Long-Term Debt

6 Months Ended

Jun. 30, 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 June 30, 2022, the maximum remaining amount that could be borrowed under the Line of Credit was $28,400,000. The Company had $11,600,000 of borrowings outstanding under the Line of Credit bearing an interest rate of 4.5% per annum as of June 30, 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 June 30, 2022 and December 31, 2021. As of both June 30, 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:

	June 30, 2022		December 31, 2021
	(in thousands)
A $23,000,000 term loan that matures September 30, 2026, with an 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% per annum. 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.	$	22,465	$	15,909
A $21,580,000 term loan ("2029 Loan") that was set to mature in May 2029. Interest accrued at prime rate less 0.25% (3.00% at December 31, 2021) and principal payments ranging from $24,000 to $40,000 along with interest were 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 was reported as a reduction of the carrying value of debt on the accompanying consolidated balance sheet. This loan was refinanced in June 2022 (see below).	—		$	20,808
A $28,700,000 term loan ("2027 Loan") that matures July 1, 2027, with an initial balance of $20,700,000 and an option to request for additional advances up to a maximum of $8,000,000 through June 30, 2023. Interest accrues at a fixed rate of 4.375% per annum. Principal and interest payments of $104,000 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 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 coverage ratio.	20,700		—
Long-term debt	43,165		36,717
Less: unamortized loan fees	(239)		(200)
Less: current portion	(910)		(1,178)
Long-term debt, net of current portion	$	42,016	$	35,339

At June 30, 2022, future maturities are (in thousands):

2022 (remainder)	$	434
2023	957
2024	990
2025	1,040
2026	20,653
Thereafter	19,091
Total	$	43,165

The Company's refinance of the 2029 Loan with the 2027 Loan in June 2022 was accounted for as a debt modification. The Company was in compliance with all of its financial covenants as of both June 30, 2022 and December 31, 2021.