LIQUIDITY

9 Months Ended

Dec. 31, 2022

Liquidity

LIQUIDITY

NOTE 3 – LIQUIDITY

The Company reported a net loss of approximately $1,653,000 and used cash in operating activities of approximately $2,264,000 for the nine months ended December 31, 2022 .

On October 14, 2022 the Company entered into a Credit and Security Agreement (the “Credit Agreement”) with Fifth Third Bank, National Association, as Lender (“Fifth Third”) replacing the Company’s credit facilities with Crestmark Bank and Iron Horse Credit that were terminated by the Company on October 13, 2022. The Credit Agreement provides for a three-year secured revolving credit facility in an aggregate principal amount of up to $15,000,000 decreased to $7,500,000 during the period of January 1 through July 31 of each year. The Credit Agreement matures on October 14, 2025.

As of December 31, 2022 the Company was in default under the Credit Agreement due to non-compliance with the fixed charge coverage ratio covenant primarily due to the decrease in revenue for the three months ended December 31, 2022 and increased general and administrative expenses. To date, Fifth Third has not taken action to accelerate the Company’s obligations under the Credit Agreement and the Company is currently in negotiations with Fifth Third to obtain a waiver and renegotiate the fixed charge coverage ratio covenant. There can be no assurance that the negotiations will be successful and that Fifth Third will grant the Company a waiver or renegotiate the covenant.

The Company expects cash flows from operations as well as other financing resources to be adequate to satisfy working capital requirements for at least the next twelve months from the date the accompanying condensed consolidated financial statements are issued. The Company plans to supplement cash flows from operations from several activities and resources including the following:

● Continue to negotiate remediation of the existing default on the Revolving Credit Facility with Fifth Third.

● Raise additional cash through equity offering.

● Utilize “dynamic discount” programs offered by several of the Company’s major customers which allow for accelerated payment of invoices in exchange for an early pay discount.

The Company believes that our cash on hand, working capital (net of cash), cash expected to be generated from our operating forecast, cash expected to be raised through an equity offering along with the availability of cash from our Credit Agreement with Fifth Third (See Note 7 –FINANCING) will be adequate to meet the Company’s liquidity requirements for at least twelve months from the date of this report. While the Company is optimistic that it will be successful in these efforts to achieve our plan, there can be no assurances that we will be successful in doing so. As such, the Company has a continued support letter from its parent company, Ault Alliance, through March 31, 2024.