Note 7 - Long-term Debt

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Long-term Debt [Text Block]

NOTE 7: LONG-TERM DEBT

The Company had a revolving credit facility with HSBC Bank, USA, N.A. (“HSBC”) providing up to

$7

million, although the Company had never utilized this facility. This credit facility expired on

September 1, 2018.

The Company has a loan agreement with HSBC which is secured by a mortgage on our Central Islip, NY headquarters. The loan is payable in

120

consecutive equal monthly installments of

$25,000

in principal plus interest and a final balloon payment upon maturity in

March 2022.

The balances as of

June 30, 2019

and

December 31, 2018

were approximately

$2.5

million and

$2.7

million respectively. Interest accrues on the Loan, at our option, at the variable rate of LIBOR plus

1.75%

or Prime less

0.5%.

On

November 30, 2017,

the Company purchased the premises located at

555

North Research Place, Central Islip, NY. The purchase price of the building was

$13,850,000

exclusive of closing costs. The Company’s newly formed wholly-owned subsidiary,

555

N Research Corporation (the “Assignee”) and the Islip IDA, entered into a Fee and Leasehold Mortgage and Security Agreement (the ”Loan”) with HSBC in the amount of

$10,387,500,

which was used to finance a portion of the purchase price to acquire the premises located at

555

North Research Place, Central Islip, New York. The Loan was evidenced by the certain Note, dated

November 30, 2017 (

the “Note”), by and between Assignee and the Bank, and secured by a certain Fee and Leasehold Mortgage and Security Agreement (the “Mortgage”), dated

November 30, 2017,

as well as a collateral Assignment of Leases and Rents.

The Loan is payable in

60

consecutive equal monthly installments of

$62,481

including interest and final balloon payment upon maturity in

December 2022.

The balance outstanding as of

June 30, 2019

and

December 31, 2018

were approximately

$9.9

million and

$10.0

million respectively. The Loan bears interest for each Interest Period (as defined in the Note), at the fixed rate of

3.9148%.

The maturity date for the Note is

December 1, 2022.

As a condition of the Bank making the Loan, the Company was required to guaranty Assignee’s obligations under the Loan pursuant that certain Unlimited Guaranty, dated

November 30, 2017 (

the “Guaranty”). On

May 31, 2019,

the Company entered into

two

sublease agreements for a portion of the CVD Materials facility. During the quarter ended

June 30, 2019,

the Company recognized

$36,000

of rental income which commenced

June 1, 2019.

Commencing

July 2019,

the monthly rental income will increase to approximately

$67,000

per month or approximately

$800,000

per annum.

At

December 31, 2018,

the Company was

not

in compliance with the

one

financial covenant (fixed charge coverage ratio) contained in the Mortgage. On

March 26, 2019

the Company received a waiver from HSBC until

April 1, 2020.

On

August 5, 2019,

the Company entered into a Mortgage Modification Agreement which replaced the former covenant with a Minimum Liquid Assets covenant. The Company is in compliance with its obligations under the mortgage at

June 30, 2019.