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Note 9 - Third-party Long-term Debt

9 Months Ended

Sep. 30, 2025

(9)

Third-Party Long-Term Debt

Debt Agreements. Blue Dolphin and certain subsidiaries are currently parties to the following debt agreements with third parties:

		Original		Monthly Principal
		Principal		and Interest Payment
Loan Description	Parties	(in millions)	Maturity	(in millions)	Interest Rate	Loan Purpose
Veritex Loans
LE Term Loan Due 2034 (in default)⁽¹⁾	LE	$25.0	June 2034	$0.3	WSJ Prime + 2.75%	Capital improvements
	Veritex
LRM Term Loan Due 2034 (in default)⁽¹⁾	LRM	$10.0	December 2034	$0.1	WSJ Prime + 2.75%	Capital improvements
	Veritex
GNCU Loan
NPS Term Loan Due 2031 (in default)⁽²⁾	NPS	$10.0	October 2031	$0.1	5.75%	Working capital
	GNCU
SBA Economic Injury Disaster Loans
Blue Dolphin Term Loan Due 2051⁽³⁾	Blue Dolphin	$2.0	June 2051	$0.01	3.75%	Working capital
	SBA
LE Term Loan Due 2050⁽⁴⁾	LE	$0.15	August 2050	$0.0007	3.75%	Working capital
	SBA
NPS Term Loan Due 2050⁽⁴⁾	NPS	$0.15	August 2050	$0.0007	3.75%	Working capital
	SBA
Equipment Loan Due 2025⁽⁵⁾	LE	$0.07	October 2025	$0.0013	4.5%	Equipment Purchase
	Texas First
Equipment Loan Due 2031 (6)	LE	$0.138	March 2031	$0.0028	12.7%	Equipment Purchase
	Ritchie Bros. Financial Services

⁽¹⁾

Our secured loan agreements with Veritex are subject to certain financial and non-financial covenants. As of September 30, 2025, LE and LRM were in default related to financial covenants under the LE Term Loan Due 2034 and LRM Term Loan Due 2034. With respect to non-financial covenants, we are required to have a balance of $1.0 million in a payment reserve account held by Veritex. At September 30, 2025 and December 31, 2024 restricted cash totaled $1.0 million.

⁽²⁾

Loan requires monthly interest-only payments for the first thirty-six (36) months. Afterwards, principal and interest payments are due monthly through loan maturity. First principal payment commenced in November 2024. As of September 30, 2025 and the filing date of this report, the NPS Term Loan Due 2031 was in default due to non-financial covenant violations.

⁽³⁾	Original principal amount was $0.5 million; the Blue Dolphin Term Loan Due 2051 was modified to increase the principal amount by $1.5 million. Payments deferred for thirty (30) months; first payment commenced in November 2023; interest accrued during deferral period; loan not forgivable.

⁽⁴⁾	Payments deferred for thirty (30) months; first payment commenced in February 2023; interest accrued during deferral period; loan not forgivable.

⁽⁵⁾	In October 2020, LE entered into the Equipment Loan Due 2025 to purchase a backhoe; the backhoe is used at the Nixon facility. The Equipment loan was paid in full in November 2025.
⁽⁶⁾	In March 2025, LE entered into the Equipment Loan Due 2031 to purchase mobile offices; the mobile offices are used at the Nixon facility.

Outstanding Principal, Debt Issue Costs, and Accrued Interest. Third-party long-term debt, including outstanding original principal, as of the dates indicated, was as follows:

	September 30,			December 31,
	2025			2024
	(in thousands)
Veritex Loans
LE Term Loan Due 2034 (in default)	$	17,853		$	18,753
LRM Term Loan Due 2034 (in default)		7,450			7,793
Kissick Debt ⁽¹⁾		-			1,432
GNCU Loan
NPS Term Loan Due 2031 (in default)		8,800			9,671
SBA Economic Injury Disaster Loans
Blue Dolphin Term Loan Due 2051		2,000			2,000
LE Term Loan Due 2050		150			150
NPS Term Loan Due 2050		150			150
Equipment Loan Due 2025		3			14
Equipment Loan Due 2031		131			-
		36,537			39,963

Less: Long-term debt, net, current portion		(32,532	)		(35,920	)
Less: Unamortized debt issue costs		(1,591	)		(1,743	)
	$	2,414		$	2,300

⁽¹⁾	Kissick Debt was paid in full in March 2025.

Unamortized debt issue costs associated with the Veritex and GNCU loans, as of the dates indicated, consisted of the following:

	September 30,			December 31,
	2025			2024
	(in thousands)
Veritex Loans
LE Term Loan Due 2034 (in default)	$	1,674		$	1,674
LRM Term Loan Due 2034 (in default)		768			768
GNCU Loan
NPS Term Loan Due 2031 (in default)		730			730

Less: Accumulated amortization		(1,581	)		(1,429	)
	$	1,591		$	1,743

Amortization expense was less than $0.1 million for the three months ended September 30, 2025 and 2024 and $0.2 million for the nine months ended September 30, 2025 and 2024.

