NOTE 4 – LINE OF CREDIT

Effective September 30, 2020, the Company entered into a Loan Agreement with Pinnacle which will expire on September 30, 2026. The Loan Agreement, as amended, provides for a revolving credit facility under which Pinnacle may, in its sole discretion upon the Company’s request, make advances to us up to $7,500, subject to certain limitations and adjustments. The Loan Agreement contains certain affirmative and negative covenants.

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 (8.0% at December 31, 2025 and 8.75% 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 (9.0% at December 31, 2025 and 9.75% 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, the Company was not in compliance with the affirmative covenant requiring the Company to attain a minimum Effective Tangible Net Worth greater than $6,000, as the Company attained an Effective Tangible Net Worth of approximately $755 after recording an inventory write-down of $1,967 to adjust the book value of its inventory to its net realizable value, and $455 impairment of right-of-use asset and deposits. On March 10, 2026, the Company and Pinnacle executed a Notice of Additional Defaults and Forbearance Agreement, in which Pinnacle agrees to forbear from exercising certain rights and remedies under the Loan Documents arising from the Specified Existing Defaults for the period commencing March 10, 2026, the Effective Date, to July 31, 2026, the Forbearance Termination Date, considering the Company 1) on or prior to the Effective Date, pays Pinnacle the amount of $250, 2) on or prior to the Effective Date, assigns to Pinnacle new Eligible Accounts in the aggregate amount of at least $185, with 85% of the Net Face Amount of such new Eligible Accounts to be applied to reduce the loan obligations, 3) within forty-five (45) days of the Effective Date, reduce the loan obligations by the aggregate amount of $225, which reduction can result from a cash payment or the assignment of sufficient new Eligible Accounts, with 85% of the Net Face Amount of such new Eligible Accounts to be applied towards such reduction amount, 4) does not create any new events of default, 5) pays in full all obligations to Pinnacle by the Termination Date. If the Company timely complies with all terms listed above, and so long as the Forbearance Termination Date has not occurred, Pinnacle agrees that it will re-commence making Advances to the Company in the amount equal to 42.5% of the Net Face Amount of the thereafter arising Eligible Accounts, with the remaining 42.5% of the Net Face Amount of such Eligible Accounts to be applied to reduce the then outstanding obligations. In March 2026, the Company paid $250 to Pinnacle Bank and timely complied with the requirements under the Forbearance Agreement and commenced taking advances at 42.5% of the Net Face Amount of Eligible Accounts on March 12, 2026. While the Company expects to stay in compliance and pay the full obligation to Pinnacle by July 31, 2026, there is no guarantee that the Company will be able to do so. If the Company is unable to comply with the Loan Agreement, or pay the full obligation to Pinnacle by the July 31, 2026, Pinnacle may immediately enforce its claims, rights, liens, and security interests under the Forbearance Agreement, and the Loan Documents, including, but not limited to, taking possession of its collateral, or any portion thereof, and foreclosing upon its collateral, or any portion thereof, in accordance with the Loan Documents and applicable law. 

The balance of the loan agreement at December 31, 2024 was $4,797. During 2025, the Company repaid a net of $761 to the Loan Agreement. At December 31, 2025, the outstanding balance under the line of credit was $4,036, which includes interest, fees and financing costs (see below), and the Company had an over advance balance under the line of credit in the amount of $495.

The total interest expense, fees, and financing costs incurred under the Loan Agreement during 2025 and 2024 were $746 and $733, respectively. Of these amounts, $106 in 2025 and $99 in 2024 were recorded under general and administrative expenses, while $640 in 2025 and $634 in 2024 were recorded under interest expense and finance costs in the accompanying statements of operations.