Item 1.01 Entry into a Material Definitive Agreement.
Loan Agreement with Vast Bank, N.A.
On December 28, 2021, the Company renewed its credit facility for its Nave and Triton subsidiaries with Vast Bank, N.A. ("Vast") by entering into a Business Loan Agreement and various ancillary debt and collateral agreements. The renewed Nave and Triton credit facility is for a maximum of $3,000,000 and is secured by the Company’s Nave and Triton Subsidiaries’ accounts receivable and inventory. As renewed, the Nave and Triton credit facility has been reduced by $1,000,000 and requires quarterly interest payments based on the Wall Street Journal Prime Rate floating rate plus 0.75%, and a fixed charge coverage ratio of 1.25x to be tested quarterly. The Company is required to pay a non-use fee equal to 25 basis points if the line of credit is not utilized. The Company may repay outstanding loans at any time without premium or penalty. The Nave and Triton credit facility matures on December 17, 2022.
On December 28, 2021, Vast also renewed a $4,500,000 accounts receivable purchase facility (“Existing Facility”), secured by the Company’s Fulton subsidiary’s accounts receivable excluding a major customer. This credit facility has been increased by $500,000 in connection with the renewal. In connection with the renewal, Vast originated a new accounts receivable purchase facility (“New Facility”) with a total capacity of $8,500,000 secured by receivables of a major customer that previously was collateralized under the Existing Facility. Under both facilities, Vast advances the Company 90% of sold receivables and establishes a reserve of 10% of the sold receivables until the Company collects the sold receivables. Under the Existing Facility, Vast charges a fee of 1.6% of sold receivables, and under the New Facility Vast charges a fee of 1.5% of sold receivables. Both facilities have a fixed charge coverage ratio of 1.25x to be tested quarterly. Both the Existing Facility and the New Facility mature on December 17, 2022.
As of September, 30, 2021, the Company was not in compliance with the fixed charge coverage ratio. On December 22, 2021, Vast granted a waiver of the covenant violation under the credit facility.
The proceeds of loans made under the Nave and Triton credit facility and the Fulton credit facilities will be used for working capital needs.