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Bank Debt
 12 Months Ended
Jun. 30, 2012
Bank Debt [Abstract]  
BANK DEBT

NOTE 5 – BANK DEBT

Union Bank Credit Facility

On February 4, 2011, we entered into a credit facility agreement with Union Bank that provides for the following:

 

  •  

A revolving credit line of up to $1,500,000 in borrowing availability, under which no amounts were borrowed;

 

  •  

A non-revolving credit line of up to $350,000 in borrowing availability for the purchase of equipment, which expired unused on February 4, 2012; and

 

  •  

A term loan of $1,250,000, of which $774,000 was outstanding at June 30, 2012.

The maximum amount of borrowing under the revolving credit line was the lesser of:

 

  (a) $1,500,000; or

 

  (b) the sum of 80% of eligible domestic accounts receivable, plus the lesser of:

 

  (i) $400,000; or

 

  (ii) 15% of the eligible raw materials and finished goods inventories.

 

The revolving credit line’s terms required monthly interest payments based on borrowed amounts at a floating interest rate, calculated as Union Bank’s Reference Rate plus 0.5% (an aggregate interest rate of 3.75% at June 30, 2012). The line’s initial term was to expire on December 15, 2012.

The terms of the $1.25 million term loan, the proceeds of which were used to pay off in full the Wells Fargo term loan described below, require monthly principal payments of $29,762, plus interest over its 42-month term. The term loan bears interest at a floating rate, calculated as Union Bank’s Reference Rate plus 0.5% (an aggregate interest rate of 3.75% at June 30, 2012).

All personal property assets of the Company collateralize the outstanding borrowings under the Union Bank credit facility.

Our bank credit facility agreements contain various covenants, including certain covenants measured annually based on fiscal year results, concerning our financial performance. At June 30, 2012, we were in violation of profitability-based covenants, for which the bank had the right to declare us in default of the bank credit facility agreements and the entire amount owing under the facility, consisting of a term loan, to become immediately due and payable.

On August 30, 2012, we notified the bank of our intent to terminate the credit facility agreements and repay the term loan in full on or before September 30, 2012. By letter to us dated September 4, 2012, the bank waived, through October 1, 2012, the rights it otherwise would have had pursuant to the covenant violations described above.

Wells Fargo Bank Credit Facility

From November 2008 until February 4, 2011, we had a credit facility with Wells Fargo Bank consisting of the following:

 

  •  

A revolving credit line of up to $1,000,000 in borrowing availability, under which no amounts were outstanding during its term; and

 

  •  

A five-year term loan with an initial balance of $2,000,000, of which $1,367,000 was outstanding at June 30, 2010. On February 4, 2011, the term loan was paid off in full, as discussed further above.

Union Bank Mortgage

In March 2006, we entered into a ten-year mortgage with Union Bank for $1.65 million. The principal balance of the mortgage bore interest at a fixed annual rate of 6.73%. Payments on the mortgage were $11,379 per month (based on a 25-year amortization), with the balance of $1.3 million in principal due on April 1, 2016. The mortgage was collateralized by our Carson City land and building. On September 16, 2010, we paid the remaining $1,519,000 balance due on the Union Bank mortgage, fully retiring such indebtedness.