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Line of Credit and Borrowing Agreement

12 Months Ended

Nov. 01, 2019

Line Of Credit And Borrowing Agreement

NOTE 5 - Line of Credit and Borrowing Agreement:

We maintain a line of credit with Wells Fargo Bank, N.A. that expires on March 1, 2020. Under the terms of this line of credit, we may borrow up to $7,500 at an interest rate equal to the bank’s prime rate or LIBOR plus 1.5%. The borrowing agreement contains various covenants, the more significant of which require us to maintain a minimum tangible net worth, a minimum quick ratio, a minimum net income after tax and total capital expenditures less than $7,500. The Company was in violation of the capital expenditure covenant at November 1, 2019 which was subsequently waived (per letter dated December 16, 2019). The Company borrowed $2,000 under this line of credit on April 15, 2019, which was repaid on April 25, 2019.

On December 26, 2018, we entered into a master collateral loan and security agreement with Wells Fargo Bank, N.A for up to $15,000 in equipment financing. Pursuant to the loan agreement, we made two borrowings of $7,500 each, to purchase specific equipment for our new Chicago processing facility at a fixed rate of 4.13% and 3.98%, respectively, per annum. The loan terms are seven years and are secured by the purchased equipment. The first funding of $7,500 was received on December 28, 2018. The second funding was received on April 23, 2019. The master collateral loan and security agreement with Wells Fargo Bank, N.A. contains various affirmative and negative covenants that limit the use of funds and define other provisions of the loan. The main financial covenants are listed below:

	●	Total Liabilities divided by Tangible Net Worth (as defined) not greater than 2.5 to 1.0 at each fiscal quarter,

	●	Quick Ratio (as defined) not less than 1.0 to 1.0 at each fiscal quarter end, and

	●	Net income after taxes not less than one dollar on a quarterly basis, determined as of each fiscal quarter end.

The first secured equipment note payable is due with monthly principal and interest payments of $103 commencing on January 31, 2019 for 84 monthly installments including interest of 4.13% per annum. The second secured equipment note payable is due with monthly principal and interest payments of $102 commencing on May 31, 2019 for 84 monthly installments including interest of 3.98% per annum.

	November 1, 2019			November 2, 2018
Secured equipment notes payable to Wells Fargo Bank, N.A. collateralized by equipment for the new Chicago processing facility.	$	13,747		$	-
Less current portion of notes payable		(1,943	)		-
Total long-term notes payable	$	11,804		$	-

The Company was in compliance with all covenants under the master collateral loan and security agreement as of November 1, 2019.