NOTE 5 – LINE OF CREDIT

Effective September 30, 2020, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Pinnacle Bank (“Pinnacle”). The Loan Agreement, as amended, provides for a revolving credit facility under which Pinnacle may 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. The Loan Agreement expires on September 30, 2024.

At December 31, 2022, the outstanding balance under the line of credit was $1,884. During 2023, the Company advanced an aggregate of $2,354 under the facility. At December 31, 2023, the outstanding balance under the line of credit was $4,238 and the Company had availability under the line of credit in the amount of $376.

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 December 31, 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 December 31, 2023 and 9.75% at December 31, 2022).

During 2023, amendments to the Loan Agreement included, among other, extending the 90-day period on AT&T accounts receivable to 120 days, raising the concentration percentage applicable to certain Tier-1 telecommunication customers from 50% to 75% in the definition of eligible accounts receivable, and increasing the aggregate advance limit under the credit facility from $6,000 to $7,500, for a fee of $23 (1.5% of the $1.5 million increase).

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 December 31, 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. The Loan Agreement contains certain affirmative and negative covenants, all of which the Company was in compliance with at December 31, 2023.