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Note 8 - Bank Debt and Notes Payable

12 Months Ended

Dec. 31, 2023

8. BANK DEBT and NOTES PAYABLE

The Company is party to a Credit Agreement with JPMorgan Chase Bank, N.A. as lender (as amended, the “Credit Agreement”).

The Company entered into a sixth amendment to the Credit Agreement on June 12, 2023. The most significant change in the amended Credit Agreement was the discontinued use of LIBOR as a reference rate, with the adoption of the Federal Reserve Bank of New York's Secured Overnight Financing Rate (SOFR) as the primary reference rate. This change was anticipated and aligns with the US Dollar LIBOR panel ceasing on June 30, 2023.

The Company entered into a seventh amendment to the Credit Agreement on November 27, 2023. The Seventh Amendment to the Credit Agreement, among other things, (a) extends the maturity date of the underlying credit facility from June 1, 2024 to June 1, 2027, (b) increases the maximum annual amount that the Company and its subsidiaries may pay in dividends or other restricted payments to $2,000,000 from $1,250,000, and (c) permits the repurchase by the Company and its subsidiaries of up to $7,000,000 of Company equity prior to June 30, 2024, subject to compliance with certain financial covenants under the Credit Agreement.

A Term Loan A matured December 1, 2022, and was paid in full on January 4, 2023.

The revolving facility under the Credit Agreement includes a $3 million sublimit for the issuance of letters of credit thereunder. Interest for borrowings under the revolving facility accrues at a per annum rate equal to Prime Rate or SOFR (previously LIBOR) plus applicable margins of (i) (0.25%) for Prime Rate loans and (ii) 1.75% for SOFR (previously LIBOR) loans. The Credit Agreement includes a commitment fee on the unused portion of the revolving facility of 0.25% per annum payable quarterly.

The obligations of the Company and other borrowers under the Credit Agreement are secured by a blanket lien on all the assets of the Company and its subsidiaries. The Credit Agreement also includes customary representations and warranties and applicable reporting requirements and covenants. The financial covenants under the Credit Agreement include a minimum fixed charge coverage ratio, a maximum senior funded debt to EBITDA ratio and a maximum total funded debt to EBITDA ratio.

Bank debt balances consist of the following:

	*December 31,*		*December 31,*
	*2023*		*2022*
Term debt	$	-	$	222,222
Revolving debt		5,112,187		19,281,119
Total Bank debt		5,112,187		19,503,341
Less: current portion		-		222,222
Non-current bank debt		5,112,187		19,281,119
Less: unamortized debt costs		15,515		56,801
Net non-current bank debt	$	5,096,672	$	19,224,318

The Company had $24.9 million and $10.7 million available to borrow on the revolving credit facility at December 31, 2023 and 2022, respectively.

Notes Payable – Related Party

In connection with the Komtek Forge acquisition, on January 15, 2021, the Company refinanced its previously outstanding First Francis promissory notes in the aggregate amount of $2,077,384, including accrued interest payable through the refinance date and combined this amount with an existing First Francis promissory note carried by Komtek Forge in the amount of $1,702,400 into one note for a combined $3,779,784 loan due to First Francis Company, payable in quarterly installments beginning April 15, 2021. The interest rate on the refinanced loan remained at 6.25% per annum. First Francis is owned by Ambassador Edward Crawford and Matthew Crawford, both of whom serve on the Board of Directors of the Company.

Notes Payable – Seller Note

Effective July 1, 2018, the Company completed the acquisition of all of the issued and outstanding shares of capital stock of CAD. Upon the closing of the transaction, the CAD shares were transferred and assigned to the Company in consideration of the payment by the Company of an aggregate purchase price of $21 million, $12 million of which was payable in cash at closing, with the remainder paid in the form of a subordinated promissory note issued by the Company in favor of a Seller (the “Seller Note”). The Seller Note had an interest rate of four percent (4.00%) per annum and the loan was paid in full on March 31, 2023.

Notes Payable

Notes payable consists of the following:

	*December 31,*		*December 31,*
	*2023*		*2022*
In connection with the Komtek Forge acquisition, the Company refinanced its previously outstanding First Francis promissory notes, accrued interest payable through the refinance date and the assumed First Francis promissory note into one note on January 15, 2021 for a $3,779,784 loan due to First Francis Company, payable in quarterly installments beginning April 15, 2021 and maturing on October 15, 2025	$	1,294,435	$	2,587,877
In connection with the CAD acquisition, the Company entered into a promissory note on July 1, 2018 for a $9,000,000 loan due to the seller, payable in quarterly installments beginning September 30, 2018. The note was paid in full on March 31, 2023		-		562,500
Total notes payable		1,294,435		3,150,377
Less current portion		824,226		1,303,972
Notes payable – non-current portion	$	470,209	$	1,846,405

Principal payments on the notes payable are as follows for the years ended December 31:

	Related Party		Total Principal
	Notes		Payments

2024		824,226		824,226
2025		470,209		470,209
2026		-		-
2027		-		-
Total principal payments	$	1,294,435	$	1,294,435