NOTE 5 – LINE OF CREDIT

Credit Facility

Effective September 30, 2020, the Company entered into a Loan and Security Agreement (as amended from time to time, the “Loan Agreement”) with Pinnacle Bank (“Pinnacle”). At September 30, 2023, the outstanding balance under the line of credit was $5,194 and the Company had availability under the line of credit of $119. The Loan Agreement initially expired on September 30, 2022, and on November 3, 2022, the Loan Agreement was amended to expire on September 30, 2024.

The Loan Agreement, provides for a revolving credit facility under which Pinnacle may make advances to the Company, subject to certain limitations and adjustments, of up to (a) 85% of the aggregate net face amount of the Company’s accounts receivable and other contract rights and receivables, plus (b) the lesser of (i) 35% of the lower of cost or wholesale market value of certain inventory of the Company or (ii) $2,500.

Borrowings based on receivables bears an interest on the daily balance at a rate of 1.25% above the prime rate, but in no event less than 3.75% per annum (9.75% at September 30, 2023 and 8.75% at December 31, 2022). Interest on the portion of the daily balance consisting of advances against inventory accrues interest at a rate of 2.25% above the prime rate, but in no event less than 4.75% per annum (10.75% at September 30, 2023 and 9.75% at December 31, 2022).

On April 13, 2023, the Company entered into a Third Modification to the Loan Agreement under which the Company and Pinnacle agreed to add a new section which provides for Pinnacle to lend the Company up to $146 collateralized by certain equipment. At September 30, 2023, the outstanding balance under this section of the Loan Agreement was $122 and is included in the total outstanding balance of $5,194.

On May 25, 2023, the Company entered into a Fourth Modification to the Loan Agreement under which the parties (a) agreed to amend the amount of available advances under the Loan Agreement such that the aggregate amount of the outstanding advances under the revolving credit facility may not be greater than $6 million, and (b) raised the concentration percentage applicable to certain Tier-1 telecommunication customers from 50% to 75% in the definition of eligible accounts.

On September 5, 2023, the Company entered into a Fifth Modification to the Loan Agreement under which the parties (a) extend the 90-day period on AT&T accounts receivable to 120 days; (b) increase the lesser of (i) 35% of the lower of cost or wholesale market value of certain inventory of the Company or (ii) $2.5 million to the lessor of (i) 40% of the aggregate eligible inventory value of eligible inventory or (ii) $4.0 million; (c) increase the aggregate advance limit under the credit facility from $6.0 million to $7.5 million; and (e) among other items, charge a fee of $23, 1.5% of the $1.5 million increase in the inventory advance limit, plus a $1 document fee, to Pinnacle, as conditions precedent to the Fifth Modification.

Pinnacle may terminate the Loan Agreement at any time upon ninety days prior written notice and immediately upon the occurrence of an event of default. Under the Loan Agreement, the Company granted Pinnacle a security interest in all presently existing and thereafter acquired or arising assets of the Company. The Loan Agreement also contains a financial covenant requiring the Company to attain an effective tangible net worth, as defined, which the Company attained as of September 30, 2023.

The Loan Agreement obligates the Company to pay Pinnacle a yearly facility fee in an amount equal to 1.125% of the sum of the advance limit.