Long-Term Debt (Tables)

6 Months Ended

Jun. 30, 2022

Long-Term Debt

Schedule of long-term debt

	June 30,		December 31,
	2022		2021
	($000’s omitted)
Line of credit payable to a financial institution; Interest rate is the BSBY Daily Floating Rate (Interest rate 2.58943% as of June 30, 2022) (A)	$	—	$	4,250
Equipment note obligations; Interest rate fixed for term of each funding based upon the Lender’s lease pricing at time of funding. (Interest rate/factor 1.795530% - 1.835015% as of June 30, 2022)(B)		602		712
Equipment financing lease obligations; Interest rate fixed for term of each funding based upon the Lender’s lease pricing at time of funding. (Interest rate/ factor 1.822758% - 1.869304% at time of funding)(C)		34		64
		636		5,026
Less current portion		(255)		(276)
Long term debt	$	381	$	4,750

A.) The Company has a $6,000,000 line of credit. The interest rate is a rate per year equal to the sum (i) the greater of the Bloomberg’s Short-term Bank Yield (BSBY) Daily Floating Rate or the Index Floor, plus (ii) 1.65 percentage point(s). For purpose of this paragraph “Index Floor” means 0.5%. In addition, the Company is required to pay a commitment fee of 0.25% on the unused portion of the line of credit. The line of credit expires December 31, 2023.

On January 11, 2022, the Company executed an amendment to the loan agreement, which extended the line of credit availability period from December 31, 2022 to December 31, 2023. The amended agreement suspended the Debt Service Coverage Ratio loan covenant up through and including the third quarter of 2022. A Quarterly Minimum Cash Flow measurement loan covenant replaced the Debt Service Coverage Ratio loan covenant. Minimum Cash Flow means net income, plus depreciation, depletion, and amortization expense, plus interest expense, plus non-cash expense related to the Servotronics, Inc. Employee Stock Ownership Plan, plus non-cash stock and stock option transactions. Also, the amended agreement requires the Company to maintain a minimum liquidity, defined as cash on hand plus line of credit availability of at least $9,000,000. At June 30, 2022 and December 31, 2021 the Company was in compliance with our loan covenants.

Although the Company meets the current covenant requirements as of June 30, 2022, it is probable that the Company will fail to meet the Quarterly Minimum Cash Flow covenant requirement as of September 30, 2022.  As the Company has no term loan or line of credit outstanding balances as of June 30, 2022 and the Minimum Liquidity Covenant is not expected to fail at September 30, 2022, the Company does not anticipate adverse consequences of its probable failure to satisfy future covenants.

The line of credit is secured by all personal property of the Company with the exception of certain equipment that was purchased from proceeds of government grants. There was approximately $0 and $4,250,000 outstanding at June 30, 2022 and December 31, 2021, respectively.

B.) The Company had an equipment loan facility in the amount of $1,000,000 available until July 9, 2021. This line was non-revolving and non-renewable. The loan term for the equipment covered by the agreement is 60 months. Monthly payments are fixed for the term of each funding based upon the Lender’s lease pricing in effect at the time of such funding. There was approximately $602,000 outstanding at June 30, 2022 and $712,000 balance outstanding at December 31, 2021.

C.) The Company had a lease line of credit for equipment financing in the amount of $1,000,000 available until June 28, 2018. This line was non-revolving and non-renewable. The lease term for equipment covered by the lease line of credit is 60 months. Monthly payments are fixed for the term of each funding based upon the Lender’s lease pricing in effect at the time of such funding. There was approximately $34,000 outstanding at June 30, 2022 and $64,000 at December 31, 2021.

Schedule of payments for capital lease obligations

	June 30,		December 31,
Year	2022		2021
	($000’s omitted)
2022	$	154	$	296
2023		246		246
2024		192		192
2025		83		83
2026		11		11
Total principal and interest payments		686		828
Less amount representing interest		(50)		(52)
Present value of net minimum lease payments		636		776
Less current portion		(255)		(276)
Long-term principle payments	$	381	$	500