Loan and Security Agreement

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Loan and Security Agreement

6. Loan and Security Agreement

On July 15, 2022, the Company executed a Loan and Security Modification Agreement (the “2022 Loan Amendment”) to amend its Amended and Restated Loan and Security Agreement, dated as of August 7, 2020 (the “2020 Loan Agreement”) with Western Alliance Bank (the “Lender”), to increase the revolving line of credit available thereunder from $25.0 million to $35.0 million, to extend the maturity date of the revolving line of credit from August 2022 to July 2025 and to provide the Company access to a term loan of up to $10.0 million. The 2020 Loan Agreement, as amended by the 2022 Loan Amendment, is referred to as the “2022 Amended Loan Agreement.”

Pursuant to the 2022 Amended Loan Agreement, borrowings under the revolving line of credit cannot exceed 85% of eligible accounts receivable balances, bore interest at the greater of 4.25% or the prime rate as published in The Wall Street Journal and mature on July 15, 2025. During an Event of Default (as defined in the 2022 Amended Loan Agreement), the annual interest rate to be charged would be the annual rate otherwise applicable to borrowings under the 2022 Amended Loan Agreement plus 5.00%.

Under the 2022 Amended Loan Agreement, the term loan could have been drawn through December 31, 2023 and borrowings would have borne interest at 0.25% plus the greater of 4.25% or the prime rate as published in The Wall Street Journal. Borrowings under the term loan of the 2022 Amended Loan Agreement would be repayable in monthly interest-only payments through December 31, 2023. Commencing on January 1, 2024, the term loan would be payable in 42 equal monthly installments of the then outstanding principal and accrued interest through June 2027. The Company would have been able to prepay all, but not less than all, of any outstanding principal with respect to advances made under the term loan provided that such outstanding principal was paid in full along with any accrued but unpaid interest to date plus any fees that became payable under the 2022 Amended Loan Agreement. As of June 30, 2023, the Company had not borrowed any amounts under the term loan facility. The term loan availability was eliminated pursuant to the 2023 Loan Amendment (as defined below) (see Note 12).

Borrowings are collateralized by substantially all of the Company’s assets and property. Under the 2022 Amended Loan Agreement, the Company agreed to affirmative and negative covenants to which the Company was to remain subject until maturity. The covenants included limitations on the Company’s ability to incur additional indebtedness and engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses. In addition, under the 2022 Amended Loan Agreement and through December 31, 2023, the Company was required to maintain a minimum asset coverage ratio of 1.50 to 1.00 defined as the sum of unrestricted cash held at the Lender and eligible accounts receivable to all borrowings outstanding under the 2022 Amended Loan Agreement. Commencing December 31, 2023, the company would have been required to maintain, and test on a quarterly basis, a fixed charge coverage ratio of at least 1.25 to 1.00 and a leverage ratio of not more than 3.00 to 1.00. The fixed charge coverage ratio would have been measured as the Company’s ratio of (i) trailing twelve-month adjusted “EBITDA” (as defined in the 2022 Amended Loan Agreement) less capital expenditures, less cash taxes, to (ii) trailing twelve-month interest and principal payments to the Lender. The leverage ratio would have been measured as the ratio of (i) the Company’s outstanding obligations owing to the Lender, to (ii) the Company’s trailing twelve-month adjusted EBITDA (as defined in the 2022 Amended Loan Agreement). As of June 30, 2023, the Company was in compliance with these covenants and the Company had no amounts outstanding under the revolving line of credit. In August 2023, the Company further amended the 2022 Amended Loan Agreement pursuant to the 2023 Loan Amendment (see Note 12).