NOTE 5 — DEBT

Term Loan and Line of Credit

On November 21, 2014, we entered into a Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, N.A., as administrative agent, and other lender parties thereto. Pursuant to the Credit Agreement, the lenders agreed to provide a $10,000,000 senior term loan and a $5,000,000 revolving line of credit to our primary operating subsidiary. Amounts outstanding under the Credit Agreement bear interest at either LIBOR or the base rate, as elected by the Company, plus an applicable margin. Subject to the Company’s leverage ratio, pursuant to the terms of the amendment to the Credit Agreement entered into as of April 15, 2015, the applicable LIBOR rate margin varies from 4.25% to 6.25%, and the applicable base rate margin varies from 3.25% to 5.25%. The term loan and line of credit provide support for working capital, capital expenditures and other general corporate purposes, including permitted acquisitions. The outstanding senior term loan is secured by substantially all of our assets. Pursuant to the terms of the fourth amendment to the Credit Agreement entered into as of November 20, 2018, the original term loan and line of credit maturity date of November 21, 2019 was extended to May 21, 2020. The senior term loan principal balance is payable in quarterly installments, which started in March 2015 and will continue through the maturity date, with the full remaining unpaid principal balance due at maturity. Financing costs associated with the new credit facility are being amortized over its term on a straight-line basis, which is not materially different from the effective interest method.

The Credit Agreement includes customary financial covenants, including the requirements that the Company maintain minimum liquidity and achieve certain minimum EBITDA levels (as defined in the Credit Agreement). In addition, the Credit Agreement prohibits the Company from paying dividends on the common and preferred stock. Pursuant to the terms of the Credit Agreement, the Company is required to maintain minimum liquidity of at least (i) $5,000,000 through January 31, 2018, (ii) $4,000,000 from February 1, 2018 through November 19, 2018, (iii) $3,500,000 from November 20, 2018 through and including January 31, 2019, and (iv) $4,000,000 from February 1, 2019 through and including the maturity date of the credit facility.

The following table shows our minimum EBITDA covenant thresholds, as modified by the fourth amendment to the Credit Agreement:


Applicable period	Minimum EBITDA
For the fiscal quarter ended October 31, 2018	$	(509,000)
For the 2-quarter period ended January 31, 2019		20,000
For the 3-quarter period ending April 30, 2019		204,000
For the 4-quarter period ending July 31, 2019		180,000
For the 4-quarter period ending October 31, 2019		508,000
For the 4-quarter period ending January 31, 2020		408,000
For the 4-quarter period ending April 30, 2020 and each fiscal quarter thereafter		562,000

The Company was in compliance with the applicable financial loan covenants at January 31, 2019.

As of January 31, 2019, the Company had no outstanding borrowings under the revolving line of credit, and had accrued $14,000 in interest and unused line fees. Based upon the borrowing base formula set forth in the Credit Agreement, as of January 31, 2019, the Company had access to the full amount of the $5,000,000 revolving line of credit.

Outstanding principal balances on debt consisted of the following at:


	January 31, 2019		January 31, 2018
Senior term loan	$	4,030,000	$	4,626,000
Deferred financing cost		(82,000)		(128,000)
Total		3,948,000		4,498,000
Less: Current portion		(597,000)		(597,000)
Non-current portion of debt	$	3,351,000	$	3,901,000

Future principal payments of debt consisted of the following at January 31, 2019:


Fiscal year	Senior Term Loan (1)
2019	$	597,000
2020		3,433,000
Total repayments	$	4,030,000

(1)

Term loan balance on the consolidated balance sheet is reported net of deferred financing costs of $82,000.