Accrued interest related to third-party long-term debt, reflected as accrued interest payable in our consolidated balance sheets, as of the dates indicated, consisted of the following:

	September 30,			December 31,
	2025			2024
	(in thousands)

SBA Economic Injury Disaster Loans
Blue Dolphin Term Loan Due 2051	$	59		$	93
LE Term Loan Due 2050		5			8
NPS Term Loan Due 2050		5			8
Veritex Loans
LE Term Loan Due 2034 (in default)		45			48
LRM Term Loan Due 2034 (in default)		57			61
GNCU Loan
NPS Term Loan Due 2031 (in default)		18			17
Equipment Loan Due 2025		-			-
		189			235
Less: Accrued interest payable, current portion		(189	)		(235	)
Long-term interest payable, net of current portion	$	-		$	-

We classified the debt associated with the LE Term Loan Due 2034, LRM Term Loan Due 2034, and NPS Term Loan Due 2031 within long-term debt, current portion on our consolidated balance sheets at September 30, 2025 and December 31, 2024 due to being in default.

Defaults.

As of September 30, 2025 and through the filing date of this report, LE and LRM were in default related to financial covenants under the LE Term Loan Due 2034 and LRM Term Loan Due 2034, respectively. NPS was in default related to non-financial covenants under the NPS Term Loan Due 2031. Defaults may permit lenders to declare the amounts owed under the related loan agreements immediately due and payable, exercise their rights with respect to collateral securing obligors’ obligations, and exercise any other rights and remedies available. We can provide no assurance that: (i) our assets or cash flow will be sufficient to fully repay borrowings under secured loan agreements that are in default, either upon maturity or if accelerated, (ii) LE, LRM, or NPS will be able to refinance or restructure the debt, or (iii) third parties will provide future forbearances or default waivers, particularly if the banks with whom we have relationships fail. If one or more banks fail, we could be exposed to additional events of default (if not cured or waived) under existing secured loan agreements. Defaults under our secured loan agreements and any exercise by third parties of their rights and remedies related to such defaults may have a material adverse effect on our business, the trading price of our Common Stock, and on the value of an investment in our Common Stock, and holders of our Common Stock could lose their investment in our Common Stock in its entirety. If the debt associated with secured loan agreements is accelerated and we are unable to refinance or restructure the debt or obtain default waivers, we may have to consider other options, including selling assets, raising additional debt or equity capital, cutting costs, reducing cash requirements, filing bankruptcy, or ceasing operating. See “Notes ( 3) and ( 10)” to our consolidated financial statements for additional information regarding defaults under our secured loan agreements with related parties and third parties and their potential effects on our business, financial condition, and results of operations.

Guarantees and Security.

Loan Description	Guarantees	Security
Veritex Loans
LE Term Loan Due 2034 (in default)	● USDA	●	First priority lien on Nixon facility’s business assets (excluding accounts receivable and inventory)
	● Jonathan Carroll⁽¹⁾	●	Assignment of all Nixon facility contracts, permits, and licenses
	● Affiliate cross-guarantees	●	Absolute assignment of Nixon facility rents and leases, including tank rental income
		●	$5.0 million life insurance policy on Jonathan Carroll
LRM Term Loan Due 2034 (in default)	● USDA	●	Second priority lien on rights of LE in crude distillation tower and other collateral of LE
	● Jonathan Carroll⁽¹⁾	●	First priority lien on real property interests of LRM
	● Affiliate cross-guarantees	●	First priority lien on all LRM fixtures, furniture, machinery, and equipment
		●	First priority lien on all LRM contractual rights, general intangibles, and instruments, except with respect to LRM rights in its leases of certain specified tanks for which Veritex has second priority lien
		●	Substantially all assets
GNCU Loan
NPS Term Loan Due 2031 (in default)	● USDA	●	Deed of trust lien on approximately 56 acres of land and improvements owned by LE
	● Jonathan Carroll⁽¹⁾	●	Leasehold deed of trust lien on certain property leased by NPS from LE
	● Affiliate cross-guarantees	●	Assignment of leases and rents and certain personal property
SBA EIDL
BDEC Term Loan Due 2051	---	●	Business assets (e.g., machinery and equipment, furniture, fixtures, etc.)
LE Term Loan Due 2050	---	●	Business assets (e.g., machinery and equipment, furniture, fixtures, etc.)
NPS Term Loan Due 2050	---	●	Business assets (e.g., machinery and equipment, furniture, fixtures, etc.)
Equipment Loan Due 2025	---	●	First priority security interest in the equipment (backhoe)
Equipment Loan Due 2031	---	●	First priority security interest in the equipment (mobile offices)

⁽¹⁾	^{Veritex required Jonathan Carroll to personally guarantee repayment of borrowed funds and accrued interest.}

Representations, Warranties, and Covenants. The First Term Loan Due 2034, Second Term Loan Due 2034, NPS Term Loan Due 2031, BDEC Term Loan Due 2051, LE Term Loan Due 2050, and NPS Term Loan Due 2050 contain representations and warranties, affirmative and negative covenants, and events of default that we consider usual and customary for bank facilities of these types. Specifically, The First Term Loan Due 2034 and Second Term Loan Due 2034 contain quarterly debt service coverage, total combined current assets, total combined current liabilities, and total combined debt ratios and annual current and debt to net worth ratios. The First Term Loan Due 2034 also requires that a $1.0 million payment reserve account be maintained. The NPS Term Loan Due 2031 requires NPS to have an active deposit account with the lender, provide standalone audited financial statements for NPS, a wholly owned subsidiary, and meet annual maintenance of debt service coverage and current ratios. There are no covenants associated with BDEC Term Loan Due 2051, LE Term Loan Due 2050, NPS Term Loan Due 2050, the Equipment Loan Due 2025, and the Equipment Loan Due 2031.