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”). The balance outstanding under the line of credit at September 30, 2020 was $245. There was no balance outstanding under the line of credit at December 31, 2019. As of September 30, 2020, the Company had availability under the line of credit in the amount of $2,560.

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. In no event shall the aggregate amount of the outstanding advances under the revolving credit facility be greater than $4,000. Interest accrues on the daily balance at a rate of 1.25% above the prime rate (the “Standard Interest Rate”), but in no event shall the Standard Interest Rate be less than 3.75% per annum. 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 per annum (the “Inventory Interest Rate”), but in no event shall the Inventory Interest Rate be less than 4.75% per annum. The Loan Agreement also contains a financial covenant requiring the Company to attain an effective tangible net worth, defined as its total assets, excluding all intangible assets, less its total liabilities plus loans to the Company from our officers, stockholders or employees that have been subordinated to the Company’s obligations to Pinnacle, greater than $6,000 as determined by Pinnacle as of the end of each fiscal quarter.

The Loan Agreement’s initial term ends on September 30, 2022 and is renewed thereafter for additional one-year terms. Either party may terminate the Loan Agreement on the last day of the initial term or subsequent renewal term by giving the other party at least sixty days prior written notice. In addition, Pinnacle may terminate the Loan Agreement at any time upon sixty days prior written notice and immediately upon the occurrence of an event of default. 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 plus the original principal balance of any term loans and advances other than under the revolving credit facility.

Under the Loan Agreement, the Company also agreed to grant Pinnacle a security interest in all presently existing and thereafter acquired or arising assets of the Company. The Loan Agreement also contains customary representations, warranties and covenants, and other terms and conditions.

Supplier Agreement

Effective June 4, 2019, the Company executed a Supplier Agreement with Citibank, N.A. Under the terms of the Supplier Agreement, the Company may from time to time offer to sell to Citibank certain of the Company’s accounts receivable relating to invoiced sales made to AT&T. Once AT&T approves the invoice, AT&T sends payment instructions to Citibank. The sale price is equal to the face amount of the receivable less the applicable discount charge calculated by multiplying the face amount of the receivable by (i) the annual discount rate (which is equal to the 90-day London Inter-bank Offered Rate plus 1.00%) and (ii) the discount acceptance period (which is equal the number of days in the payment terms less the number of days necessary to approve the invoice) divided by 360. On October 8, 2020, the Company terminated the Supplier Agreement with Citibank, N.A. During the period ended September 30, 2020, a total of $2,621 of accounts receivables had been sold to Citibank by the Company, and the Company incurred fees of approximately $12 during the nine-month period then ended.