The next step in this process having completed the weekly income statement as well as the weekly roll forward is to move to the weekly revolver base. One of the primary goals of the 13-week cash flow analysis is to determine if there is enough liquidity under the current borrowing arrangements to help the company weather the storm. We will be examining on a weekly basis if the expected cash flows will require the company to draw down on its existing revolver and whether there is enough room on the facility or under the facility to draw the necessary funds. If there is not, then the company will need to seek a remedy. Knowing this in advance is crucial. The existing revolver is a $100 million facility that is secured by the assets of the company. It's an asset-backed loan. The assets the loan is tied to are the accounts receivable and the inventory. Those are the two accounts we will be focusing on in this part of the model. Based on the eligible amounts of those accounts, the company can borrow up to a 100 million, net of any letters of credit or guarantees, and of course, net of any existing borrowings under the revolver. This is what is referred to as excess capacity. The Monthly Revolver Base tab shows us that calculation on a monthly basis for the past several months. We will need to calculate this on a weekly basis going forward. Let's go to the Weekly tab. These assumptions will carry over to that tab so I will explain them in more detail there. The critical pieces of data on this page are the assumptions here in the shaded cells. So let's talk first about accounts receivable. We have two assumptions here for accounts receivable. We have an assumption in row 14 for the percentage of accounts receivable over 90 days and that is based on a historical percentage and it's being subtracted from the beginning accounts receivable. This is because from the bank's perspective, any accounts that are due past 90 days are considered to be too risky to lend on. The next assumption we have here is in C10 and this is the eligible base rate. So what we're going to do here is we're going to take our accounts receivable. We're going to look at the beginning amount. We're going to subtract the accounts that cannot be factored in to the borrowing base amount and that's going to give us an eligible amount of accounts receivable. We are then going to apply the 75% assumption to this to determine our ending eligible base rate amount. And so the 75% is basically established by the bank. Typically, for accounts receivable, they can be anywhere from 70 to 90% in an asset-backed loan. So this is kind of on the lower side. It might have to do with the particular position that SGC is in. So what we'll do here is we will build an accounts receivable balance. This isn't quite a roll forward, but it does sort of work on similar principles. We're going to take the ending accounts receivable from the balance sheet and I have that separated down here by a row because I don't want people to confuse this with the ending eligible base rate amount. We need to make sure that our beginning accounts receivable balance is actually coming from the balance sheet. It's not this base rate amount because that is actually simply going into the revolver calculation. We are then going to calculate our expected amount of receivables, which are greater than 90 days. That's the amount we're going to discount and that's gonna be the 35% times the beginning AR and then we're going to flip that to be a negative. And then the eligible accounts receivable is simply the net of those two and the eligible base rate amount is going to be the assumption, which I'm going to anchor, times the eligible accounts receivable.

And now, I noticed that my less over 90 days is showing up as a hard-coded font. So I'm just gonna quickly change that to get that. That's a formula now, so it shouldn't be. And so we have our eligible amount of accounts receivable for the base. Revolver base is 33,559. I can go ahead and copy these numbers across. And what we see here is that as long as the accounts are growing in line with sales, the company is growing and the borrowing base of the company can grow as well. And that's important for the revolver calculation. Now, we're gonna move down to the inventory and take a look at the inventory assumptions. So there are a few more for inventory. It's a little bit more complicated. Inventory is also kind of one step farther removed from cash with accounts receivable. From a bank's perspective, the accounts are already a sale made at the market price and we're simply waiting for the cash to come in. From the bank's perspective, liquidating inventory is a little bit more complicated. Raw material inventory has value, finished goods has value, but work in progress inventory tends to not have value. So we need to know what percentage of the inventory is work in process. We also have to know what percentage is obsolete and what percentage is promotional or giveaway. Sometimes it's called burn. So we need those three assumptions, which we have here. And we also have another assumption for the eligible base rate of that inventory. So we will go ahead and subtract our obsolete inventory, subtract our promotional inventory, subtract our work in process, and then we'll apply the 75% rate to that amount. So once again, my beginning balance is going to come from my ending inventory balance which I've already done on the roll forwards. So here, I wanna take my assumption and I want to anchor the column and not the row. So I will anchor the C and let the row float so I can pick up my assumptions below. And I wanna apply that to my beginning balance, which is the inventory. And here, I want the column to float, but not the row. So I will anchor the row with a dollar sign. And last but not least, I need to flip it to be a negative because I'm going to subtract my obsolete inventory. And if I copy that down, I should get formula to pick up the proper assumption. And then I can copy across my eligible inventory which is simply the sum or the net of these numbers. And now, I need to apply my eligible percentage of 75% times my eligible percentage of 75% times the eligible inventory amount and that's gonna give me my eligible inventory base. The ending inventory on the balance sheet, again, is coming from the roll forward. It's not this amount. This amount will flow up to here in the next year and we'll see if that's correct when I copy across. And it looks like that is in fact what happened. So our formulas are working. So what is the total revolver base availability? The eligible base rate amount for the inventory Q22 plus the eligible base rate amount for the accounts receivable in Q10. And I'll copy this across and we'll talk about more. We'll talk about this number more in detail on the cashflow statement itself. But basically, what this is saying is that for the bank's purposes, this is the number on which the available amount under the revolver will be based. So in the case of SGC, they have a $100 million revolver. However, based on their current assets which are linked to that revolver, they're only eligible to borrow this amount under that $100 million cap. They're effectively capped again by their assets and that's what this number represents.