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Long-Term Debt

9 Months Ended

Sep. 30, 2021

Note 7 – Long-Term Debt

Long-term debt consists of the following:

	September 30		December 31
In thousands	2021		2020
8¼% Limited convertible senior subordinated notes due 2012	$	302	$	352
9½% Subordinated debentures due 2012		220		220
Revolving credit line – related party		439		-
Revolving credit line		-		612
Term loans – related party		1,000		1,000
Term loan		641		811
Total debt		2,602		2,995
Less deferred financing costs and debt discount		84		180
Net debt		2,518		2,815
Less portion due within one year		2,518		2,546
Net long-term debt	$	-	$	269

On September 16, 2019, the Company entered into a loan agreement (the “Loan Agreement”) with MidCap. On June 3, 2020, March 23, 2021 and May 31, 2021, the Company and MidCap entered into modification agreements to the Loan Agreement. On July 30, 2021, MidCap assigned the loan to Unilumin. 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% (7.93% at September 30, 2021) on a revolving credit loan based on accounts receivable, inventory and equipment for general working capital purposes. As of September 30, 2021, the balance outstanding under the Loan Agreement was $439,000. 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 Company to attain certain EBITDA amounts for certain periods, including the nine months ended September 30, 2021. The Company was not in compliance with this covenant. The Loan Agreement is secured by substantially all of the Company’s assets.

On April 23, 2020, the Company entered into a loan note (the “Loan Note”) with Enterprise Bank and Trust (“Lender”) as lender under the CARES Act of the Small Business Administration of the United States of America (“SBA”), dated as of April 20, 2020. Under the Loan Note, the Company borrowed $810,800 from Lender under the Paycheck Protection Program (“PPP”) included in the SBA’s CARES Act, $641,000 of which is outstanding as of September 30, 2021. The Loan Note proceeds are forgivable as long as the Company uses the loan proceeds for eligible purposes including payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leave; rent; utilities; and maintains its payroll levels. Certain employees were not retained by the Company, so the potential amount of loan forgiveness will be reduced. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1.00%, with a deferral of payments for the first six months. While the Company believes that its use of the loan proceeds will meet the conditions of forgiveness of the loan, we cannot assure you that we will not take actions that could cause the Company to be ineligible for forgiveness of the loan, in whole or in part.

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 had agreed to not demand payment on the loan through at least December 31, 2020, and has not made any such demands as of the date of this filing. As of September 30, 2021, the entire amount was outstanding and is included in current portion of long-term debt in the Consolidated Balance Sheets. As of September 30, 2021 and December 31, 2020, the Company had accrued $225,000 and $180,000, respectively, of interest related to this loan, which are included in accrued liabilities in the Condensed Consolidated Balance Sheets.

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 had agreed to not demand payment on the loan through at least December 31, 2020, and has not made any such demands as of the date of this filing. As of September 30, 2021, the entire amount was outstanding and is included in current portion of long-term debt Consolidated Balance Sheets. As of September 30, 2021 and December 31, 2020, the Company had accrued $225,000 and $180,000, respectively, of interest related to this loan, which 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, 2021 and December 31, 2020, the Company had outstanding $302,000 and $352,000, respectively, of Notes. The Notes matured as of March 1, 2012 and are currently in default. As of September 30, 2021 and December 31, 2020, the Company had accrued $301,000 and $329,000, respectively, of interest related to the Notes, which is included in Accrued liabilities in the Consolidated Balance Sheets. The trustee, by notice to the Company, or the holders of 25% of the principal amount of the Notes outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately. On January 15, 2021, holders of $50,000 of the Notes accepted the Company’s offer to exchange each $1,000 of principal, forgiving any related interest, for $400 in cash, for an aggregate payment by the Company of $20,000. As a result of the transaction, the Company recorded a gain on the extinguishment of debt, net of expenses, of $77,000 in the nine months ended September 30, 2021.

As of September 30, 2021 and December 31, 2020, the Company had outstanding $220,000 of Debentures. The Debentures matured as of December 1, 2012 and are currently in default. As of September 30, 2021 and December 31, 2020, the Company had accrued $247,000 and $232,000, respectively, of interest related to the Debentures, which is included in Accrued liabilities in the Consolidated Balance Sheets. The trustee, by notice to the Company, or the holders of 25% of the principal amount of the Debentures outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately.