Note 11 - Notes Payable and Long-term Debt

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Debt Disclosure [Text Block]

Note 11.  Notes Payable and Long-Term Debt

Notes payable and long-term debt consisted of the following for the periods indicated (in thousands):

	September 30, 2021			December 31, 2020
Revolving line of credit with a U.S. bank up to $20,000 with interest at 2.25% , maturing October 15, 2022	$	19,300		$	18,700
Paycheck Protection Program Term Note with interest at fixed rate 1.0%, maturing April 16, 2022		—			6,229
Revolving line of credit with a Taiwan bank up to $3,436 with 2.2% interest, maturing April 14, 2021		—			1,756
Notes payable to a finance company due in monthly installments with 3.5% interest, maturing January 21, 2022		361			1,941
Notes payable to a finance company due in monthly installments with 3.1% interest, maturing January 21, 2022		676			2,149
Revolving line of credit with a China bank up to $8,917 with interest ranging from 4.5%, maturing October 14, 2020		—			2,299
Revolving line of credit with a China bank up to $25,449 with interest from 3.01% to 4.57%, maturing May 24, 2024		17,924			11,603
Credit facility with a China bank up to $14,125 with interest of 3.5%, maturing January 5, 2024		14,892			—
Credit facility with a China bank up to $7,167 with interest of 5.7%, maturing from June 20, 2022		7,401			7,510
Sub-total		60,554			52,187
Less debt issuance costs, net		(29	)		(18	)
Grand total		60,525			52,169
Less current portion		(41,254	)		(38,265	)
Non-current portion	$	19,271		$	13,904
Bank Acceptance Notes Payable
Bank acceptance notes issued to vendors with a zero percent interest rate	$	6,481		$	15,860

The current portion of long-term debt is the amount payable within one year of the balance sheet date of September 30, 2021.

Maturities of long-term debt are as follows for the future one-year periods ending September 30, (in thousands):

2022	$	41,254
2023		19,271
Total outstanding	$	60,525

On September 28, 2017, the Company entered into a Loan Agreement (“Loan Agreement”), a Promissory Note, an Addendum to the Promissory Note, a Truist Bank Security Agreement, a Trademark Security Agreement, and a Patent Security Agreement (together the “Credit Facility”) with Truist Bank (which acquired Branch Banking and Trust Company or BB&T in connection with a merger in December 2019). The Company’s obligations under the Credit Facility are secured by the Company’s accounts receivable, inventory, intellectual property, and all business assets with the exception of real estate and equipment.

On September 30, 2019, the Company executed a Fourth Amendment to Loan Agreement (the “Fourth Amendment”) with Truist Bank. Under the terms of the Fourth Amendment (i) the maximum commitment under the line of credit was reduced from $25,000,000 to $20,000,000; (ii) the maturity date of the line of credit was extended to April 2, 2021; (iii) pricing of the unused line fee was adjusted to 0.30% per annum; and (iv) the Fourth Amendment established the requirement that if, at any time during any reporting period and pursuant to the most recent loan base report received by Truist Bank, the principal balance outstanding under the line of credit exceeds the lesser of the approved maximum amount of the line of credit commitment amount or the collateral loan value reduced by the reserves, the Company shall immediately prepay the line of credit to the extent necessary to eliminate such excess. Such reserves shall, at any time that the fixed charge coverage ratio for the loan is less than 1.5 to 1.0, tested for the period of twelve months ended on the applicable covenant measurement date, equal to an amount equal to seventy-five percent (75%) of the lesser of the line of credit commitment amount or collateral loan value reduced by the sum of (i) the principal balance outstanding under the line of credit, (ii) the letter of credit exposure reserve, and (iii) the availability reserve as determined by Truist Bank from the most recent loan base report and otherwise in the sole discretion of Truist Bank after consideration of collections.

On  April 5, 2021, the Company executed a Fifth Amendment to the Loan Agreement (the "Fifth Amendment") and a Fourth Amendment to a Security Agreement, a Note Modification Agreement, and an Addendum to a Promissory Note (together with the Fifth Amendment the “Amended Credit Facility”) with Truist Bank. The Amended Credit Facility renews the $20 million line of credit with Truist Bank originally entered into on September 28, 2017. Under the terms of the Amended Credit Facility, the maturity date of the line of credit is extended from  April 2, 2021 to  October 15, 2022. Borrowings will bear interest at a rate equal to LIBOR plus 1.5%, with a LIBOR floor of 0.75%. As of September 30, 2021, the Company had $19.3 million outstanding and was in compliance with all covenants under the Amended Credit Facility.

