Long-Term Debt

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

Long-Term Debt

Line of Credit

Pursuant to the terms of the Business Loan Agreement, dated February 23, 2018, between Lollicup, as borrower, and Hanmi Bank, as lender (as amended, the “Loan Agreement”), the Company has a line of credit with a maximum borrowing capacity of $40,000,000 (the “Line of Credit”). The Line of Credit also includes a standby letter of credit sublimit. The Line of Credit was secured by the Company’s assets and guaranteed by the Company’s stockholders. The Company is not required to pay a commitment (unused) fee on the undrawn portion of the Line of Credit and interest is payable monthly.

On October 6, 2021, the Company amended the Loan Agreement. Prior to October 6, 2021, interest accrued at an annual rate of prime less 0.25% with a minimum floor of 3.75%, and the amount that could be borrowed was subject to a borrowing base that was calculated as a percentage of the accounts receivable and inventory balances measured monthly. Additionally, the Company was required to comply with certain financial covenants, including a minimum current ratio, minimum tangible net worth, minimum debt service coverage ratio, and minimum debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio.

The amendment on October 6, 2021, among other things, (1) extended the maturity date to October 6, 2023, (2) revised the interest on any line of credit borrowings to an annual rate of prime less 0.25%, with a minimum floor of 3.25%, (3) removed the requirement for the maximum amount of borrowings to be subject to a borrowing base requirement that was calculated as a percentage of accounts receivable and inventory balances, (4) removed the minimum tangible net worth and minimum debt service coverage ratio from the financial covenant requirement, and (5) added a minimum fixed charge coverage ratio in the financial covenant requirement.

As of March 31, 2022, the maximum remaining amount that could be borrowed under the Line of Credit was $29,800,000. The Company had $10,200,000 of borrowings outstanding under the Line of Credit bearing an interest rate of 3.25% per annum as of March 31, 2022. The Company had $0 of borrowings outstanding under the Line of Credit as of December 31, 2021. The amount issued under the standby letter of credit was $0 as of both March 31, 2022 and December 31, 2021. As of both March 31, 2022 and December 31, 2021, the Company was in compliance with the financial covenants under the Line of Credit.

Long-Term Debt

Long-term debt consists of the following:

	March 31, 2022		December 31, 2021
	(in thousands)
A $21,580,000 term loan that matures in May 2029. Interest accrues at prime rate less 0.25% (3.25% and 3.00% at March 31, 2022 and December 31, 2021, respectively) and principal payments ranging from $24,000 to $40,000 along with interest are due monthly throughout the term of the loan, with the remaining principal balance due at maturity. The loan was collateralized by substantially all of the Company’s and Global Well’s assets and was guaranteed by the Company and its stockholders. The Company incurred debt issuance costs of approximately $119,000, which is reported as a reduction of the carrying value of debt on the accompanying consolidated balance sheet.	$	20,726	$	20,808
A $23,000,000 term loan that matures September 30, 2026, with the initial balance of $16,115,000 and an option to request for additional advances up to a maximum of $6,885,000 through September 2022, which the Company exercised in February 2022. Interest accrues at a fixed rate of 3.5%. Principal and interest payments of $116,000 are due monthly throughout the term of the loan, with the remaining principal balance due at maturity. The loan is collateralized by substantially all of Global Wells’ assets and is guaranteed by Global Wells and one of the Company’s stockholders. In accordance with the loan agreement, Global Wells is required to comply with certain financial covenants, including a minimum debt service coverage ratio.	22,610		15,909
Long-term debt	43,336		36,717
Less: unamortized loan fees	(192)		(200)
Less: current portion	(1,190)		(1,178)
Long-term debt, net of current portion	$	41,954	$	35,339

At March 31, 2022, future maturities are (in thousands):

2022 (remainder)	$	887
2023	1,224
2024	1,276
2025	1,333
2026	19,703
Thereafter	18,913
Total	$	43,336

The Company was in compliance with all of its financial covenants as of both March 31, 2022 and December 31, 2021.