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NOTE 6 - NOTES PAYABLE | 9 Months Ended
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Sep. 30, 2017
Debt Disclosure [Abstract] |
Debt Disclosure [Text Block] | NOTE 6 – NOTES PAYABLE The following table summarizes our outstanding debt as of the dates indicated:
Notes Payable |  | Maturity |  | Stated Interest Rate |  |  | Balance as of September 30, 2017 |  |  | Balance as of December 31, 2016 |
Subordinated Notes Payable- Mangrove acquisition |  | 3/18/2018 |  |  | 3.50 | % |  | $ | - |  |  | $ | 6,000 |
Subordinated Notes Payable- PMSI acquisition |  | 4/30/2018 |  |  | 2.00 | % |  |  | 1,125 |  |  |  | - |
Subordinated Notes Payable- CPI acquisition |  | 4/30/2018 |  |  | - | % |  |  | 500 |  |  |  | - |
Subordinated Notes Payable- PSNW acquisition |  | 3/31/2018 |  |  | 2.00 | % |  |  | 600 |  |  |  | - |
Subordinated Notes Payable- iSystems acquisition |  | 5/25/2019 |  |  | 3.50 | % |  |  | 5,000 |  |  |  | - |
Subordinated Notes Payable- Compass acquisition |  | 5/25/2022 |  |  | 2.0 | % |  |  | 1,500 |  |  |  | - |
Term Loan – Wells Fargo Syndicate Partner |  | 5/25/2022 |  |  | 9.53 | % |  |  | 34,562 |  |  |  | - |
Term Loan - Wells Fargo |  | 5/25/2022 |  |  | 4.53 | % |  |  | 34,563 |  |  |  | 24,715 |
Total Notes Payable |  |  |  |  |  |  |  | $ | 77,850 |  |  | $ | 30,715 |
Short-term notes payable |  |  |  |  |  |  |  | $ | 8,869 |  |  | $ | 5,455 |
Long-term notes payable |  |  |  |  |  |  |  | $ | 68,981 |  |  | $ | 25,260 |
The following table summarizes the debt issuance costs as of the dates indicated:
Notes Payable |  | Gross Notes Payable at September 30, 2017 |  |  | Debt Issuance Costs and Debt Discount |  |  | Net Notes Payable at September 30, 2017 |
Notes payable, current portion |  | $ | 8,869 |  |  | $ | (145 | ) |  | $ | 8,724 |
Notes payable, net of current portion |  |  | 68,981 |  |  |  | (2,001 | ) |  |  | 66,980 |
Total Notes Payable |  | $ | 77,850 |  |  | $ | (2,146 | ) |  | $ | 75,704 |
Notes Payable |  | Gross Notes Payable at December 31, 2016 |  |  | Debt Issuance Costs and Debt Discount |  |  | Net Notes Payable at December 31, 2016 |
Notes payable, current portion |  | $ | 5,455 |  |  | $ | - |  |  | $ | 5,455 |
Notes payable, net of current portion |  |  | 25,260 |  |  |  | (679 | ) |  |  | 24,581 |
Total Notes Payable |  | $ | 30,715 |  |  | $ | (679 | ) |  | $ | 30,036 |
The following table summarizes the future principal payments related to our outstanding debt:
Year Ended |  | Gross Amount |
December 31, 2017 (October to December) |  | $ | 875 |
December 31, 2018 |  |  | 8,525 |
December 31, 2019 |  |  | 6,300 |
December 31, 2020 |  |  | 3,800 |
December 31, 2021 |  |  | 3,800 |
Thereafter |  |  | 54,550 |
Gross Notes Payable |  | $ | 77,850 |
Subordinated Notes Payable- PMSI Acquisition In January 2017, we acquired all of the outstanding shares of common stock (the “Shares”) of Personnel Management Systems, Inc., a Washington corporation (“PMSI”), pursuant to a Stock Purchase Agreement (the “Stock Purchase Agreement”). The aggregate consideration for the Shares consisted of (i) $3,875 in cash and (ii) a subordinated promissory note (the “PMSI Note”) in the principal amount of $1,125 subject to adjustment as provided in the Stock Purchase Agreement. We funded the cash payment with proceeds from our recent public stock offering. The PMSI Note bears interest at an annual rate of 2.0% and matures on April 30, 2018. The entire unpaid principal and all accrued interest under the PMSI Note is payable at maturity. Subordinated Notes Payable- CPI Acquisition In January 2017, we acquired substantially all the assets of Corporate Payroll, Inc., an Ohio corporation (“CPI”), relating to its payroll service bureau business, pursuant to an Asset Purchase Agreement (the “CPI Asset Purchase Agreement”). The aggregate consideration for the assets consisted of (i) $1,500 in cash, (ii) a subordinated promissory note (the “CPI Note”) in the