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Note 7 - Debt Obligations
 12 Months Ended
Jan. 02, 2022
Notes to Financial Statements  
Debt Disclosure [Text Block]

NOTE 7-DEBT OBLIGATIONS

 

Revolving Line of Credit

 

On September 28, 2018, the Company entered into a Loan and Security Agreement (the "Loan Agreement"), with Heritage Bank. The Loan Agreement provided for, among other things, the Revolving Facility with aggregate commitments of $9.0 million.

 

On December 21, 2018, the Company entered into an Amended and Restated Loan and Security Agreement (the "Amended and Restated Loan Agreement") with Heritage Bank to replace in its entirety the Loan Agreement. The Amended and Restated Loan Agreement increased the Revolving Facility from $9.0 million to $15.0 million (the "Revolving Facility"). The Amended and Restated Loan Agreement requires the Company to maintain at least $3.0 million in unrestricted cash at Heritage Bank. The Company was in compliance with all loan covenants under the Amended and Restated Loan Agreement as of the end of the current reporting period.

 

On November 6, 2019 the Company entered into a First Amendment to the Amended and Restated Loan Agreement to extend the maturity date of the Revolving Facility for one year through September 28, 2021. Under this amendment, the Revolving Facility advances shall bear interest, on the outstanding daily balance thereof, at a rate per annum equal to the greater of (i) one half of one percentage point (0.50%) above the prime rate, or (ii) five and one half of one percentage points (5.5%).

 

On December 11, 2020, the Company entered into a Second Amendment (the “Second Amendment”) to their Amended and Restated Loan Agreement with Heritage Bank of Commerce. The Second Amendment amends the Amended and Restated Loan Agreement to, among other things, i) extend the loan maturity date for one year through September 28, 2022 and ii) loan advances will bear interest, on the outstanding daily balances thereof, at a rate per annum equal to one half of one percentage point (0.50%) above the prime rate.

 

On August 16, 2021, the Company entered into a Third Amendment to the Amended and Restated Loan Agreement with Heritage Bank (the "Third Amendment"). The Third Amendment (a) waived the Company’s non-compliance with the minimum cash covenant which  obligated the Company to maintain at least $3.0 million of unrestricted cash at all times and (b) amended this obligation such that the Company shall now be required to maintain unrestricted cash in its accounts at the Bank in an amount of at least $3.0 million measured i) immediately prior to the funding of any credit extension, and ii) at all times that any advance is outstanding.

 

On November 16, 2021, the Company entered into a Fourth Amendment (the “Fourth Amendment”) to the Amended and Restated Loan Agreement with Heritage Bank originally entered into on December 21, 2018 (the "Amended and Restated Loan Agreement"). The Fourth Amendment extended the loan maturity date through December 31, 2023 and amended and restated an annual, non-refundable Facility Fees of Forty-Five Thousand Dollars ($45,000) due, prorated, on December 31, 2021 and in full on each anniversary of the Closing Date for so long as the Revolving Facility is in place. 

 

On both January 2, 2022 and January 3, 2021, the Company had $15.0million of outstanding balance for the revolving line of credit with interest rates of 3.75%  and 3.75%.  We were in compliance with all loan covenants under the Amended and Restated Loan Agreement, as amended as of the end of the current reporting period. See Note 1.

 

Heritage Bank has a first priority security interest in substantially all of the Company’s tangible and intangible assets to secure any outstanding amounts under the Amended and Restated Loan Agreement.

 

Payroll Protection Program Loan

 

On May 6, 2020, the Company entered into a loan agreement with Heritage Bank (“PPP Loan”) for a loan of $1.2 million pursuant to the PPP under the CARES Act, as implemented by the U.S. Small Business Administration.

 

The PPP Loan was evidenced by a promissory note (“Note”) dated May 6, 2020, and matured two years from the disbursement date. The Note bore interest at a rate of 1.00% per annum, with the first six months of interest deferred. Principal and interest were payable monthly commencing six months after the disbursement date and may be prepaid by the Company at any time prior to maturity with no prepayment penalties. The Note contained customary events of default relating to, among other things, payment defaults or breaches of the terms of the Note. Upon the occurrence of an event of default, the lender may require immediate repayment of all amounts outstanding under the Note.  The Company applied for loan forgiveness in the fourth quarter of fiscal 2020, in accordance with the terms under the CARES Act.  On January 26, 2021, the Company received a notice from Heritage Bank that amounts under the PPP Loan had been forgiven. The Company recorded the loan forgiveness under Gain on forgiveness of PPP Loan on its consolidated statement of operations for the year ended January 2, 2022.