On April 17, 2020, the Company entered into a term note ("PPP Term Note") with Truist Bank, with a principal amount of $6.23 million pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP loan is evidenced by a promissory note. The PPP Term Note bears interest at a fixed annual rate of 1.00%, with the first six months of interest deferred. Beginning in November 2020, the Company is required to make  18 equal monthly payments of principal and interest with the final payment due in April 2022. The PPP Term Note may be accelerated upon the occurrence of an event of default. The PPP Term Note is unsecured and guaranteed by the United States Small Business Administration ("SBA"). On June 14, 2021, the Company received notification from Truist Bank that the SBA approved the Company's application for forgiveness of the entire principalamount of the PPP Term Note, plus all accrued interest. The forgiveness of the PPP Term Note has been recognized as other income during the second quarter ended June 30, 2021.

On September 15, 2020, Prime World entered into an Amendment to the Finance Lease Agreements dated November 29, 2018 and January 21, 2019 (the “Amendment”) with Chailease Finance Co., Ltd. (“Chailease”). The Amendment amends the Finance Lease Agreements, dated November 29, 2018 and January 21, 2019 (hereafter collectively referred to as the “Original Finance Agreements”). Pursuant to the Amendment, Prime World agrees to pay Chailease NT$22,311,381, or approximately $0.8 million for certain leased equipment listed in the Amendment (the “Leased Equipment”). This payment will include all outstanding lease payments, costs and expenses; simultaneously, Chailease agrees to transfer title of such Leased Equipment back to Prime World. Regarding all other equipment contemplated in the Original Finance Agreements but not listed in the Amendment, pursuant to the terms and conditions made under the Original Finance Agreements, Prime World is obligated to pay Chailease monthly lease payments which total NT$159,027,448, or approximately $5.5 million (the “Lease Payments”). The Lease Payments will begin on September 21, 2020 with the last Lease Payment due on January 21, 2022, title of all other equipment contemplated under the Original Finance Agreements but not listed in the Amendment will transfer to Prime World upon completion of the Lease Payments and expiration of the Original Finance Agreements. As of September 30, 2021, 

$0.4 million was outstanding under the November 29, 2018 Finance Lease Agreement and $0.7 million was outstanding under the January 21, 2019 Finance Lease Agreement.

On  October 7, 2020, Prime World entered into a revolving credit facility totaling  NT$100 million, or approximately  $3.44 million (the “NT$100M Credit Line”) and a $1 million USD credit line (the “ US$1M Credit Line”) with Taishin International Bank in Taiwan ("Taishin"). Borrowing under the  NT$100M Credit Line will be used for short-term working capital; borrowing under the  US$1M Credit Line will be strictly used for spot transactions in the foreign exchange market. The  NT$100M Credit Line and the US$1M Credit Line are collectively referred to as the “Taishin Credit Facility”. On January 14, 2021, the NT$100M Credit Line with Taishin was extended for three ( 3) months until April 14, 2021. Prime World  may draw upon the Taishin Credit Facility from  October 7, 2020 through  April 14, 2021. The term of each draw under the  NT$100M Credit Line shall be either  90 or  120 days and will bear interest at a rate of  2.15% for each draw; borrowings under the  US$1M Credit Line will bear interest equal to Taishin’s foreign exchange rate effective on the day of the applicable draw. At the end of the draw term Prime World will make payment for all principal and accrued interest. Prime World’s obligations under the Taishin Credit Facility will be secured by a promissory note between Prime World and Taishin. As of September 30, 2021 , the Company has fully repaid the Taishin Credit Facility. 

On April 19, 2019, the Company’s China subsidiary, Global, entered into a twelve (12) month revolving line of credit agreement, totaling 60,000,000 RMB, or approximately $8.9 million (the “China Merchants Credit Line”), with China Merchants Bank Co., Ltd., in Ningbo, China (“China Merchants”). The China Merchants Credit Line will be used by Global for general corporate purposes, including the issuance of bank acceptance notes to Global’s vendors. On April 14, 2020, Global extended the revolving line of credit agreement with China Merchants by six (6) months. Global  may draw upon the China Merchants Credit Line from April 19, 2019 until October 14, 2020 (the “Credit Period”). During the Credit Period, Global may request to draw upon the China Merchants Credit Line on an as-needed basis; however, the amount of available credit under the China Merchants Credit Line and the approval of each draw may be reduced or declined by China Merchants due to changes in Chinese government regulations and/or changes in Global’s financial and operational condition at the time of each requested draw. Each draw will bear interest equal to China Merchants’ commercial banking interest rate effective on the day of the applicable draw. Global’s obligations under the China Merchants Credit Line are unsecured. The China Merchants Credit Line has been replaced by the Replacement China Merchants Credit Line on  October 19, 2020.

