Note 8 - Corporate Debt |
9 Months Ended | ||
|---|---|---|---|
May 31, 2026 | |||
| Notes to Financial Statements | |||
| Debt Disclosure [Text Block] |
The Company is party to a Credit Agreement (as amended, the Credit Agreement) with JPMorgan Chase Bank, N.A. (JPM), which provides the Company with a senior secured revolving line of credit (the Credit Facility) of up to $12.0 million (as amended below), which includes a $5.0 million sublimit for standby letters of credit. Borrowings of $11,763,555 and $9,329,021 were outstanding under the Credit Facility as of May 31, 2026 and August 31, 2025, respectively.
On December 17, 2025, the Company and JPM renewed the Company’s Credit Agreement to extend the maturity date of the Credit Facility from January 5, 2026 to February 5, 2027. On January 30, 2026, the Company and JPM entered into an amendment to the Credit Agreement, which increased the availability under the Credit Facility from $10.0 million to $12.0 million.
The principal amount under the Credit Facility, together with all accrued unpaid interest and other amounts owing thereunder, if any, will be payable in full on the maturity date, unless the Credit Facility is extended or renewed or terminated earlier.
Borrowings under the Credit Agreement bear interest at a floating rate, at the option of the Company, equal to either the CB Floating Rate or the Adjusted SOFR Rate. The term "CB Floating Rate" means the greater of the Prime Rate in the United States or 2.50%. The term "Adjusted SOFR Rate" means the term secured overnight financing rate for either one, three or six months (depending on the interest period selected by the Company) plus 0.10% per annum. With respect to any borrowings using an Adjusted SOFR Rate, there is an applicable margin of 2.35% applied per annum. There is no applicable margin with respect to borrowings using a CB Floating Rate. In March 2026, the Company elected to convert its outstanding borrowings under the Credit Facility from the CB Floating Rate to the Adjusted SOFR Rate. The weighted average interest rate was 6.20% and 6.65% for the nine months ended May 31, 2026 and 2025, respectively.
To secure the Credit Agreement, the Company assigned JPM a continuing security interest in all of its right, title and interest in collateral made up of the assets of the Company.
The Credit Agreement contains customary affirmative and negative covenants, including, among other matters, limitations on the Company’s ability to incur additional debt, grant liens, engage in certain business operations and transactions, make certain investments, modify its organizational documents or form any new subsidiaries, subject to certain exceptions. Further, the Credit Agreement contains a negative covenant that restricts the ability of the Company to redeem or repurchase its common stock or pay dividends if the result of which would cause an event of default under the Credit Agreement. The Credit Agreement also requires the Company to maintain a Fixed Charge Coverage Ratio of at least 1.25 to 1.00. The term “Fixed Charge Coverage Ratio” means the ratio, computed for the Company on a consolidated basis, of net income plus income tax expense, plus amortization expense, plus depreciation expense, plus interest expense, and plus dividends received from joint ventures, minus unfinanced capital expenditures and equity in income from joint ventures, all computed for the twelve month period then ending, to scheduled principal payments made, plus scheduled finance lease payments made, plus interest expense paid, plus income tax expense paid, and plus cash distributions and dividends paid, all computed for the same twelve month period then ending.
The Company was not in compliance with the Fixed Charge Coverage Ratio covenant under the Credit Agreement as of May 31, 2026. The Credit Agreement requires the Company to maintain a Fixed Charge Coverage Ratio of at least 1.25 to 1.00, and the Company's Fixed Charge Coverage Ratio was 0.68 to 1.00 as of May 31, 2026. On July 7, 2026, the Company obtained a waiver from JPM with respect to such noncompliance of the Fixed Charge Coverage Ratio covenant for the period ended May 31, 2026. The Company was in compliance with all other covenants under the Credit Agreement as of May 31, 2026.
The Credit Agreement also contains customary events of default, including, without limitation, payment defaults, material inaccuracy of representations and warranties, covenant defaults, bankruptcy and insolvency proceedings, cross-defaults to certain other agreements, breach of any financial covenant and change of control. Upon the occurrence and during the continuance of any event of default, JPM may accelerate the payment of the obligations thereunder and exercise various other customary default remedies.
On April 27, 2026 and May 28, 2026, the Company's wholly owned subsidiary in China, NTIC China, renewed its loan agreements with China Construction Bank Corporation. Each term loan provides NTIC China with RMB 10,000,000 (approximately USD $1.40 million), for an aggregate of RMB 20,000,000. The term loans mature on April 26, 2027 and May 27, 2027, respectively, and the Company expects to amend or extend each loan at maturity on substantially the same terms, although there can be no assurance that it will be able to do so. Each term loan bears interest at the one-year Loan Prime Rate (LPR) minus 75 basis points, fixed at the LPR in effect on the business day prior to the loan's effective date and held constant for the 12-month term, resulting in an annual interest rate of 3.25% for each loan, with interest due monthly and principal due at maturity. Both term loans are secured by an office building owned by NTIC China and the loan agreements contain certain financial and other covenants. NTIC China was in compliance with all covenants under the loan agreements as of May 31, 2026. The outstanding balance as of May 31, 2026 for both term loans was a total of USD $2,955,083. The outstanding balance as of August 31, 2025 for both term loans was a total of USD $2,804,695.
On August 30, 2025, the Company’s majority owned subsidiary in India, Natur-Tec India, entered into a Foreign Currency Term Loan Agreement with IDFC FIRST Bank Limited (the Bank). The term loan provides Natur-Tec India with a facility of INR 500 lakhs (USD $600,000) to finance the purchase of land in Chennai, India. The loan was disbursed on August 30, 2025 for INR 461 lakhs (USD $522,545) and is repayable in 85 monthly installments to a US dollar account of USD $7,899 each beginning October 5, 2025 and continuing through September 5, 2032. Borrowings bear interest at a fixed rate of 6.45% per annum. The loan is secured by a lien over Natur-Tec India’s cash deposits with the Bank totaling INR 476 lakhs (USD $539,731), and the related land purchase, which was registered in November 2025. The outstanding balance as of May 31, 2026 was INR 425.7 lakhs (USD $448,239), of which INR 56.0 lakhs (USD $59,003) was classified as current and INR 369.6 lakhs (USD $389,236) as long-term. The term loan contains customary affirmative and negative covenants applicable to Natur-Tec India, including, among other matters, restrictions on incurring additional indebtedness, creating liens, or changing the nature of its business. Natur-Tec India was in compliance with all covenants under the term loan agreement as of May 31, 2026.
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