(

)

Line of Credit

As of

February 1, 2020

, the Company had a bank line of credit that provides borrowing capacity of

$20.0

million. Borrowings under the credit agreement are secured by its assets and a pledge of

66%

of the Company’s ownership interest in certain of its foreign subsidiaries. The credit agreement expires on

December 31, 2020

and contains various restrictions on indebtedness, liens, guarantees, redemptions, mergers, acquisitions or sale of assets, loans, transactions with affiliates and investments. The agreement limits the conditions under which the Company

may

declare dividends and repurchase shares. For example, we

may

not

use the proceeds of the line of credit to repurchase shares. The commitment fee is

0.25%

per annum and borrowings bear interest at LIBOR plus

3.25%.

Financial covenants included maintaining a minimum fixed charge coverage ratio and

not

exceeding a maximum funded debt to EBITDA ratio as of the end of the

fourth

quarter of fiscal

2019

(as defined in the credit agreement). The line of credit agreement also includes an anti-hoarding clause, which precludes borrowings that would cause our cash balance to exceed

million. In addition, the Company has a

$1.0

million letter of credit against the line at the end of fiscal

2019.

As of

February 1, 2020

: (i) the Company was in compliance with all covenants and (ii) there were

borrowings under the line of credit.

The Company has

not

borrowed on its credit facility as of

April 13, 2020

and had approximate

$23.8

million i

n operating cash. Due to the impacts of COVID-

and the closure of our owned and operated stores, our financial performance in the

first

quarter of fiscal

2020

will be negatively impacted. As a result, it is likely that we will be unable to comply with certain covenants in our existing line of credit. The Company's liquidity

may

be negatively impacted if stores do

not

resume normal operations and the Company

may

be required to pursue additional sources of financing to meet its financial obligations. Obtaining such financing is

not

guaranteed and is largely dependent on market conditions and other factors. The Company believes that its current cash balance, along with the actions taken as outlined above, provides it with sufficient current liquidity. Future impact of COVID-

may

require further actions by the Company to improve its cash position, including but

not

limited to, monetizing Company assets including the Company owned warehouse in Ohio, inventory, implementing further employee furloughs, and foregoing capital expenditures and other discretionary expenses.