Note 7 –Long-Term Debt

Long-term debt consists of the following:

	September 30 2019		December 31 2018
In thousands	September 30 2019		December 31 2018
8¼% Limited convertible senior subordinated notes due 2012	$	352	$	387
9½% Subordinated debentures due 2012		220		220
Revolving credit line		-		1,440
Term loans		-		1,590
Term loans - related party		1,000		1,000
Forgivable loan		650		650
Total debt		2,222		5,287
Less deferred financing costs		-		257
Net debt		2,222		5,030
Less portion due within one year		572		3,584
Net long-term debt	$	1,650	$	1,446

On September 16, 2019, the Company entered into the Loan Agreement with MidCap. The Loan Agreement has a term of three years, unless earlier terminated by the parties in accordance with the termination provisions of the Loan Agreement. The Loan Agreement allows the Company to borrow up to an aggregate of $4.0 million at an interest rate of the 3-month LIBOR interest rate plus 4.75% (7.00% at September 30, 2019) on a revolving credit loan based on accounts receivable, inventory and equipment for general working capital purposes. LIBOR is expected to be discontinued after 2021. The Loan Agreement with MidCap provides procedures for determining a replacement or alternative rate in the event that LIBOR is unavailable. However, there can be no assurances as to whether such replacement or alternative rate will be more or less favorable than LIBOR. We intend to monitor the developments with respect to the potential phasing out of LIBOR after 2021 and will work with MidCap to ensure any transition away from LIBOR will have minimal impact on our financial condition. We however can provide no assurances regarding the impact of the discontinuation of LIBOR on the interest rate that we would be required to pay or on our financial condition. As of September 30, 2019, there is no balance outstanding under this Loan Agreement. The Loan Agreement also requires the payment of certain fees, including a facility fee, an unused credit line fee and a collateral monitoring charge. The Loan Agreement contains financial and other covenant requirements, including financial covenants that require the Borrowers to attain certain EBITDA amounts for certain periods, the first of which is for the three months ended December 31, 2019. The Loan Agreement is secured by substantially all of the Borrowers’ assets. The foregoing description of the Loan Agreement is included to provide information regarding its terms. It does not purport to be a complete description and is qualified in its entirety by reference to the full text of the Loan Agreement.

The Company has a $500,000 loan from Carlisle Investments Inc. (“Carlisle”) at a fixed interest rate of 12.00%, which matured on April 27, 2019 with a bullet payment of all principal due at such time. Interest is payable monthly. Carlisle has agreed to not demand payment on the loan through at least December 31, 2020. As of September 30, 2019, the entire amount was outstanding and is included in long-term debt, less current portion in the Condensed Consolidated Balance Sheets. As of September 30, 2019 and December 31, 2018, the Company had accrued $105,000 and $60,000, respectively, of interest related to this loan. Carlisle has agreed to not demand payment on $60,000 of the interest as of September 30, 2019, so it is included in deferred pension liability and other in the Condensed Consolidated Balance Sheets. The remaining $45,000 of accrued interest as of September 30, 2019 and the $60,000 of accrued interest as of December 31, 2018 are included in accrued liabilities in the Condensed Consolidated Balance Sheets. Marco Elser, a former director of the Company, exercises voting and dispositive power as investment manager of Carlisle.

The Company has an additional $500,000 loan from Carlisle at a fixed interest rate of 12.00%, which matured on December 10, 2017 with a bullet payment of all principal due at such time (the “Second Carlisle Agreement”). Interest is payable monthly. Carlisle has agreed to not demand payment on the loan through at least December 31, 2020. As of September 30, 2019, the entire amount was outstanding and is included in long-term debt, less current portion in the Condensed Consolidated Balance Sheets. As of September 30, 2019 and December 31, 2018, the Company had accrued $105,000 and $60,000, respectively, of interest related to this loan. Carlisle has agreed to not demand payment on $60,000 of the interest as of September 30, 2019, so it is included in deferred pension liability and other in the Condensed Consolidated Balance Sheets. The remaining $45,000 of accrued interest as of September 30, 2019 and the $60,000 of accrued interest as of December 31, 2018 are included in accrued liabilities in the Condensed Consolidated Balance Sheets. Under the Second Carlisle Agreement, the Company granted a security interest to Carlisle in accounts receivable, materials and intangibles relating to a certain purchase order for equipment issued in April 2017.

