Line of Credit and Factoring Agreement

9 Months Ended

Sep. 30, 2023

Line of Credit and Factoring Agreement

Line of Credit and Factoring Agreement

10. Line of Credit and Factoring Agreement

From June 15, 2017 to June 2023, the Company had a Loan and Security Agreement with Atlantic Union Bank (the “Loan Agreement”). The available amount under the working capital line of credit was subject to a borrowing base, which was 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 was secured by a first lien security interest on all of the Company’s assets in the United States. The Loan Agreement with Atlantic Union Bank matured in June 2023 and was not renewed.

On April 28, 2023, the Company entered into an Accounts Receivable Purchase Agreement (the “Purchase Agreement”) with Republic Capital Access, LLC (the “Buyer”) for the non-recourse sale of eligible accounts receivable relating to U.S. Government prime contracts or subcontracts of the Company (collectively, the “Purchased Receivables”) to replace the Company’s matured Loan and Security Agreement with Atlantic Union Bank. Upon purchase, Buyer becomes the absolute owner of any such Purchased Receivables, which are payable directly to the Buyer. The total amount of Purchased Receivables is subject to a maximum limit of $4 million outstanding Purchased Receivables at any time, with an available increase to $14 million, subject to adequate receivables. The Purchase Agreement contains customary fees, covenants and representations.

Pursuant to the Purchase Agreement, the Company may from time to time offer and sell eligible accounts receivable to the Buyer. The Buyer pays the sales proceed of the purchase of the receivable invoices in two installments; first installment is Initial Purchase Price, which is 90% if the debtor is an agency of the U.S. Government, and 85% if the debtor is not an agency of the U.S. Government, of the invoice amount. The second and final installment is the residual purchase price that is the invoice amount less the initial purchase price less applicable discount factor and fees.

During the three month and nine month periods ended September 30, 2023, the Company sold a total of $3.6 million and $5.2 million, respectively, of receivables for proceeds net of fees of $3.5 million and $5.1 million, respectively. As of September 30, 2023, there is no outstanding residual payment balance and availability under the Purchase Agreement of $4 million.