Note 5 - Debt |
6 Months Ended | |||||||||||||||||||||||||
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Jun. 30, 2026 | ||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||
| Debt Disclosure [Text Block] |
5. DEBT
Spectrum Loan Facility
On
June 1, 2022 (the "Spectrum Effective Date"), the Company entered into the Spectrum Loan Facility with Spectrum. Pursuant to the terms of the Assignment of Accounts and Security Agreement, as amended (the “AR Agreement”), Spectrum agreed to advance funds equal to approximately
85% of eligible accounts receivable that are collected by Spectrum under a “lock box” arrangement. The maximum amount that
may be advanced under the AR Agreement is
$3.75 million less any amounts loaned under the Credit Agreement.
Under the terms of the General Credit and Security Agreement (the "Credit Agreement"), the Company could borrow monies to purchase eligible equipment in an amount equal to the lesser of (i)
75% of the cost of such eligible equipment and
(ii) $500,000; provided that this maximum eligibility would automatically be reduced by
th
each month during the term of the facility. The Credit Agreement also allowed for additional borrowing in an amount equal to the lesser of (i) 50% of the net amount of eligible inventory (as defined in the Credit Agreement), (ii) $350,000, and (iii) 50% of the purchased accounts receivable outstanding under the related AR Agreement.
The initial term of the Spectrum Loan Facility was 24 months from the Spectrum Effective Date. Subject to certain exceptions, in the event of an early termination of the AR Agreement by the Company or resulting from the Company’s default or other circumstances impacting the Company (including bankruptcy, reorganization, sale of assets, and cessation of business), the Company will be required to pay a prepayment fee.
The Company’s obligations under the Spectrum Loan Facility are secured by first-priority liens on essentially all of the Company’s assets; provided, however, that the Company is permitted to grant purchase money security interests on certain equipment, furniture and similar tangible assets financed by a third party.
On June 10, 2026, the Company entered into the Second Amendment to the Spectrum Loan Facility, which (i) reduced the annual facility fee from 37,500 to $28,125, (ii) extended the term through May 31, 2028 (subject to automatic 24-month renewals), (iii) revised the eligibility and customer-concentration criteria for eligible accounts, and (iv) revised the definitions of the minimum monthly fee and required reserve amount and the timing of reserve remittances. The maximum advance capacity remained $3.75 million.
In addition to annual facility fees of $28,125 and other quarterly and transaction fees payable to Spectrum, interest accrues on amounts owed under the Spectrum Loan Facility at the prime rate as quoted by the Wall Street Journal plus 3.5%, but in no event lower than 7.0%.
The Spectrum Loan Facility contains various covenants and restrictions on the Company's financial and business operations including restrictions on the purchase or redemption of any Company shares and the declaration or payment of any dividends on the Company's stock. As of June 30, 2026, the Company was in compliance with these covenants and restrictions.
The Company has borrowed $0.7 million under the Spectrum Loan Facility as of June 30, 2026. The Company includes the interest expense of the Spectrum Loan Facility ($51 thousand) as part of its interest expense on its unaudited interim condensed consolidated statements of operations, and the total amount of $0.7 million and $0.6 million borrowed under the Spectrum Loan Facility are included as short-term debt on the consolidated balance sheet as of June 30, 2026 and December 31, 2025, respectively.
Salem Loan Facility
The Company entered into a loan facility (the “Salem Loan Facility”) with Salem Investment Partners V, Limited Partnership (“Salem”) on August 11, 2022. It was subsequently amended, with the most recent amendment on December 30, 2025, when the Company entered into Amendment No. 3 to Amended and Restated Loan Agreement (the "2025 Salem Amendment") with Salem, to amend the loan’s maturity date and repayment schedule. The 2025 Salem Amendment extended the maturity date from December 31, 2028 to December 31, 2029 and the Company incurred a 1% modification fee of $45,000, payable with the final principal payment at maturity. Pursuant to the amended repayment schedule, the Company is required to repay principal in annual installments of $200,000 in the fiscal year ending December 31, 2026, $1,500,000 in the fiscal year ending December 31, 2027, $1,500,000 in the fiscal year ending December 31, 2028, and $1,300,000 in the fiscal year ending December 31, 2029. The Company determined that the 2025 Salem Amendment should be accounted for as a debt modification and the Company recorded the $45,000 modification fee as deferred debt discount. The Company incurred third-party financing costs of $5,936, which were expensed during the year ended December 31, 2025. During the three and six months ended June 30, 2026, the Company amortized $3,006 and $5,921, respectively, of deferred debt discount as interest expense and $39,079 remained unamortized.
Salem is a related party of the Company because it holds in excess of a 10% beneficial ownership interest in the Company's common stock. Accordingly, borrowings under the Salem Loan Facility are presented as notes payable – related party on the condensed consolidated balance sheet. See Note 12 - Related Party Transactions.
Borrowings under the Salem Loan Facility bear interest at a stated rate of 12.0% per annum, computed on a 360-day year and payable monthly in arrears. As of June 30, 2026, the carrying value of the amount financed under the Salem Loan Facility of $4,505,921 is reflected on the condensed consolidated balance sheet within Notes Payable - related party, current portion ($200,000) and within Notes Payable - related party, noncurrent ($4,305,921), and approximates its fair value as the stated interest rate approximates the Company's market rate for equivalent financing terms.
Summary
As of June 30, 2026, debt is expected to mature as follows:
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