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, the applicable LIBOR rate margin varied from 4.25% to 5.25%, and the applicable base rate margin varied from 3.25% to 4.25%. Pursuant to the terms of the amendment to the Credit Agreement entered into as of April 15, 2015, the applicable LIBOR rate margin was changed to vary from 4.25% to 6.25%, and the applicable base rate margin was changed to vary from 3.25% to 5.25%. The term loan and line of credit mature on November 21, 2019 and provide support for working capital, capital expenditures and other general corporate purposes, including permitted acquisitions. At closing, the Company repaid indebtedness under its prior credit facility using approximately $7,400,000 of the proceeds provided by the term loan. The prior credit facility with Fifth Third Bank was terminated concurrent with the entry of the Credit Agreement and unamortized debt financing costs and discount of $315,000 associated with the terminated debt was included in loss on early extinguishment of debt. Financing costs of $355,000 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 facility prohibits the Company from paying dividends on the common and preferred stock. Pursuant to the terms of the second amendment to the Credit Agreement entered into as of April 29, 2016, the Company is required to maintain minimum liquidity of at least $6,500,000 from April 29, 2016 through and including the maturity date of the credit facility.

The following table shows our future minimum trailing four quarter period EBITDA covenant thresholds, as modified by the second amendment to the Credit Agreement:



For the four-quarter period ending	Minimum EBITDA
April 30, 2016	$	3,000,000
July 31, 2016	1,500,000
October 31, 2016	250,000
January 31, 2017	0

For the four-quarter period ending April 30, 2017, and fiscal quarters thereafter, the minimum EBITDA will be determined within 30 days following delivery of, and based upon, the projections then most recently delivered by the Company.

As of April 30, 2016, the Company had no outstanding borrowings under the revolving line of credit, and had accrued $4,000 in unused line fees.

Outstanding principal balances on debt consisted of the following at:



	April 30, 2016			January 31, 2016
Senior term loan	$	8,114,000		$	8,535,000
Capital lease	469,000			686,000
Total	8,583,000			9,221,000
Less: Current portion	(2,879,000		)	(1,266,000		)
Non-current portion of debt	$	5,704,000		$	7,955,000

In May 2015, we used the proceeds received from the Unibased escrow fund to make a $750,000 payment of principal towards the senior term loan with Wells Fargo. In August 2015, we used the proceeds received in connection with the execution of a settlement agreement with FTI Consulting, Inc. (“FTI”) to make a $250,000 payment of principal towards the senior term loan with Wells Fargo. As a result of these prepayments, the schedule of future principal payments was revised to reduce each future principal payment on a pro rata basis.

Future principal repayments of debt consisted of the following at April 30, 2016:



	Senior Term Loan (1)			Capital Lease (2)		Total
2016	$	2,244,000	(3)	$	390,000	$	2,634,000
2017	898,000			93,000		991,000
2018	898,000			—		898,000
2019	4,326,000			—		4,326,000
Total repayments	$	8,366,000		$	483,000	$	8,849,000

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(1)	Term loan balance on the condensed consolidated balance sheet is reported net of deferred financing costs of $252,000.


(2)	Future minimum lease payments include principal plus interest.


(3)	Includes required prepayment of $1,738,000 made in May 2016. See Note 8 - Subsequent Events for further details.