Business Context and Reporting Period
This Form 8-K filing by TSS, Inc. (Delaware) reports a material definitive agreement and the creation of a direct financial obligation. The report date is January 7, 2019, covering the event date of December 31, 2018.
Key Financial Metrics and Debt Structure
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: 80% of eligible accounts receivable (excluding certain vendor payment program receivables).
- Interest Rate: LIBOR plus 3% (effective rate of 5.37% as of December 31, 2018).
- Unused Facility Fee: 0.25% payable quarterly in arrears.
- Maturity Date: December 31, 2020.
- Collateral: Secured by substantially all of the Borrower's assets.
- Guarantors: Vortech, L.L.C., VTC, L.L.C., Total Site Solutions Arizona LLC, and Alletag Builders, Inc.
Material Changes and Covenants
The company entered into a new asset-based lending facility, representing a material change in its capital structure. The agreement imposes specific financial covenants and restrictions:
- Liquidity Requirement: Minimum liquidity of $500,000 at all times (excluding loan availability).
- Maximum Total Leverage Ratio: 3.00.
- Minimum Total Interest Coverage Ratio: 2.50.
- Minimum Total Fixed Charge Coverage Ratio: 1.25.
- Indebtedness Limit: New indebtedness is limited to $250,000 per fiscal year without prior written approval.
The filing text does not provide specific revenue, profit, cash flow, or margin figures for the period.
Outlook, Risks, and Contingencies
The filing includes standard forward-looking statements regarding future business plans and strategy, noting that actual results may differ due to various risks. The agreement contains customary events of default, including payment defaults, insolvency, bankruptcy, judgment defaults, material adverse changes, and change of ownership. The company undertakes no obligation to update forward-looking statements.
Investor Verification Checklist
- Verify the company's current liquidity position to ensure compliance with the $500,000 minimum requirement.
- Confirm the company's ability to meet the Total Leverage Ratio (3.00) and coverage ratios (2.50 and 1.25) under the new facility.
- Review the definition of "eligible accounts receivables" to understand the actual borrowing capacity versus the $1.5 million maximum.
- Monitor for any new indebtedness exceeding the $250,000 annual limit without lender approval.
- Examine the full Loan Agreement (Exhibit 10.1) for specific exclusions and limitations on the borrowing base.