Credit Agreement

9 Months Ended

Sep. 30, 2024

Credit Agreement

Credit Agreement

Note 7: Credit Agreement

On March 20, 2023 (the “Closing Date”), the Company entered into a $25 million credit agreement (the “Credit Agreement”) with Pinnacle Bank (“Pinnacle”). The Credit Agreement provides for the following: (i) term loan facility in an aggregate principal amount of $20 million (the “Term Loan”), and (ii) revolving line of credit in an up to aggregate principal amount of $5 million (the “Revolving LOC”), subject to an 85% limit based on the current eligible accounts receivable (as defined in the Credit Agreement).

Pursuant to the terms of the Credit Agreement, the per annum interest rate of the Term Loan is variable based on the one-month secured overnight financing rate (“SOFR”) plus 2.35%, subject to a minimum SOFR of 2.00%. However, the Term Loan issued on the Closing Date has a per annum interest rate of 6.217%, which was fixed with respect to the entire principal amount as a result of an interest rate swap agreement entered into between the Company and Pinnacle on the Closing Date in accordance with the terms of the Credit Agreement.

The Company began making monthly interest only payments on the Term Loan on April 1, 2023. On January 1, 2024, the Company began making monthly principal payments of 333,333 plus interest payments on the Term Loan until the maturity date of December 20, 2028.

The proceeds of the Term Loan along with certain cash on hand of the Company were used to repay in its entirety the one-year Secured Promissory Note (the “Seller Note”) issued to Lead Capital, LLC (“the Seller”) in connection with the Company’s November 1, 2022 acquisition of iNewswire.com LLC (“Newswire”) for a lump sum payment of $22,880,000. In order to settle the Seller Note on March 20, 2023, the Company paid $370,000 to Seller, with the Seller agreeing to forgive $440,000 of interest which would have otherwise been due. The $370,000 payment is recorded in Other income (expense), net on the Consolidated statements of operations for the nine months ended September 30, 2023.

Effective June 25, 2024, the aggregate principal amount of the Revolving LOC was reduced to $1,500,000. The Company currently has no plans to utilize the Revolving LOC but may do so in the future. If the Company does utilize any funds under the Revolving LOC, the funds will bear interest at a per annum rate equal to the then current SOFR plus 2.05%. Effective June 25, 2024, Pinnacle’s commitment to fund under the Revolving LOC was amended to terminate on June 30, 2025, unless terminated earlier pursuant to the terms of the Credit Agreement. The Company terminated its existing $3,000,000 unsecured line of credit with Fifth Third Bank immediately prior to the Closing Date. As of September 30, 2024, there was no outstanding balance under the Revolving LOC and the interest rate was 7.21%.

The Credit Agreement originally contained financial covenants, which commenced with fiscal quarter ending September 30, 2023, and were subsequently amended on June 25, 2024, as follows:

	Original	As Amended
Fiscal Quarter	Fixed Charge Coverage Ratio	Fixed Charge Coverage Ratio
Each fiscal quarter ending on or after June 30, 2023 through June 30, 2024	1.2:1.0	1.2:1.0
Fiscal quarter ending on or after September 30, 2024 through March 31, 2025	1.2:1.0	1.15:1.0
Each fiscal quarter ending on or after June 30, 2025	1.2:1.0	1.2:1.0
	Leverage Ratio	Leverage Ratio
Each fiscal quarter ending on or after June 30, 2023 through September 30, 2023	2.75:1.0	2.75:1.0
Fiscal quarter ending December 31, 2023	2.5:1.0	2.5:1.0
Fiscal quarter ending March 31, 2024	2.5:1.0	2.75:1.0
Each fiscal quarter ending on or after June 30, 2024 through September 30, 2024	2.5:1.0	3.5:1.0
Fiscal quarter ending December 31, 2024	2.5:1.0	3.0:1.0
Fiscal quarter ending March 31, 2025	2.5:1.0	2.85:1.0
Each fiscal quarter ending on or after June 30, 2025	2.5:1.0	2.75:1.0

Additionally, as long as the Company maintains a Leverage Ratio greater than 2.75:1.0, the Company is required to maintain unrestricted liquidity, as defined in the amendment, of not less than $1,500,000, beginning June 30, 2024.

The Credit Agreement also contains customary affirmative covenants for a transaction of this nature, including among other things, covenants relating to: maintenance of adequate financial and accounting books and records, delivery of financial statements and other information, preservation of existence of the Company and subsidiaries, payment of taxes and claims, compliance with laws, maintenance of insurance, foreign qualification, use of proceeds, cash management system, maintenance of properties, and conduct of business.

The Credit Agreement also contains customary negative covenants for a transaction of this nature, including, among other things, covenants relating to debt, liens, investments, negative pledges, dividends and other debt payments, restriction on fundamental changes, sale of assets, transactions with affiliates, restrictive agreements, and changes in fiscal year.

The Credit Agreement also contains various Events of Default (subject to certain grace periods, to the extent applicable), including among other things, Events of Default for the nonpayment of principal, interest or fees; breach of certain covenants; inaccuracy of the representations or warranties in any material respect; bankruptcy or insolvency; dissolution or change of control; certain unsatisfied judgments; defaults under material agreements; certain unfunded liabilities under employee benefit plans; certain unsatisfied judgments; certain ERISA violations; and the invalidity or unenforceability of the Credit Agreement. If an Event of Default occurs, the Company may be required to repay all amounts outstanding under the Credit Agreement. The Term Loan and any advances under the Revolving LOC are secured by a first priority lien and security interest to the benefit of Pinnacle in the Event of Default on all of the Company’s current or future assets and each of the Guarantor’s current or future assets.