principal amount of $500 and (iii) 112,166 shares of our common stock valued at $1,000, subject to adjustment as provided in the CPI Asset Purchase Agreement. We funded the cash payment with proceeds from our recent public stock offering. The CPI Note bears no interest and matures on April 30, 2018. The entire unpaid principal under the CPI Note is payable at maturity. Subordinated Notes Payable – PSNW Acquisition In January 2017, we acquired substantially all the assets of Payroll Specialties NW, Inc., an Oregon corporation (“PSNW”), pursuant to an Asset Purchase Agreement (the “PSNW Asset Purchase Agreement”). The aggregate consideration for the assets consisted of (i) $3,010 in cash and (ii) a subordinated promissory note (the “PSNW Note”) in the principal amount of $600, subject to adjustment as provided in the PSNW Asset Purchase Agreement. We funded the cash payment with proceeds from our recent public stock offering. The PSNW Note bears interest at an annual rate of 2.0% and matures on April 30, 2018. The entire unpaid principal and all accrued interest under the PSNW Note is payable at maturity. Subordinated Notes Payable- iSystems Acquisition In May 2017 we acquired 100% of the outstanding equity interests of iSystems Intermediate Holdco, Inc., a Delaware corporation (“iSystems”), pursuant to an equity purchase agreement (the “Equity Purchase Agreement”). The aggregate purchase price consisted of (i) $32,000 in cash, subject to adjustment as provided in the Equity Purchase Agreement, (ii) a secured subordinated promissory note (“iSystems Note”) in the principal amount of $5,000, subject to adjustment as provided in the Equity Purchase Agreement, and (iii) 1,526,332 shares of unregistered common stock valued at $18,000. The iSystems Note bears interest at an annual rate of 3.5% and matures on May 25, 2019. The unpaid principal and all accrued interest under the promissory note is payable in two installments of $2.5 million on May 25, 2018 and May 25, 2019, subject to adjustment. Subordinated Notes Payable- Compass Acquisition In May 2017, we acquired 100% of the outstanding shares of capital stock of Compass HRM, Inc. (“Compass”) pursuant to a stock purchase agreement (the “Stock Purchase Agreement”). The aggregate purchase price consisted of $4,500 in cash and a subordinated promissory note (“Compass Note”) in the principal amount of $1,500, subject to adjustment as provided in the Stock Purchase Agreement. The Compass Note bears interest at an annual rate of 2.0% and matures on May 25, 2022. The Compass Note is payable in five annual installments of $300 on the anniversary of the closing date, subject to adjustment. Subordinated Notes Payable- Mangrove Acquisition In March 2016, we acquired all of the issued and outstanding shares of common stock (the “Shares”) of Mangrove. The aggregate consideration for the Shares consisted of (i) $11,348 in cash, a portion of which was used to pay certain obligations of Mangrove and (ii) a secured subordinated promissory note (the “Note”) in the principal amount of $6,000, subject to adjustment as provided in the Stock Purchase Agreement. We funded the cash payment with proceeds from the Credit Agreement with Wells Fargo. This note was paid in full in the first quarter of 2017. Term Loan - Wells Fargo In March 2014, we entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, N.A., as administrative agent, and the lenders that are party thereto. The Credit Agreement contains customary events of default, including, among others, payment defaults, covenant defaults, judgment defaults, bankruptcy and insolvency events, cross defaults to certain indebtedness, incorrect representations or warranties, and change of control. In some cases, the defaults are subject to customary notice and grace period provisions. In March 2014 and in connection with the Credit Agreement, we and our wholly-owned active subsidiaries entered into a Guaranty and Security Agreement with Wells Fargo Bank. Under the