As of September 30, 2019 and December 31, 2018, the Company had outstanding $352,000 and $387,000, respectively, of 8¼% Limited convertible senior subordinated notes due 2012 (the “Notes”) which are no longer convertible into common shares. The Notes matured as of March 1, 2012 and are currently in default. On February 15, 2019, holders of $35,000 of the Notes accepted the Company’s offer to exchange each $1,000 of principal, forgiving any related interest, for $200 in cash, for an aggregate payment by the Company of $7,000. As a result of the transaction, the Company recorded a gain on the extinguishment of debt, net of expenses, of $52,000 in 2019. As of September 30, 2019 and December 31, 2018, the Company had accrued $293,000 and $298,000, respectively, of interest related to the Notes, which is included in accrued liabilities in the Condensed Consolidated Balance Sheets.

As of September 30, 2019 and December 31, 2018, the Company had outstanding $220,000 of 9½% Subordinated debentures due 2012 (the “Debentures”). The Debentures matured as of December 1, 2012 and are currently in default. As of September 30, 2019 and December 31, 2018, the Company had accrued $206,000 and $190,000, respectively, of interest related to the Debentures, which is included in accrued liabilities in the Condensed Consolidated Balance Sheets.

On May 23, 2017, the Company received $650,000 structured as a forgivable loan from the City of Hazelwood, Missouri. The loan will be forgiven on a pro-rata basis if predetermined employment levels are attained and would expire on April 1, 2024. If the Company attains the employment levels required by the agreement, there is no interest due, otherwise interest accrues at a rate of prime plus 2.00% (7.00% at September 30, 2019). As of September 30, 2019 and December 31, 2018, the Company had accrued $107,000 and $71,000, respectively, of interest related to this loan, which is included in accrued liabilities in the Condensed Consolidated Balance Sheets. In February 2018, in accordance with the agreement, the Company requested a 1-year extension of the terms of the agreement, which was approved by the City of Hazelwood in March 2018, so the agreement now terminates on April 1, 2025. As of the March 31, 2019 measurement date, the Company has not yet attained the appropriate employment levels and has requested an additional extension from the City of Hazelwood.

On July 12, 2016, the Company entered into a credit agreement, as subsequently amended on various dates, the latest being March 1, 2019 (collectively, the “Credit Agreement”) with CNH Finance Fund I, L.P. (“CNH”) as lender. Under the Credit Agreement, the Company was able to borrow up to an aggregate of $4.0 million, which included (i) up to $3.0 million of a revolving loan and (ii) a $1.0 million term loan. On April 10, 2019, the Company satisfied the Credit Agreement in full and the Credit Agreement was terminated. The termination fee of $60,000 and the remaining debt discount of $23,000 were written off and included in loss on extinguishment of debt on the Condensed Consolidated Statements of Operations.

On June 11, 2018, the Company entered into a Subordinated Secured Promissory Note (the “SMI Note”) with SM Investors, L.P. (“SMI”), pursuant to which the Company borrowed $330,000 from SMI. On April 17, 2019, the Company satisfied the SMI Note in full and the remaining debt discount of $53,000 was written off and included in loss on extinguishment of debt on the Condensed Consolidated Statements of Operations.

On June 11, 2018, the Company entered into another Subordinated Secured Promissory Note (the “SMII Note”) with SM Investors II, L.P. (“SMII”), pursuant to which the Company borrowed $670,000 from SMII. On April 17, 2019, the Company satisfied the SMII Note in full and the remaining debt discount of $109,000 was written off and included in loss on extinguishment of debt on the Condensed Consolidated Statements of Operations.