11. Subsequent Event

On November 2, 2018, the Company entered into an amendment to its existing loan and security agreement governing the terms and conditions of its credit facility.

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requires the Company to maintain availability of at least five percent (5%) of the borrowing base; and

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waives compliance with the minimum interest coverage ratio and minimum loss reserve requirements for the measurement period ending August 31, 2018; and

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modifies the minimum interest coverage ratio requirement to be 0.00 to 1.0 for the measurement period ending September 30, 2018, 0.80 to 1.00 for the measurement period ending October 31, 2018, and 1.0 to 1.0 for the measurement period ending November 30, 2018 and thereafter.

The interest coverage ratio is calculated as of each month end for the three-month period then ended as the ratio of (A) the Company’s adjusted net earnings plus interest expense and provision for income tax for the applicable period to (B) the Company’s interest expenses for such period. The minimum loss reserve amount is calculated as of each month for the tree-month period then ended as (A) four times the net charge-offs divided by (B) the net balances due under all contracts divided by three. The interest rates for borrowings under the credit facility remain at base rate plus 3.0% or LIBOR plus 4.0%.

The Company’s obligations under the loan and security agreement are secured by substantially all of the operating assets of the Company. The loan and security agreement contains other events of default and requires the Company to comply with certain other financial ratios and covenants and to satisfy specified financial tests, including maintenance of asset quality and portfolio performance tests. Failure to meet any required financial ratios, covenants or financial tests could result in an event of default under the loan and security agreement. If an event of default occurs, the Company’s lenders could increase borrowing costs, restrict the Company’s ability to obtain additional borrowings under the facility, accelerate all amounts outstanding under the facility, or enforce their interest against collateral pledged under the facility.