Guaranty and Security Agreement, we and each of our wholly-owned active subsidiaries have guaranteed all obligations under the Credit Agreement and granted a security interest in substantially all of our and our subsidiaries’ assets. The Credit Agreement provided for a term loan in the amount of $15,000 maturing in March 2019. The Credit Agreement also provided for a revolving loan commitment in the aggregate amount of up to $3,000. The outstanding principal amount of the revolving loan is due and payable in March 2019. As of September 30, 2017 and December 31, 2016, $0 was outstanding and $5,000 was available for borrowing under the revolver. Additionally, the Credit Agreement provided for a $10,000 uncommitted incremental term loan facility to support permitted acquisitions. In March 2017, we amended our Credit Agreement with Wells Fargo Bank, N.A to, among other things, obtain an additional term loan in the amount of $5,000. In the first quarter of 2017, we used the proceeds of the additional term loan to repay a portion of all amounts outstanding under the secured subordinated note we issued in connection with the Mangrove acquisition. Amended and Restated Credit Agreement In May 2017, we entered into an amended and restated credit agreement (the “Restated Credit Agreement”) with Wells Fargo Bank, N. A., as administrative agent, and the lenders that are parties thereto, amending and restating the terms of the Credit Agreement dated as of March 2014, as amended. The Restated Credit Agreement provides for an increase in the aggregate principal amount of total commitments from approximately $32,714 to $75,000. This increase includes an additional term loan commitment of approximately $40,286 and an additional revolver commitment of $2,000. The term loan consists of a $35,000 “First Out Loan Obligation” funded by Wells Fargo as administrative agent, and a $35,000 “Last Out Loan Obligation” funded by Wells Fargo’s syndicate partner, Goldman Sachs. The Restated Credit Agreement amends the applicable margin rates for determining the interest rate payable on outstanding First Out and Last Out loan obligations as follows:
Leverage Ratio |  | First Out Base Rate Margin |  | First Out LIBOR Rate Margin |  | Last Out Base Rate Margin |  | Last Out LIBOR Rate Margin
< 3.25:1 |  | 2.00 Percentage Points |  | 3.00 Percentage Points |  | 7.00 Percentage Points |  | 8.00 Percentage Points
> 3.25:1 |  | 2.50 Percentage Points |  | 3.50 Percentage Points |  | 7.50 Percentage Points |  | 8.50 Percentage Points
The outstanding principal amount of the term loan is payable in equal installments of $875 beginning on September 30, 2017 and the last day of each fiscal quarter thereafter. The outstanding principal balance and all accrued and unpaid interest on the term loan is due on May 25, 2022. The Restated Credit Agreement also: · amends our leverage ratio covenant to increase the maximum ratio to 5.75:1 at June 30, 2017, stepping down to 3.25:1 at June 30, 2020 and each quarter-end thereafter; · amends our fixed charge coverage ratio to be not less than 1.35:1 at June 30, 2017 and September 30, 2017, not less than 1.45:1 at December 31, 2017, and not less than 1.50:1 beginning with the quarter ending March 31, 2018 and each quarter-end thereafter; and · adds a Trailing Twelve Months (“TTM”) recurring revenue covenant, requiring software-as-a-service, hardware-as-a-service and cloud subscription and maintenance support revenues to be at least $41,000 at June 30, 2017 and stepping up to $60,500 at June 30, 2022 and each quarter-end thereafter. As of September 30, 2017, we were in compliance with all covenants and all payments remain current. We expect to be in compliance or be able to obtain compliance through debt repayments with available cash on hand or cash we expect to generate from the ordinary course of operations over the next twelve months.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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