Line of Credit

12 Months Ended

Dec. 31, 2022

Line of Credit

Line of Credit

13.  Line of Credit

 On June 15, 2017, the Company entered into a Loan and Security Agreement with Atlantic Union Bank (formerly known as Access National Bank) (the “Loan Agreement”). The Loan Agreement provides for a $5.0 million working capital revolving line of credit.

Effective, June 15, 2022, the Company entered into a seventh modification agreement (“Modification Agreement”) with Atlantic Union Bank to amend the existing Loan Agreement. The Modification Agreement (i) extended the maturity date of the facility from June 15, 2022 through June 15, 2023, (ii) removed the current ratio and interest coverage ratio financial covenants, (iii) increased the tangible net worth covenant from $2,000,000 to $6,500,000 measured quarterly, (iv) added a minimum EBITDA covenant that requires that the Company’s Adjusted EBITDA to not be less than $1,000,000 on a trailing 12-month basis as of the last day of each quarter and (v) modified the definition of Borrowing Base.

Effective June 27, 2022, the Company entered into an eighth Modification Agreement with Atlantic Union Bank to amend the existing Loan Agreement to increase the working capital revolving line of credit from $5.0 million to $7.0 million.

The available amount under the working capital line of credit is subject to a borrowing base, which is equal to the lesser of (i) $7.0 million or (ii) sum of 90% of the net unpaid balance of the Company’s eligible government accounts receivable and 80% of the net unpaid balance of the Company’s eligible commercial accounts receivable. The facility is secured by a first lien security interest on all of the Company’s personal property, including its accounts receivable, general intangibles, inventory and equipment maintained in the United States. As of December 31, 2022, the Company was eligible to borrow up to $7.0 million under the borrowing base formula.

At December 31, 2022, the Company was not in compliance with the tangible net worth covenant as its tangible net worth was approximately $4,500,000 instead of the required $6,500,000; however, the lender provided a waiver of that December 31, 2022 violation.