The below summarizes certain amendments to the Current Credit Facility

 

  ●

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.

●On September 10, 2025, the Company entered into a Ninth Amendment where it agreed that $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. Additionally, this amendment waived the default as June 30, 2025.

 

●On December 15, 2025, the Company entered into a Tenth Amendment which waived the defaults caused by the failure to achieve the required fixed charge coverage ratio for the fiscal quarter ended June 30, 2025, and for exceeding the permitted amount of capital expenditures for the fiscal year ending December 31, 2025. Additionally, the maturity date of the revolving credit and term loans were extended to March 31, 2026, and the capital expenditure covenant was amended. The company paid an amendment fee of $40,000.

 

●On February 26, 2026, the Company entered into an Eleventh Amendment to which extended the maturity date of the revolving credit and term loans to September 30, 2026. The company paid an amendment fee of $25,000 and agreed to pay an additional fee of $150,000 on the maturity date.

 

As the Company is in default under the Current Credit Facility, the lender could exercise additional rights and remedies, such as increasing the rate of interest on outstanding amounts 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. The Company is actively engaged in constructive discussions with various lenders as the Company has been advised by its lender that it will not renew its Current Credit Facility. While these discussions have been professional and remain ongoing, there can be no assurance that agreements will be reached with existing lenders or with alternative financing sources.

 

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 March 31, 2026, the Company has borrowing capacity of approximately $717,000 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%. Semi-annual payments in the amount of $42,000 are due commencing on July 1, 2025. The first semi-annual payment was for interest only. The second payment due January 1, 2026 and all subsequent semi-annual payments include both principal and interest. As of March 31, 2026, the amount classified as short term is $29,000 and the amount classified as long term is $928,000.

Interest expense related to the Solar Credit Facility amounted to approximately $14,000 and $14,000 for the three months ended March 31, 2026 and 2025, 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 $726,000 and $784,000 as of March 31, 2026 and December 31, 2025, 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 
   March 31,   March 31, 
   2026   2025 
Finance Lease cost:          
Amortization of ROU assets  $49,000   $49,000 
Interest on lease liabilities   14,000    18,000 
Total lease Costs  $63,000   $67,000 
           
Other Information:          
Cash Paid for amounts included in the measurement lease liabilities:          
Financing cash flow from finance lease obligations  $58,000   $54,000 
           
Supplemental disclosure of non-cash activity          
Acquisition of finance lease asset  $
-
   $
-
 

 

   March 31,   December 31, 
   2026   2025 
Weighted  Average Remaining Lease Term - in years   3.6    4.8 
Weighted Average Discount rate - %   7.43%   7.44%

 

As of March 31, 2026, the aggregate future minimum finance lease payments, including imputed interest are as follows:

 

For the year ending  Amount 
December 31, 2026 (remainder of year)  $193,000 
December 31, 2027   190,000 
December 31, 2028   190,000 
December 31, 2029   190,000 
December 31, 2030   75,000 
Total future minimum finance lease payments   838,000 
Less: imputed interest   (112,000)
Less: Current portion   (194,000)
Long-term portion  $532,000 

 

Loan Payable – Financed Assets

 

The Company financed the purchase of a delivery vehicle in July 2020. The loan obligation totaled $3,000 and $5,000 as of March 31, 2026 and December 31, 2025, 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, 2026 (remainder of year  $3,000 
Loans Payable - financed assets   3,000 
Less: Current portion   (3,000)
Long-term portion  $
-
 

 

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, 2026 and December 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 

 

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, 2026 and 2025 on all related party notes payable was $86,000 and $99,000, 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 October 1, 2026.

 

The Related Party Notes are subordinate to outstanding debt pursuant to the Current Credit Facility and mature on October 1, 2026.