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Note 5 - Revolving Line of Credit
 12 Months Ended
Dec. 31, 2021
Notes to Financial Statements  
Debt Disclosure [Text Block]

Note 5 -         Revolving Line of Credit

 

In February 2021, we entered into a new revolving line of credit (the “credit facility”) with Texas Capital Bank, National Association (“Lender”) pursuant to a Business Loan Agreement (Asset Based) (the “Loan Agreement”) dated effective December 31, 2020. The obligations under the credit facility are secured by substantially all our assets. Our wholly-owned subsidiaries, Vortech, L.L.C., and VTC, L.L.C. jointly and severally guaranteed our obligations under the credit facility.

 

The maximum principal amount of the credit facility is $1,500,000. The credit facility is subject to a borrowing base of the lesser of $1,500,000 or 80% of eligible accounts receivables, subject to customary exclusions and limitations. Certain accounts receivables subject to a vendor payment program with a customer are excluded from the definition of eligible accounts receivables under the credit facility. Borrowings under the credit facility will bear interest at LIBOR plus 3% (effective rate of 3.58% at December 31, 2021). In addition to interest payable on the principal amount of indebtedness outstanding from time to time under the credit facility, we will pay a 0.25% unused facility fee, payable quarterly in arrears. The credit facility matured on December 31, 2021.

 

The credit facility requires that we maintain a minimum liquidity of $1,500,000 at all times. It also requires us to comply with certain financial covenants including a maximum Senior Leverage Ratio of 3.00 and a minimum Fixed Charge Coverage Ratio of 1.50. The credit facility also limits the amount of new indebtedness to $250,000 per fiscal year without Lender’s prior written approval.

 

The Loan Agreement and ancillary documents include customary affirmative covenants for secured transactions of this type, including maintaining adequate books and records, periodic financial reporting, compliance with laws, maintenance of insurance, maintenance of assets, timely payment of taxes, and notice of adverse events. The Loan Agreement and ancillary documents include customary negative covenants, including incurrence of other indebtedness, mergers, consolidations and transfers of assets and liens on assets of the Company. The Loan Agreement and ancillary documents include customary events of default, including payment defaults, failure to perform or observe terms, covenants or agreements included in the Loan Agreement and ancillary documents, insolvency and bankruptcy defaults, judgment defaults, material adverse change defaults, and change of ownership defaults.

 

There were no amounts outstanding under this credit facility at December 31, 2021. Due to our operating losses we were not in compliance with the financial covenants at December 31, 2021, and therefore were not eligible to borrow against this facility.