Revolving line of credit, Convertible debentures and loan due to related party |
12 Months Ended |
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Dec. 31, 2020 | |
| Debt Disclosure [Abstract] | |
| Revolving line of credit, Convertible debentures and loan due to related party | Revolving line of credit and Notes Payable On May 4, 2018 ("Closing Date") we entered into a Credit Agreement with Webster Business Credit Corporation ("Webster") that originally matured in May 2021, provided 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 bore interest at a rate equal to, at our option, to either (1) One Month LIBOR, plus 3.00%, or (2) Webster’s Base Rate, plus 1.5%. Webster’s Base Rate is defined as the highest of (a) the Federal Funds rate plus 0.5%, (b) Webster’s Prime Rate as adjusted by the bank from time to time, and (c) One Month LIBOR, plus 2.75%, 6.25% as of December 31, 2019.
The Credit Agreement contained certain affirmative and negative covenants applicable to us, which include, among other things, restrictions on our ability to (i) incur additional indebtedness, (ii) make certain investments, (iii) acquire other entities, (iv) dispose of assets and (v) make certain payments including those related to dividends or repurchase of equity. The Credit Agreement also contained financial covenants including maintaining a fixed charge coverage ratio of not less than 1.10:1.00 and we could not make any unfinanced capital expenditures in excess of $500,000 in the aggregate in any fiscal year.
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 Credit Agreement. The unamortized portion of debt issuance cost related to the Credit Agreement was $— and $49,946, respectively, as of December 31, 2020 and 2019, and is included as a reduction to the revolving line of credit in the accompanying Consolidated Balance Sheets.
On May 11, 2020, we terminated our Credit Agreement, dated May 4, 2018, with Webster Business Credit Corporation, together with related agreements, including a Revolving Note, Security Agreement, Blocked Account Agreement, and Master Letter of Credit Agreement. We paid an early termination fee in the amount of $25,000 in connection with the termination of the Credit Agreement, and continue to use depository and cash management services provided by Webster Bank. 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. As of December 31, 2020 and 2019, the outstanding balance on the line of credit was $0 and $2,452,330, respectively.
On April 17, 2020, we 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 us 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.
On January 19, 2021, we received a letter dated January 12, 2021 from Webster Bank, NA confirming that the Paycheck Protection Program Loan to us pursuant to the Coronavirus Aid, Relief, and Economic Recovery Act, as amended, in the original principal amount of $1,874,200 together with accrued interest of $12,733 was forgiven in full as of January 11, 2021.
Subsequent to the year end, on February 5, 2021, we obtained a Paycheck Protection Program Second Draw unsecured loan through Webster Bank, N.A. in the amount of $1,874,269 in connection with the Paycheck Protection Program pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), as amended. The loan is guaranteed by the United States Small Business Administration. Interest on the loan balance is at the rate of 1% per year, and repayment of the loan balance is deferred until June 5, 2022. If not forgiven in accordance with the Cares Act, as amended, the loan is repayable in forty-four (44) monthly installments of $43,400 beginning July 5, 2022 with final payment due February 5, 2026. We intend to use the loan proceeds for payroll, rent, utilities and other operating expenses, and expect to apply for forgiveness of the loan balance as permitted under the CARES Act, as amended. 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.
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