NOTE 9—DEBT

The Company recognized approximately $0.6 million and $1.8 million in interest expense for the three and nine months ended September 30, 2024, respectively, and $0.6 million and $1.8 million for the three and nine months ended September 30, 2023, respectively. The weighted-average interest rate as of September 30, 2024 was 14.55%.

Term Loan

On November 9, 2018, the Company entered into that certain five-year secured Credit Agreement with SWK, pursuant to which the Company has outstanding principal of $13.3 million (“SWK Loan”) as of September 30, 2024. In addition, pursuant to the Credit Agreement, the Company is required to pay certain exit fees totaling $1.4 million upon loan termination which are recorded as a debt premium. The Company’s obligations under the Credit Agreement are secured by substantially all of the Company’s assets. Under the terms of the Credit Agreement and subsequent amendments as discussed in the Company’s 2023 Form 10-K, repayment of the SWK Loan is interest-only for the first two years, paid quarterly with the option to extend the interest-only period. Principal repayments were to begin in the first quarter of 2021. On June 30, 2022 the Company entered into the ninth amendment to the Credit Agreement (the "Ninth Amendment"), which extended the interest-only period by two quarters from May 2023 to November 2023. On December 30, 2022, the Company entered into the tenth amendment to the Credit Agreement, which lowered the required minimum consolidated unencumbered liquid assets from $3 million to $2.5 million and removed the conditional minimum last twelve months aggregate revenue and EBITDA as of the end of the twelve-month period ended December 31, 2022. On November 15, 2023, the Company entered into the Eleventh Amendment to Credit Agreement, which reduced the principal amortization payments due on November 15, 2023 and February 15, 2024 to $165,000, reduced the required minimum consolidated unencumbered liquid assets to $1.5 million through and including December 30, 2023 and to $2.5 million thereafter, and reduced the required minimum consolidated unencumbered liquid assets to $3.5 million as of the last day of any fiscal quarter beginning with the period ending March 31, 2024. In connection with the Ninth Amendment, the Company prepaid $1.0 million of the outstanding loan balance. Principal repayments began in November 2023 and are $0.7 million quarterly after February 2024 until the SWK Loan matures in May 2025. The loan bears interest of 9% plus LIBOR with a floor of 1.25%, or another index that approximates LIBOR as close as possible if and when LIBOR no longer exists.

In May 2024 all remaining long-term balances related to the SWK Loan were reclassified to current liabilities due to the loan maturity date of May 31, 2025.

The Company was scheduled to make its quarterly principal and interest payment of approximately $1.2 million on August 15, 2024. However, the Company was unable to make this payment. On August 22, 2024 SWK notified the Company of an alleged event of default under the Credit Agreement, and extended the August payment date to August 30, 2024.

On August 31, 2024, the Company and SWK entered into a Forbearance Agreement (the "Forbearance Agreement"). Under the terms of the Forbearance Agreement, SWK agreed: (a) not to accelerate or cause the acceleration of the maturity of the loans or other obligations or to otherwise enforce payment of the obligations of the Company in full under the Credit Agreement and the loan

documents, and (b) not to exercise any other default or event of default related rights and remedies available to SWK against the Company under any loan document or applicable law with respect to any obligation owed under the loan documents. Upon termination or expiration of the period (the “Forbearance Period”), SWK shall be entitled to exercise any of its respective rights and remedies under the Forbearance Agreement, the other loan documents, or applicable law, including, without limitation, the right to enforce any and all of the liens on, and security interests in, the collateral described in the loan documents, without further notice, demand, notice of intent to accelerate, notice of acceleration, presentment, protest or other formalities of any kind. The Forbearance Period terminated upon the Company's filing of chapter 11 bankruptcy on October 1, 2024. The Company also agreed to pay the reasonable fees and expenses of SWK in connection with entering into the Forbearance Agreement and the other loan documents.

In addition, the Forbearance Agreement provided that during the Forbearance Period, provided no Forbearance Default has occurred and certain other conditions are met, Agent and Lenders agreed to fund term loans, in an aggregate amount not to exceed $2,500,000 (the bridge loan) and in accordance with the terms of the Forbearance Agreement, to pay operating expenses of the Company, including, without limitation, payments with respect to out of pocket legal or restructuring expenses of the Company, Agent or Lenders.

Under the Forbearance Agreement, the Company also agreed to, among other things, prepare for and file a bankruptcy case under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware for the sale of the Company’s assets. In connection with the sale process the Company agreed to comply with certain process milestones which require, among other things, the entry into a purchase and sale agreement with a so-called “stalking horse bidder” by September 30, 2024, filing a bankruptcy case by October 1, 2024, and closing the sale by November 15, 2024. All of the milestones and the entire sale process are subject to bankruptcy court approval and the milestones that occur after the commencement of the Company’s bankruptcy case are subject to change by the bankruptcy court to accommodate its own schedule.

The Forbearance Agreement further provides that the Company shall request that Lenders provide a debtor-in-possession loan (the “DIP Loan”) to the Company in the Chapter 11 case, on terms acceptable to the Agent and Lenders. The Agent is to condition the provision of the DIP Loan to the Company on the $2,500,000 bridge loan described in the preceding paragraph itself being considered a debtor-in-possession loan and being “rolled-up” in the DIP Loan to be provided to the Company in the Chapter 11 case pursuant to the final order that will be entered in the Chapter 11 case by the bankruptcy court approving the DIP Loan.

During the Forbearance Period, the Company had agreed, among other things: (a) not to grant or pay any executive bonuses without the consent of the Agent, (b) to provide the Agent with notice of any employee resignation, (c) not to make any expenditure for the business to consumer laser product line, (d) to comply with the cash flow forecasted budget it created in connection with entering into the Forbearance Agreement and to keep its aggregate expenditures within an agreed upon budget variance of 10% in the case of expenditures, (e) to provide weekly reporting of actual results compared to the budget, (f) not to suffer the appointment of a receiver, trustee, custodian or similar fiduciary, (g) to pay all reasonable fees and expenses incurred by the Agent and Lenders in connection with the Forbearance Agreement and the loan documents, including the reasonable and documented fees and expenses of the Agent’s and Lenders’ external counsel, and (h) not to pay or make any distributions on account of subordinated debt of the Company and its subsidiaries or agree to any amendments to any subordinated debt documents without the Agent’s consent.

As of September 30, 2024, the Company was in compliance with the terms of the Forbearance Agreement.

EIDL Loan

On May 22, 2020, the Company executed the standard loan documents required for securing a loan (the “EIDL Loan”) from the Small Business Administration (the "SBA") under its Economic Injury Disaster Loan assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. The principal amount of the EIDL Loan is $150,000, with the proceeds to be used for working capital purposes. Interest on the EIDL Loan accrues at the rate of 3.75% per annum, and installment payments, including principal and interest, are due monthly beginning in July 2021 and are payable through July 2050. In April 2021, the SBA announced that it was extending the first payment due date for all loans until 2022, or 24 months from the loan execution date. In March 2022, the SBA announced that it was extending the first payment due date for all loans an additional six months, or 30 months from the loan execution date. The Company began making payments on the EIDL Loan starting in November 2022. Fixed payments are first applied to any accrued interest.