Note 9 - Third-party Long-term Debt

6 Months Ended

Jun. 30, 2026

(9)

Third-Party Long-Term Debt

Debt Agreements. Blue Dolphin and certain subsidiaries are currently parties to the following debt agreements with third parties:

		Original		Monthly Principal
		Principal		and Interest Payment
Loan Description	Parties	(in millions)	Maturity	(in millions)	Interest Rate	Loan Purpose
Huntington Loans
LE Term Loan Due 2034 (in default)⁽¹⁾	LE	$25.0	June 2034	$0.3	WSJ Prime + 2.75%	Capital improvements
	Huntington
LRM Term Loan Due 2034 (in default)⁽¹⁾	LRM	$10.0	December 2034	$0.1	WSJ Prime + 2.75%	Capital improvements
	Huntington
GNCU Loan
NPS Term Loan Due 2031 (in default)⁽²⁾	NPS	$10.0	October 2031	$0.1	5.75%	Working capital
	GNCU
SBA Economic Injury Disaster Loans
Blue Dolphin Term Loan Due 2051⁽³⁾	Blue Dolphin	$2.0	June 2051	$0.01	3.75%	Working capital
	SBA
LE Term Loan Due 2050⁽⁴⁾	LE	$0.15	August 2050	$0.0007	3.75%	Working capital
	SBA
NPS Term Loan Due 2050⁽⁴⁾	NPS	$0.15	August 2050	$0.0007	3.75%	Working capital
	SBA
Equipment Loan Due 2031 ⁽⁵⁾	LE	$0.138	March 2031	$0.0028	12.7%	Equipment Purchase
	Ritchie Bros. Financial Services

⁽¹⁾

^{Our secured loan agreements with Huntington are subject to certain financial and non-financial covenants. As of June 30, 2026, LE and LRM were in default related to financial covenants under the LE Term Loan Due 2034 and LRM Term Loan Due 2034. With respect to non-financial covenants, we are required to have a balance of $1.0 million in a payment reserve account held by Huntington. At June 30, 2026 and December 31, 2025 restricted cash totaled $1.0 million.}

⁽²⁾	^{As of June 30, 2026 and the filing date of this report, the NPS Term Loan Due 2031 was in default due to non-financial covenant violations.}

⁽³⁾	^{Original principal amount was $0.5 million; the loan was modified to increase the principal amount by $1.5 million effective in February 2022. Loan is not forgivable.}

⁽⁴⁾	^{Loan is not forgivable.}

⁽⁵⁾	^{In March 2025, LE entered into the Equipment Loan Due 2031 to purchase mobile offices; the mobile offices are used at the Nixon facility.}

Notes to Consolidated Financial Statements (Continued)

Outstanding Principal, Debt Issue Costs, and Accrued Interest. Third-party long-term debt, including outstanding original principal, as of the dates indicated, was as follows:

	June 30,			December 31,
	2026			2025
	(in thousands)
Huntington Loans
LE Term Loan Due 2034 (in default)	$	16,963		$	17,532
LRM Term Loan Due 2034 (in default)		7,065			7,326
GNCU Loan
NPS Term Loan Due 2031 (in default)		7,884			8,495
SBA Economic Injury Disaster Loans
Blue Dolphin Term Loan Due 2051		2,000			2,000
LE Term Loan Due 2050		150			150
NPS Term Loan Due 2050		150			150
Equipment Loan Due 2031		118			127
		34,330			35,780

Less: Long-term debt, net, current portion		(30,510	)		(31,830	)
Less: Unamortized debt issue costs		(1,439	)		(1,540	)
	$	2,381		$	2,410

Unamortized debt issue costs associated with the Huntington and GNCU loans, as of the dates indicated, consisted of the following:

	June 30,			December 31,
	2026			2025
	(in thousands)
Huntington Loans
LE Term Loan Due 2034 (in default)	$	1,674		$	1,674
LRM Term Loan Due 2034 (in default)		768			768
GNCU Loan
NPS Term Loan Due 2031 (in default)		730			730

Less: Accumulated amortization		(1,733	)		(1,632	)
	$	1,439		$	1,540

Amortization expense was less than $0.1 million for both of the three months ended June 30, 2026 and 2025 , and $0.1 million for both the six months ended June 30, 2026 and 2025.

