Note 12: Bank Indebtedness and Production Facilities

The Company has certain credit facilities (together, the “Facilities”) that are comprised of the following:

Revolving Demand Facility

As of September 30, 2024 and December 31, 2023, the Company had an outstanding balance of $0.6 million (CAD 0.8 million) and $2.9 million (CAD 3.8 million), respectively, on the revolving demand facility by way of bank prime rate loan draws, included as Bank Indebtedness within current liabilities on the Company’s condensed consolidated balance sheets.

During March 2024, the Company amended the revolving demand facility. As a result of the amendment, the revolving demand facility allows for draws of up to $0.7 million (CAD 1.0 million) to be made by way of CAD prime rate loans, CAD overdrafts, USD base rate loans or letters of credit up to a maximum of $0.2 million in either CAD or USD and having a term of up to 1 year. The CAD prime borrowings and overdrafts bear interest at a rate equal to bank prime plus 2.00% per annum. The USD base rate borrowings bear interest at a rate equal to bank base rate plus 2.00% per annum.

Treasury Risk Management Facility

During March 2024, an amendment was entered into that removed the treasury risk management facility. As of the date of the amendment and December 31, 2023, there were no outstanding amounts drawn under the treasury risk management facility.

Production Facilities

The production facilities are used for financing specific productions. The Company’s production facilities bear interest at rates ranging from bank prime plus 1.00% - 1.25% per annum. The production facilities are generally repayable on demand and are guaranteed and secured by the Company with no limitations for maximum potential future payments. The security reflects substantially all of the Company's tangible and intangible assets including a combination of federal and provincial tax credits, other government incentives, production service agreements and license agreements.

As of September 30, 2024 and December 31, 2023, the Company had an outstanding balance of $8.7 million (CAD 11.8 million), including $1.3 million (CAD 1.7 million) of interest, and $15.3 million (CAD 20.3 million), including $1.4 million (CAD 1.9 million) of interest, respectively, recorded as Production Facilities, net within current liabilities on the Company’s condensed consolidated balance sheets.

Equipment Lease Line

During March 2024, the equipment lease line was terminated, however, the Company continued to make the regular principal and interest payments under the specific financing terms of the existing equipment lease agreements. Each existing transaction under the equipment lease line has specific financing terms in respect of the leased equipment such as term, finance amount, rate, and payment terms. The finance rates for these equipment leases range from 4.49% to 7.18% with remaining lease terms of 1 - 2 months as of September 30, 2024.

As of September 30, 2024, the outstanding balance of $0.6 million (CAD 0.8 million) was included within current Finance Lease Liabilities on the Company’s condensed consolidated balance sheets.

Equipment Lease Facility

The Company also entered into an equipment lease agreement with a Canadian bank. This additional equipment lease facility allows the Company to finance equipment purchases of up to $1.0 million (CAD 1.4 million) in total. Each transaction under the equipment lease facility has specific financing terms in respect of the leased equipment such as term, finance amount, rate, and payment terms. As of September 30, 2024, the Company has leases remaining under this facility with finance rates of 7.52% to 8.20% and remaining lease terms of 14 - 23 months.

As of September 30, 2024, the outstanding balance of $0.4 million (CAD 0.5 million) was included within current and noncurrent Finance Lease Liabilities on the Company’s condensed consolidated balance sheets.

Loan Covenants, Violations and Waiver

The Company is subject to financial and customary affirmative and negative non-financial covenants on the revolving demand facility and equipment lease agreements that have an aggregate total outstanding balance of $1.2 million (CAD 1.6 million).

The Company has continued to make its regular principal and interest payments in a timely basis since the effective borrowing date.

The revolving demand facility and the equipment lease line can be called at any time by the lender as per the original and amended terms of the facilities. As of September 30, 2024, the Company was not in compliance with a financial covenant to maintain a minimum liquidity threshold. Due to financial covenant violations in the second quarter of 2024, the Company’s remaining equipment lease agreements with the lender of $0.6 million (CAD 0.8 million) as of September 30, 2024, are subject to early repayment. During the three months ended September 30, 2024, the lender and the Company reached an agreement in principle for a repayment plan for the equipment leases under the equipment lease line. On August 30, 2024, the Company paid $0.1 million (CAD 0.1 million) to the lender as part of its early repayment plan for the existing equipment lease line agreements. Subsequent to September 30, 2024, the Company paid $0.3 million (CAD 0.4 million) to the lender as part of its repayment plan for the equipment lease line. The Company expects to enter into a written agreement with the lender prior to the end of the fourth quarter of 2024 to amend the revolving demand facility and equipment lease line.