Note Payable and Revolving Line of Credit, Bank (Notes)
|9 Months Ended|
Sep. 30, 2020
|Debt Disclosure [Abstract]|
|Note Payable and Revolving Line of Credit, Bank||
Note Payable and Revolving Line of Credit, Bank
On May 4, 2018 ("Closing Date"), the Company, and its wholly owned subsidiaries, American DG Energy Inc. and TTcogen LLC (collectively, the "Borrowers"), entered into a Credit Agreement with Webster Business Credit Corporation (the "Lender") that matures in May 2021 and provides Borrowers a line of credit of up to $10 million on a revolving and secured basis, with availability based on certain accounts receivables, raw materials, and finished goods.
Borrowings under the Credit Agreement bear interest at a rate equal to, at the Borrower's option, either (1) One Month LIBOR, plus 3.00%, or (2) Lender’s Base Rate, plus 1.5%. Lender’s Base Rate is defined as the highest of (a) the Federal Funds rate plus 0.5%, (b) Lender’s Prime Rate as adjusted by Lender from time to time, and (c) One Month LIBOR, plus 2.75%.
On May 11, 2020 the Company and Webster Business Credit Corporation ("Webster") agreed to terminate the Credit Agreement dated May 4, 2018 by and between Webster and the Company and its wholly owned subsidiaries, together with related agreements, including a Revolving Note, Security Agreement, Blocked Account Agreement, and Master Letter of Credit Agreement. Tecogen paid an early termination fee in the amount of $25,000 in connection with the termination of the Credit Agreement, and continues to use depository and cash management services provided by Webster Bank. The $145,011 of costs incurred in connection with the issuance of the revolving credit facility were capitalized and were being amortized to interest expense on a straight-line basis over three years based on the contractual term of the Agreement. Upon termination of the Credit Agreement, the unamortized balance of debt issuance cost of $37,861 was expensed in the accompanying Condensed Consolidated Statement of Operations.
On April 17, 2020, the Company obtained an unsecured loan through Webster Bank, N.A. in the amount of $1,874,200 in connection with the Paycheck Protection Program pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the United States Small Business Administration (the "SBA"). The loan is guaranteed by the SBA. Interest on the loan balance is at the rate of 1% per year, and as a result of the enactment of the Paycheck Protection Program Flexibility Act of 2020 (the “PPP Flexibility Act”), repayment of the loan balance could be deferred until August 2021, at which time the balance would be payable in 18 monthly installments of $106,356 with the final payment due in January 2023 if not forgiven in accordance with the Cares Act and the terms of the Promissory Note executed by the Company in connection with the loan. The PPP loan may be prepaid at any time without penalty. The loan agreement and promissory note include customary provisions for a loan of this type, including prohibitions on our payment of dividends or repurchase of shares of our common stock while the PPP Loan remains outstanding. The loan agreement and promissory note also defines events of default to include, among other things, payment defaults, breaches of provisions of the loan agreement or the promissory note and cross-defaults on other loans, if applicable.
In June 2020, the PPP Flexibility Act postponed the commencement of repayment obligations for Cares Act loans to the date on which the amount of forgiveness as determined under the Cares Act is remitted to the lender, but not later than 10 months after the last day of the applicable Covered Period (the period during which costs eligible for forgiveness may be paid or accrued). The Company has used 100% of the loan proceeds for payroll, rent, and utilities (which are costs expected to be eligible for loan forgiveness under the CARES Act and the Promissory Note) during the 24 week Covered Period following the disbursement of the loan as permitted under the PPP Flexibility Act in order to maximize the amount forgivable under the loan. Whether our application for forgiveness will be granted and in what amount is subject to an application to, and approval by, the SBA and may also be subject to further requirements in any regulations and guidelines the SBA may adopt. On November 10, 2020, we submitted a loan forgiveness application to Webster seeking forgiveness for the full amount of the PPP loan. To the extent that there is a loan balance after the application of permissible forgiveness, the Company will seek to extend the loan maturity for the remaining balance to the maximum maturity of five years as permitted under the Cares Act as amended by the PPP Flexibility Act.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef