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Notes and Lines of Credit Payable | 9 Months Ended
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Oct. 31, 2013
Notes Payable [Abstract] |
Notes and Lines of Credit Payable | 5. Notes and Lines of Credit Payable Senior Secured Note The terms of the amended $500,000 Senior Secured Note to SpaGus Apollo, LLC provide for borrowings to bear interest at 8.0 % per annum with accrued interest payable in arrears on each of December 28, 2012, March 31, 2013, June 30, 2013 and October 15, 2013. On April 15, 2013 the Company was obligated to issue an additional 100,000 restricted shares of the Company’s common stock to SpaGus required under the terms of the amended Note, which had a fair value of $45,000 at the obligation date. The Company accounted for this additional payment as a modification, which was amortized to interest expense over the remaining term of the amended Note using the effective interest method. The amended Note matured and was repaid, including accrued unpaid interest, on October 16, 2013. Promissory Note In connection with the September 1, 2013 acquisition of the Los Angeles, CA medical clinic (Note 3), ACC issued a non-interest bearing promissory note to the seller, which is due in ten installments of $15,000 per month commencing December 1, 2013. ACC recorded the note at its fair value of $125,000 using an interest rate of 26.3% to discount future cash flows, which is based on the cost of recent debt issuances of Apollo. The note is secured by substantially all assets of the clinic. Lines of credit payable Secured revolving credit facility On October 15, 2013, the Company entered into a $2.0 million secured revolving credit facility (the “Credit Agreement”) with NNA of Nevada, Inc., and (“the Lender” or “NNA”). The Company and its subsidiaries are guarantors of the Company’s obligations under the Credit Agreement. Loans drawn under the Credit Agreement are secured by all of the assets of the Company and its subsidiaries, including a security interest in the deposit accounts of the Company and its subsidiaries and a pledge of the shares in the Company’s subsidiaries. Amounts outstanding under the Credit Agreement accrue interest at a rate equal to the sum of (i) three months LIBOR and (ii) six percent (6.24% at October 31, 2013). Interest is payable on the last business day of each successive month, in arrears, commencing October 31, 2013, and at each month-end thereafter. The Credit Agreement requires the Company to pay the Lender a facility fee, on the last business day of each month, at a per annum rate of 1.0% of the average daily unused portion of the revolving credit commitment under the Credit Agreement. The Credit Agreement matures June 30, 2014. The Company incurred direct costs related to the Credit Agreement aggregating $119,500 which were accounted for as deferred financing costs and will be amortized using the straight line method to interest expense over the term thereof. As of October 31, 2013 $811,878 was outstanding under the Credit Agreement. On December 20, 2013 the Company entered into the First Amendment to the Credit Agreement (the “Amended Credit Agreement”), which increased the revolving credit facility from $2 million to $4 million. The proceeds of the Amended Credit Agreement were used by the Company to repay the $500,000 senior secured note (the “Senior Secured Note”) to SpaGus Apollo, LLC , and will be used to pay or repay certain of the Company’s 10% Notes, to refinance certain other indebtedness of the Company, and for working capital and for general corporate purposes. The Amended Credit Agreement contains the following financial covenants as follows: The Credit Agreement contains the following financial covenants as follows:
| · | Consolidated EBIT: The Company will not permit Consolidated EBIT as of the last day of each fiscal quarter shown below, for the fiscal quarter then ended, to be a greater negative amount than the amount set forth below:
Period |  | Minimum Consolidated EBIT(loss) |
3rd fiscal quarter ended October 2013 |  | $ | (900,000) |
4 th fiscal quarter ended January 2014 |  | $ | (1,227,111) |
1 st fiscal quarter ended April 2014 |  | $ | (1,696,958) |
Consolidated EBIT is defined, for any period, as the aggregate of (i) Consolidated Net Income of the Company plus (ii) the sum of interest expense and income tax expense, and minus (iii) interest income, all to the extent taken into account in the calculation of Consolidated Net Income. Consolidated Net Income is defined, for any period, as the net income (or loss) of the Company and its Subsidiaries, as determined on consolidated basis in accordance with GAAP, but excluding extraordinary gains and losses and any other non-operating gains and losses.
| · | Working Capital Ratio: Permit the Working Capital Ratio to be less than 0.80: 1.00 at any time.
Working Capital Ratio is defined, as of the measurement date, the ratio of (i) the sum of (A) the current assets of the Company and its subsidiaries as determined on a consolidated basis in accordance with GAAP, and (B) the unused portion of the revolving credit commitment to (ii) the current liabilities of the Company and its subsidiaries including without the aggregate amount of the Credit Agreement borrowings. In addition, the Credit Agreement includes certain negative covenants that, subject to exceptions, limit our ability to, among other things incur additional indebtedness, engage in future mergers, consolidations, liquidations and dissolutions, sell assets, pay dividends and distributions on or repurchase capital stock, and enter into or amend other material agreements. The Credit Agreement also includes certain customary representations and warranties, affirmative covenants and events of default, which are set forth in more detail in the Credit Agreement. The Company is in compliance with its financial covenants as of October 31, 2013 under the Amended Credit Agreement. Unsecured revolving line of credit Hendel has a $100,000 revolving line of credit with a financial institution of which $94,765 was outstanding at October 31, 2013. Borrowings under the line of credit bear interest at the prime rate (as defined) plus 4.50% (7.75% per annum at October 31, 2013), interest only is payable monthly, and matures June 5, 2014. The line of credit is unsecured. Interest expense associated with the notes and lines of credit payable consisted of the following:
|  | Three months ended October 31, |  | Nine months ended October 31, |
|  | 2013 |  | 2012 |  | 2013 |  | 2012 |
Interest expense |  | $ | 16,810 |  | $ | 2,755 |  | $ | 36,901 |  | $ | 15,386 |
Amortization of loan fees and discount |  |  | 49,738 |  |  | 11,401 |  |  | 89,327 |  |  | 33,546 |
|  | $ | 66,548 |  | $ | 14,156 |  | $ | 126,229 |  | $ | 48,932 |

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