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Note 12 - Term Loan and Line of Credit
 3 Months Ended
Jan. 31, 2024
Notes to Financial Statements  
Debt Disclosure [Text Block]

Note 12 – Term Loan and Line of credit

 

In February 2022, we entered into a loan agreement (the “Loan Agreement”) providing for a revolving line of credit (the “Revolving Credit Facility”) in the amount of $3.0 million and a $17.0 million term loan (the “Term Loan”, and together with the Revolving Credit Facility, the “Credit Facility”) with Bank of America, N.A. (the “Bank”). Amounts outstanding under the Revolving Credit Facility shall bear interest at a rate of 2.0% plus the Bloomberg Short-Term Bank Yield Index Rate. The maturity date of the Revolving Credit Facility is March 1, 2024. The Company drew down the entire amount of the Term Loan on March 1, 2022. The primary interest rate for Term Loan is 3.76% per annum. The maturity date of the Term Loan is March 1, 2027.

 

Borrowings under the Credit Facility are secured by a security interest in certain assets of the Company and are subject to certain loan covenants. The Credit Facility requires the maintenance of certain financial covenants, including: (i) consolidated debt to EBITDA ratio not to exceed 3.00 to 1.00 (the “Debt Test”); (ii) consolidated fixed charge coverage ratio of at least 1.25 to 1.00 (the “FCCR Test”); and (iii) consolidated minimum EBITDA of at least $600,000 for the discrete quarter ended January 31, 2022. In addition, the Credit Facility contains customary affirmative and negative covenants.

 

On September 12, 2023, we entered into Amendment No. 1 and Waiver to the Loan Agreement (“Loan Amendment No. 1”) with the Bank, which, among other matters, provided for a one-time waiver of our failure to comply with (i) the Debt Test for the period ended July 31, 2023 and (ii) the FCCR Test for the period ended July 31, 2023. Loan Amendment No. 1 also waived testing for compliance with the Debt Test and FCCR Test for the quarterly periods ending October 31, 2023, January 31, 2024, April 30, 2024 and July 31, 2024. Further, pursuant to Loan Amendment No. 1, we were required to maintain (i) (a) until September 21, 2023, minimum liquidity (week-end cash balance plus availability from the Revolving Credit Facility) of $4.0 million, and (b) from September 22, 2023 and thereafter, liquidity equal to the greater of (1) $4.0 million or (2) 80% of the liquidity that had been forecast for this date at the fourth week of the forecast and (ii) minimum EBITDA of ($400,000), $500,000, $1.0 million, and $1.0 million for the quarters ending October 31, 2023, January 31, 2024, April 30, 2024, and July 31, 2024, respectively.

 

 

On January 26, 2024, we entered into Amendment No. 2 to the Loan Agreement (“Loan Amendment No. 2”) with the Bank, which, among other matters, eliminated the requirement to maintain minimum EBITDA of $500,000 for the quarter ending January 31, 2024. Under Loan Amendment No. 2, the line of credit available to the Company under the Revolving Credit Facility was lowered from $3.0 million to $500,000. Further, Loan Amendment No. 2 required that we maintain from September 22, 2023 and thereafter, liquidity of at least $2.0 million, rather than the greater of $4.0 million or 80% of the forecast liquidity as was required under Loan Amendment No. 1. Under Loan Amendment No. 2, the Company was required to pay an additional fee equal to 1% of the collective outstanding principal balances of the Revolving Credit Facility and Term Loan if the Credit Facility was not repaid in full on or before March 1, 2024. This additional fee, if applicable, would be due on March 2, 2024. Further, Loan Amendment No. 2 required that the Company make an additional principal payment of $1.0 million on the Term Loan on March 1, 2024, in addition to the existing monthly payments due on the Term Loan. In connection with Loan Amendment No. 2, we paid the Bank a $500,000 paydown on the Revolving Credit Facility, thereby reducing the outstanding balance from $1.0 million to $500,000.

 

On February 29, 2024, we entered into Amendment No. 3 to the Loan Agreement (“Loan Amendment No. 3”) with the Bank, which, among other matters, defers the requirement that the Company make an additional principal payment of $1.0 million on the Term Loan, from March 1, 2024, as was required under Loan Amendment No. 2, to April 1, 2024. Further, Loan Amendment No. 3 reduces the additional fee the Company is required to pay the Bank on March 2, 2024 from 1% of the collective outstanding principal balances of the Revolving Credit Facility and Term Loan as of March 1, 2024 as required under Loan Amendment No. 2, to 0.50% of the collective outstanding principal balances of the Revolving Credit Facility and Term Loan as of March 1, 2024. Additionally, Loan Amendment No. 3 requires the Company to pay the Bank a fee equal to 0.50% of the collective outstanding principal balances of the Revolving Credit Facility and Term Loan as of March 1, 2024, if the Credit Facility is not repaid in full on or before April 2, 2024 (the “April 2024 Fee”). The April 2024 Fee, if applicable, will be due on April 2, 2024. Under Loan Amendment No. 3, the Company must continue to maintain liquidity of at least $2.0 million and pay the current remaining outstanding balance of $500,000 on the Revolving Credit Facility by March 1, 2024, as required under Loan Amendment No. 2. As of January 31, 2024, we have borrowed $12,556,000 under the Term Loan and $500,000 from the Revolving Credit Facility.

 

On March 15, 2024, we entered into the EBC Credit Agreement (as defined below) and used proceeds from the initial drawings under the EBC Credit Facilities (as defined below) to repay in full outstanding obligations under the Loan Agreement and to pay fees, premiums, costs and expenses, including fees payable in connection with the EBC Credit Agreement. The Loan Agreement was terminated upon entry into the EBC Credit Agreement.