Note 7 - Long Term Debt
|6 Months Ended|
Jun. 30, 2016
|Notes to Financial Statements|
|Long-term Debt [Text Block]||
Long-term debt consists of the following at June 30, 2016 and December 31, 2015:
(1)Our Revolving Credit facility is collateralized by our accounts receivable and our Term Loan is collateralized by our property, plant, and equipment.
)See below “Revolving Credit and Term Loan Agreement” for monthly payment interest options. Prior to April 1, 2016, the monthly installment payment under the Term Loan was approximately $190,000.
(4)Net of debt discount of ($7,000) and ($50,000) at June 30, 2016 and December 31, 2015, respectively. See “Promissory Notes and Installment Agreements” below for additional information.
)Net of debt issuance costs of ($115,000) and ($152,000) at June 30, 2016 and December 31, 2015, respectively.
Revolving Credit and Term Loan
The Company entered into an Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated October 31, 2011 (“Loan Agreement”), with PNC National Association (“PNC”), acting as agent and lender. The Loan Agreement, as subsequently amended (“Amended Loan Agreement”), provided the Company with the following Credit Facility: (a) up to $12,000,000 revolving line of credit (“Revolving Credit”), subject to the amount of borrowings based on a percentage of eligible receivables (as defined) and (b) a term loan (“Term Loan”) of $16,000,000, which required monthly installments of approximately $190,000 (based on a seven-year amortization).
Under the Amended Loan Agreement, the Company had the option of paying an annual rate of interest due on the Revolving Credit at prime plus 2% or London Inter Bank Offer Rate (“LIBOR”) plus 3% and the Term Loan at prime plus 2.5% or LIBOR plus 3.5%.
On March 24, 2016, the Company entered into an amendment to the Amended Loan Agreement with PNC which provided, among other things, the following (the amendment, together with the Amended Loan Agreement is collectively known as the “Revised Loan Agreement”):
In connection with the amendment, the Company paid PNC a closing fee of $70,000. As a result of the amendment dated March 24, 2016, the Company recorded approximately $68,000 in loss on extinguishment of debt in accordance with ASC 470-50, “Debt – Modifications and Extinguishments,” which was included in interest expense in the accompanying Consolidated Statements of Operations.
Pursuant to the amendment, the Company may terminate the Revised Loan Agreement upon 90 days’ prior written notice upon payment in full of its obligations under the Revised Loan Agreement. The Company has agreed to pay PNC 1.0% of the total financing in the event the Company pays off its obligations on or before March 23, 2017, .50% of the total financing if the Company pays off its obligations after March 23, 2017 but prior to or on March 23, 2018, and .25% of the total financing if the Company pays off its obligations after March 23, 2018 but prior to or on March 23, 2019. No early termination fee shall apply if the Company pays off its obligations after March 23, 2019.
All other terms of the Amended Loan Agreement remain principally unchanged.
As of June 30, 2016, the availability under our revolving credit was $1,763,000, based on our eligible receivables and includes the remaining indefinite reduction of borrowing availability of $500,000 as discussed above.
The Company’s Credit Facility with PNC contains certain financial covenants, along with customary representations and warranties. A breach of any of these financial covenants, unless waived by PNC, could result in a default under our Credit Facility allowing our lender to immediately require the repayment of all outstanding debt under our Credit Facility and terminate all commitments to extend further credit. The Company failed to meet its minimum quarterly fixed charge coverage ratio (“FCCR”) requirement of 1.15:1 in the first quarter of 2016. On May 23, 2016, the Company’s lender waived this non-compliance. In connection with this waiver, the Company paid PNC a fee of $5,000 which was included in SG&A expenses. The Company met its financial covenant requirements in the second quarter of 2016 except for its quarterly FCCR requirement. The Company has obtained a waiver from its lender for this non-compliance. The Company believes that it will be able to meet its quarterly financial covenants in each of the remaining quarters of 2016 as the Company’s lender has revised the methodology to be used in calculating the FCCR (see Note 12 - “Subsequent Events – Credit Facility” for this waiver and the revision made to the methodology in calculating the FCCR in subsequent quarters).
The Company entered into a $3,000,000 loan dated August 2, 2013 with Messrs. Robert Ferguson and William Lampson (each known as the “Lender”). As consideration for the Company receiving the loan, the Company issued to each Lender a Warrant to purchase up to 35,000 shares of the Company’s Common Stock at an exercise price of $2.23 per share. The Warrants expire on August 2, 2016. As further consideration for the loan, the Company also issued to each Lender 45,000 shares of the Company’s Common Stock. The fair value of the Warrants and Common Stock and the related closing fees incurred from this transaction were recorded as a debt discount, which is being amortized using the effective interest method over the term of the loan as interest expense – financing fees.
The entire disclosure for long-term debt.
Reference 1: http://www.xbrl.org/2003/role/presentationRef