Notes to Consolidated Financial Statements (Continued)

Accrued interest related to third-party long-term debt, reflected as accrued interest payable in our consolidated balance sheets, as of the dates indicated, consisted of the following:

	June 30,			December 31,
	2026			2025
	(in thousands)

SBA Economic Injury Disaster Loans
Blue Dolphin Term Loan Due 2051	$	30		$	51
LE Term Loan Due 2050		3			5
NPS Term Loan Due 2050		3			5
Huntington Loans
LE Term Loan Due 2034 (in default)		178			41
LRM Term Loan Due 2034 (in default)		49			52
GNCU Loan
NPS Term Loan Due 2031 (in default)		15			15
		278			169
Less: Accrued interest payable, current portion		(278	)		(169	)
Long-term interest payable, net of current portion	$	-		$	-

We classified the debt associated with the LE Term Loan Due 2034, LRM Term Loan Due 2034, and NPS Term Loan Due 2031 within long-term debt, current portion on our consolidated balance sheets at June 30, 2026 and December 31, 2025 due to being in default.

Defaults.

As of June 30, 2026 and December 31, 2025 and through the filing date of this report, LE and LRM were in default related to financial covenants under the LE Term Loan Due 2034 and LRM Term Loan Due 2034, respectively. NPS was in default related to non-financial covenants under the NPS Term Loan Due 2031. Defaults may permit lenders to declare the amounts owed under the related loan agreements immediately due and payable, exercise their rights with respect to collateral securing obligors’ obligations, and exercise any other rights and remedies available. If one or more banks fail, we could be exposed to additional events of default (if not cured or waived) under existing secured loan agreements. Defaults under our secured loan agreements and any exercise by third parties of their rights and remedies related to such defaults may have a material adverse effect on our cash position. See “Notes (3) and (9)” to our consolidated financial statements for additional information regarding defaults under our secured loan agreements with third parties and their potential effects on our business, financial condition, and results of operations.

Notes to Consolidated Financial Statements (Continued)

Guarantees and Security.

Loan Description	Guarantees	Security
Huntington Loans
LE Term Loan Due 2034 (in default)	● USDA	●	First priority lien on Nixon facility’s business assets (excluding accounts receivable and inventory)
	● Jonathan Carroll⁽¹⁾	●	Assignment of all Nixon facility contracts, permits, and licenses
	● Affiliate cross-guarantees	●	Absolute assignment of Nixon facility rents and leases, including tank rental income
		●	$5.0 million life insurance policy on Jonathan Carroll
LRM Term Loan Due 2034 (in default)	● USDA	●	Second priority lien on rights of LE in crude distillation tower and other collateral of LE
	● Jonathan Carroll⁽¹⁾	●	First priority lien on real property interests of LRM
	● Affiliate cross-guarantees	●	First priority lien on all LRM fixtures, furniture, machinery, and equipment
		●	First priority lien on all LRM contractual rights, general intangibles, and instruments, except with respect to LRM rights in its leases of certain specified tanks for which Huntington has second priority lien
		●	Substantially all assets
GNCU Loan
NPS Term Loan Due 2031 (in default)	● USDA	●	Deed of trust lien on approximately 56 acres of land and improvements owned by LE
	● Jonathan Carroll⁽¹⁾	●	Leasehold deed of trust lien on certain property leased by NPS from LE
	● Affiliate cross-guarantees	●	Assignment of leases and rents and certain personal property
SBA EIDL
BDEC Term Loan Due 2051	---	●	Business assets (e.g., machinery and equipment, furniture, fixtures, etc.)
LE Term Loan Due 2050	---	●	Business assets (e.g., machinery and equipment, furniture, fixtures, etc.)
NPS Term Loan Due 2050	---	●	Business assets (e.g., machinery and equipment, furniture, fixtures, etc.)
Equipment Loan Due 2031	---	●	First priority security interest in the equipment (mobile offices)

⁽¹⁾	^{Huntington required Jonathan Carroll to personally guarantee repayment of borrowed funds and accrued interest.}

Representations, Warranties, and Covenants. The First Term Loan Due 2034, Second Term Loan Due 2034, NPS Term Loan Due 2031, BDEC Term Loan Due 2051, LE Term Loan Due 2050, and NPS Term Loan Due 2050 contain representations and warranties, affirmative and negative covenants, and events of default that we consider usual and customary for bank facilities of these types. Specifically, The First Term Loan Due 2034 and Second Term Loan Due 2034 contain quarterly debt service coverage, total combined current assets, total combined current liabilities, and total combined debt ratios and annual current and debt to net worth ratios. The First Term Loan Due 2034 also requires that a $1.0 million payment reserve account be maintained. The NPS Term Loan Due 2031 requires NPS to have an active deposit account with the lender, provide standalone audited financial statements for NPS, a wholly owned subsidiary, and meet annual maintenance of debt service coverage and current ratios. There are no covenants associated with BDEC Term Loan Due 2051, LE Term Loan Due 2050, NPS Term Loan Due 2050, and the Equipment Loan Due 2031.