The 10k is the latest filing and says they are not in compliance with the 18% loan. What you are trying to state has nothing to do with the loan. If the loan issuer calls the loan they are out of business. While unlikely since the company is not worth 13 million it could happen. It says right in the 10k.
The Loan Agreement contains customary events of default, non-payment of principal or other amounts under the Loan Agreement, breach of covenants and certain voluntary and involuntary bankruptcy events. The Loan Agreement also contains certain financial covenants including maintenance of certain EBITDA levels and minimum liquidity. If any event of default occurs and is continuing, the Lender may declare all amounts owed to be due (except for a bankruptcy event of default), in which case such amounts will automatically become due and payable. The Company was not in compliance with certain of its financial covenants for the month ended January 31, 2017. As a result of the covenant breach, the debt is classified as current on the accompanying consolidated balance sheets in accordance with ASC 470-10-45. In accordance with ASU 205-40, the classification of the debt as current raises substantial doubt about the Company’s ability to continue as a going concern. Management has evaluated its financial position and future planned operating results with respect to the breach of covenants and determined that it is not probable that the Lender will declare all amounts due and payable and that in the improbable case that if the Lender declares all amounts under the Loan Agreement due and payable that the Company would be able to satisfy the obligations. The Company is discussing a resolution of the covenant breach with the Lender and believes that it will be able to do so. The Company is currently able to meet its debt service requirements and operating expenses out of its cash flows from operations and expects to be able to do so for at least the next twelve months. In addition, the Company’s borrowing base under the Loan Agreement exceeds the outstanding debt providing the Lender with sufficient collateral to secure the debt. The Company’s strategy includes acquisitions of residual portfolios and the execution of any such portfolio would likely be accretive to earnings and improve the Company’s cash flow and debt service capabilities. In the event that the Lender accelerates all amounts due or requested that the Company reduce the outstanding debt, management currently believes that it would be able to satisfy such obligations by selling a portion of its residual portfolio of monthly recurring revenue without disrupting its operations. Management also believes that if required, the debt outstanding under the Loan Agreement could be refinanced with another lender. There can be no assurance that the Company will be able to resolve the matter with the Lender or execute on its contingency plans in the event it is unable to resolve the matter with the Lender.
