NOTE 4 – LINE OF CREDIT

Credit Facility

Effective September 30, 2020, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Pinnacle Bank (“Pinnacle”). Before the Loan Agreement was set to expire in September 2024, the Company and Pinnacle executed an amendment to extend the term of the Loan Agreement until September 30, 2026.

The Loan Agreement, as amended, provides for a revolving credit facility under which Pinnacle may, in its sole discretion upon our request, make advances to the Company up to $7,500, 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) 40% of the aggregate eligible inventory value of eligible inventory or (ii) $4.0 million, plus (c) up to $146 collateralized by certain equipment. Additionally, the inventory advances limit shall decrease as the Company’s effective Tangible Net Worth diminishes at ranges provided in the Loan Agreement. Such inventory advances limit can be as high as $2.0 million with a Net Tangible Worth of $10.0 million, to as low as $0 with a Net Tangible Worth of $6.0 million. Any such decrease in the inventory advances limit shall take effect on the first day of the month following the Borrower’s delivery of its quarterly financial statements, as required by the Affirmative Covenants of the Loan Agreement. As of June 30, 2025, the Company’s Net Tangible Worth is approximately $7.4 million.

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 June 30, 2025 and 9.75% at December 31, 2024). 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 June 30, 2025 and 10.75% at December 31, 2024).

Pursuant to the Loan Agreement, as amended, the standards of eligible accounts receivable include AT&T accounts receivable up to 120 days of invoice date, and eligible accounts receivable with other customers have up to 90 days of invoice date. Customer accounts with eligible accounts receivable cannot exceed a concentration percentage which is a customer’s total obligations to the Company as a percentage of eligible accounts receivable from all customers. The concentration percentage applicable to certain Tier-1 telecommunications customers is 75% of all eligible accounts receivable, and the concentration percentage applicable to all other customer is 25% of all eligible accounts.

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.

At December 31, 2024, the outstanding balance under the line of credit was $4,797 and the Company had availability under the line of credit in the amount of $654. During the six months ended June 30, 2025, the Company advanced an aggregate of $505 under the credit facility. At June 30, 2025, the outstanding balance under the line of credit was $5,302 and the Company had an amount of $66 available under the line of credit.

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. The Loan Agreement contains certain affirmative and negative covenants, all of which the Company was in compliance with at June 30, 2025.

The total interest expense, fees, and financing costs incurred under the Loan Agreement for the three-month periods ended June 30, 2025 and 2024 were $168 and $179, respectively. Of these amounts, $1 in 2025 and $1 in 2024 were recorded under general and administrative expenses, while $167 in 2025 and $177 in 2024 were recorded under interest expense and finance costs in the accompanying statements of operations.

The total interest expense, fees, and financing costs incurred under the Loan Agreement for the six-month periods ended June 30, 2025 and 2024 were $329 and $340, respectively. Of these amounts, $1 in 2025 and $2 in 2024 were recorded under general and administrative expenses, while $327 in 2025 and $338 in 2024 were recorded under interest expense and finance costs in the accompanying statements of operations.