Note 7 – Long-Term Debt

Long-term debt consists of the following:

	March 31 2020		December 31 2019
In thousands	March 31 2020		December 31 2019
8¼% Limited convertible senior subordinated notes due 2012	$	352	$	352
9½% Subordinated debentures due 2012		220		220
Revolving credit line		977		-
Term loans		1,000		1,000
Forgivable loan		650		650
Total debt		3,199		2,222
Less deferred financing costs		214		-
Net debt		2,985		2,222
Less portion due within one year		2,335		1,572
Net long-term debt	$	650	$	650

On September 16, 2019, the Company entered into the Loan Agreement with MidCap. On June 3, 2020, the Company and MidCap entered into a modification agreement to the Loan Agreement. 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% (6.51% at March 31, 2020) on a revolving credit loan based on accounts receivable, inventory and equipment for general working capital purposes. As of March 31, 2020, the balance outstanding under the Loan Agreement was $977,000. 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 Borrowers to attain certain EBITDA amounts for certain periods, the first of which is for the three months ended September 30, 2020. The Loan Agreement is secured by substantially all of the Borrowers’ assets.

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 March 31, 2020, the entire amount was outstanding and is included in current portion of long-term debt in the Consolidated Balance Sheets. As of March 31, 2020 and December 31, 2019, the Company had accrued $135,000 and $120,000, respectively, of interest related to this loan, which 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 March 31, 2020, the entire amount was outstanding and is included in current portion of long-term debt Consolidated Balance Sheets. As of March 31, 2020 and December 31, 2019, the Company had accrued $135,000 and $120,000, 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 March 31, 2020 and December 31, 2019, the Company had outstanding $352,000 of Notes. The Notes matured as of March 1, 2012 and are currently in default. As of March 31, 2020 and December 31, 2019, the Company had accrued $307,000 and $300,000, 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 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 the three months ended March 31, 2019.

As of March 31, 2020 and December 31, 2019, the Company had outstanding $220,000 of Debentures. The Debentures matured as of December 1, 2012 and are currently in default. As of March 31, 2020 and December 31, 2019, the Company had accrued $216,000 and $211,000, 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.

The Company has a $650,000 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, 2025. If the Company attains the employment levels required by the forgivable loan, there is no interest due, otherwise interest accrues at a rate of prime plus 2.00% (5.25% at March 31, 2020). As of March 31, 2020 and December 31, 2019, the Company had accrued $129,000 and $118,000, respectively, of interest related to this loan, which is included in accrued liabilities in the Consolidated Balance Sheets. On July 2, 2020, the Company and the City of Hazelwood agreed to a termination of the loan and a forgiveness of all accrued interest. The principal balance of $650,000 was repaid on that date and the forgivable loan was satisfied in full.