Business Context and Reporting Period
This Form 8-K was filed by TSS, Inc. on February 11, 2021, reporting a material definitive agreement entered into on the same date. The company, incorporated in Delaware, is based in Round Rock, Texas.
Key Financial Metrics and Obligations
The filing details a new revolving line of credit with Texas Capital Bank, National Association. Key terms include:
- Maximum Principal Amount: $1,500,000.
- Borrowing Base: The lesser of $1,500,000 or 80% of eligible accounts receivable (excluding certain vendor payment program receivables).
- Interest Rate: LIBOR plus 3% (effective rate of 3.147% as of December 31, 2020).
- Unused Facility Fee: 0.25% payable quarterly in arrears.
- Maturity Date: December 31, 2021.
- Collateral: Secured by substantially all of the Borrower's assets.
- Guarantors: Subsidiaries Vortech, L.L.C. and VTC, L.L.C. jointly and severally guarantee the obligations.
Material Changes and Covenants
The agreement imposes specific financial covenants and liquidity requirements:
- Liquidity Requirement: Borrower must maintain minimum liquidity of $1,500,000 at all times.
- Senior Leverage Ratio: Maximum of 3.00.
- Fixed Charge Coverage Ratio: Minimum of 1.50.
- Indebtedness Limit: New indebtedness is limited to $250,000 per fiscal year without prior written approval from the Lender.
The filing does not provide specific revenue, profit, or cash flow figures for the reporting period, as this report focuses solely on the entry into the credit facility.
Outlook, Risks, and Contingencies
The Loan Agreement includes customary negative covenants restricting mergers, consolidations, asset transfers, and additional liens. Events of default include payment defaults, insolvency, bankruptcy, material adverse changes, and change of ownership. The filing notes that the summary is qualified by the full Loan Agreement attached as Exhibit 99.1.
Investor Verification Checklist
- Verify the company's current liquidity position to ensure compliance with the $1,500,000 minimum liquidity covenant.
- Review the full Loan Agreement (Exhibit 99.1) for specific definitions of "eligible accounts receivable" and exclusions.
- Monitor the company's ability to maintain the required Fixed Charge Coverage Ratio of 1.50 and Senior Leverage Ratio of 3.00.
- Confirm the status of the subsidiaries (Vortech, L.L.C. and VTC, L.L.C.) as guarantors.