On May 24, 2019, the Company’s China subsidiary, Global, entered into a five-year revolving credit line agreement, totaling 180,000,000 RMB (the “SPD Credit Line”), or approximately $25.4 million, and a mortgage security agreement (the “Security Agreement”), with Shanghai Pudong Development Bank Co., Ltd ("SPD"). Borrowing under the SPD Credit Line will be used for general corporate and capital investment purposes, including the issuance of bank acceptance notes to Global’s vendors. The total SPD Credit Line of 180 million RMB is inclusive of all credit facilities previously entered into with SPD including: a 30 million RMB credit facility entered into on May 7, 2019; and a 9.9 million RMB credit facility entered into on April 30, 2019 and $2 million credit facility entered into on May 8, 2019. Global may draw upon the SPD Credit Line on an as-needed basis at any time during the 5-year term; however, draws under the SPD Credit Line may become due and repayable to SPD at SPD’s discretion due to changes in Chinese government regulations and/or changes in Global’s financial and operational condition. Each draw will bear interest equal to SPD’s commercial banking interest rate effective on the day of the applicable draw. Global’s obligations under the SPD Credit Line will be secured by real property owned by Global and mortgaged to the Bank under the terms of the Security Agreement. As of September 30, 2021, $17.9 million was outstanding under the SPD Credit Line and the outstanding balance of bank acceptance notes issued to vendors was $3.9 million.

On June 21, 2019, the Company’s China subsidiary, Global, entered into an 18 month credit facility totaling 100,000,000 RMB (the “¥100M Credit Facility”), or approximately $14.1 million, with China Zheshang Bank Co., Ltd., in Ningbo City, China (“CZB”). Borrowing under the ¥100M Credit Facility will be used by Global for general corporate purposes. On January 6, 2021, the ¥100M Credit Facility with CZB was extended for three (3) years until January 5, 2024. Global may draw upon the ¥100M Credit Facility from June 21, 2019 until January 5, 2024 (the “¥100M Credit Period”). During the ¥100M Credit Period, Global may request to draw upon the ¥100M Credit Facility on an as-needed basis; however, draws under the ¥100M Credit Facility may become due and repayable to CZB at CZB’s discretion due to changes in Chinese government regulations and/or changes in Global’s financial and operational condition. Each draw will bear interest equal to CZB’s commercial banking interest rate effective on the day of the applicable draw. Global’s obligations under the ¥100M Credit Facility will be secured by real property owned by Global and mortgaged to CZB under the terms of the Real Estate Security Agreement. The agreements for the ¥100M Credit Facility and the Real Estate Security Agreement also contain rights and obligations, representations and warranties, and events of default applicable to the Company that are customary for agreements of this type. As of September 30, 2021, $14.9 million was outstanding under the ¥100M Credit Facility and there was no outstanding balance of bank acceptance notes issued to vendors under this facility.

On June 21, 2019, the Company’s China subsidiary, Global, entered into a three-year credit facility totaling 50,000,000 RMB (the “¥50M Credit Facility”), or approximately $7.1 million, with CZB. Borrowing under the ¥50M Credit Facility will be used by Global for general corporate purposes. Global may draw upon the ¥50M Credit Facility from June 21, 2019 until June 20, 2022 (the “¥50M Credit Period”). During the ¥50M Credit Period, Global may request to draw upon the ¥50M Credit Facility on an as-needed basis; however, draws under the ¥50M Credit Facility may become due and repayable to CZB at CZB’s discretion due to changes in Chinese government regulations and/or changes in Global’s financial and operational condition. Each draw will bear interest equal to CZB’s commercial banking interest rate effective on the day of the applicable draw. Global’s obligations under the ¥50M Credit Facility will be secured by machinery and equipment owned by Global and mortgaged to CZB under the terms of the Machinery and Equipment Security Agreement. As of September 30, 2021, $7.4 million was outstanding under the ¥50M Credit Facility. 

On  October 19, 2020, the Company’s China subsidiary, Global entered into a new twelve (12) month revolving line of credit agreement, totaling 60,000,000 RMB, or approximately $8.9 million (the “Replacement China Merchants Credit Line”), with China Merchants, to replace the original China Merchants Credit Line. The Replacement China Merchants Credit Line will be used by Global for general corporate purposes. Global  may draw upon the Replacement China Merchants Credit Line during the period from  October 16, 2020 until  October 15, 2021. During such period, Global  may request to draw upon the Replacement China Merchants Credit Line on an as-needed basis; however, the amount of available credit under the Replacement China Merchants Credit Line and the approval of each draw  may be reduced or declined by China Merchants due to changes in Chinese government regulations and/or changes in Global’s financial and operational condition at the time of each requested draw. Each draw will bear interest equal to the China Merchants’ commercial banking interest rate effective on the day of the applicable draw. Global’s obligations under the Replacement China Merchants Credit Line is unsecured. As of September 30, 2021, there was no outstanding amount under the Replacement China Merchants Credit Line and the outstanding balance of bank acceptance notes issued to vendors was $2.6 million. 

As of September 30, 2021 and December 31, 2020, the Company had $4.9 million and $28.7 million of unused borrowing capacity, respectively.

As of September 30, 2021 and December 31, 2020, there was $4.3 million and $5.4 million of restricted cash, investments or security deposits associated with the loan facilities, respectively.