Note 8 - Credit Facility and Convertible Notes

9 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

8

. Credit Facility

and

Convertible

Notes

The Company maintains financing facilities and convertible note purchase agreements. For a description of the Company’s debt financing, see the notes to consolidated financial statements contained in the Company’s Annual Report on Form

10

-K for the year ended

March 31, 2018

and the summaries set forth below.

Amendments to Convertible Notes

and Issuances of Promissory Notes

On

November 16, 2018,

the Company entered into Amendment

No.

1

(the

“November

Amendment”) to its existing Junior Secured Note Purchase Agreement dated as of

December 27, 2016 (

the

“2016

Notes”) with MILFAM II L.P. (“MILFAM”) and Alimco Financial Corporation, a Delaware corporation formerly known as Alliance Semiconductor Corporation (“Alimco”, and, together with MILFAM, the “Investors”), each an affiliate of the estate of Lloyd I. Miller, II (“Miller”), the Company’s largest stockholder, pursuant to which the Investors issued promissory notes (the

“November

Notes”) to the Company in the aggregate principal amount of

$3.0

million. The

November

Notes are due on

December 27, 2021

or upon any transaction resulting in a change of control of the Company and accrue interest at an annual rate of

10%

on the aggregate outstanding principal amount, payable quarterly, beginning on

December 31, 2018.

The Company has the option to pay any amounts of interest due under the

November

Notes by compounding and adding such interest amount to the unpaid principal amount of the

November

Notes, based on an interest rate calculated at

12%

per year, provided that the Company is

not

then in default under any of its debt financing agreements. Pursuant to the terms of the

November

Amendment, the Company has agreed to pay to the Investors, conditioned on the amount of outstanding advances made by them, an amendment fee of up to

$0.5

million payable upon the maturity date of the of the

November

Notes, as well as a supplemental fee based on certain contingencies. At

December 31, 2018,

the Company has drawn

$0.5

million from the

November

Notes and has accrued

$0.3

million of the amendment fee in other long-term liabilities on the condensed consolidated balance sheets.

On

December 21, 2018,

the Company entered into Amendment

No.

2

(the

“December

Amendment”) to the

2016

Notes, pursuant to which the Investors issued promissory notes (the

“December

Notes”) to the Company in the aggregate outstanding principal amount of

$2.5

million. The

December

Notes have the same maturity date and interest options as the

November

Notes discussed above. Pursuant to the

December

Amendment,

no

further amounts will be drawn and

no

further fees will be accrued under the

November

Amendment. In connection with the

December

Amendment, the Company issued warrants exercisable for up to

10,500,000

shares of the Company’s common stock at an exercise price of

$0.01

per share (the “Warrants”) to the Investors. At

December 31, 2018,

the Company had drawn the full amount of

$2.5

million from the

December

Notes.

As a result of the

November

and

December

Amendment, the Company recorded a loss on extinguishment of approximately

$0.3

million, which consisted of deferred financing costs associated with the

2016

Notes, as well as the

November

and

December

Amendments. As the extinguishment was with a related party, the transaction was deemed to be a capital transaction and the gain is recorded in the Company’s stockholders’ equity as of

December 31, 2018.

Amendment

s

of Business Financing Agreement

On

June 14, 2018,

the Company and its wholly owned subsidiary, Determine Sourcing, Inc., entered into Amendment Number Eleven to the Amended and Restated Business Financing Agreement (the “Amendment”) with Western Alliance Bank, an Arizona corporation, as successor in interest to Bridge Bank, National Association (“Western Alliance”). The Amendment extended the maturity date of the underlying credit facility to

July 31, 2019,

revised the definition of “Prime Rate” to be

4.75%

and revised certain of the financial and compliance reporting obligations.

On

August 7, 2018,

the Company and its wholly owned subsidiary, Determine Sourcing Inc. entered into Amendment Number Twelve to the Amended and Restated Business Financing Agreement (the

“August

Amendment”) with Western Alliance . The

August

Amendment, among other things, increased the Company’s available credit under the existing facility with Western Alliance (the “Credit Facility”) by

$2

million (the “Additional Limit”), up to a total available credit amount of

$15

million. In connection with the

August

Amendment, the Company agreed to pay Western Alliance cash fees of

$40,000

plus a

one

-time facility fee equal to

0.75%

of the Additional Limit on the date of the

August

Amendment, and the Additional Limit amount was added to the calculation of the annual facility fee payable under the Credit Facility. Additionally, the definitions of “Finance Charge Percentage” and “Prime Rate” were revised to increase the respective base percentage rates to

5.00%.

Amendment of Limited Guaranty

In connection with the Amendment, on

June 14, 2018,

MILFAM entered into a Third Amended and Restated Limited Guaranty (the “Amended Guaranty”) with Western Alliance. The Amended Guaranty (i) extends the term of the Second Amended and Restated Limited Guaranty entered into by MILFAM with Western Alliance on

June 1, 2017

to

August 10, 2019,

and (ii) terminates the Second Amended and Restated Limited Guaranty entered into by the estate of Mr. Miller with Western Alliance on

June 1, 2017.

The Amended Guaranty also provides that if the maturity date of the Credit Facility is subsequently amended, the term of the Amended Guaranty would automatically extend to a date

ten

(

10

) days following the extended maturity date under the Credit Facility, but

no

later than

July 30, 2020. 

In connection with the Amended Guaranty, on

June 14, 2018,

the Company entered into a Guaranty Fee Agreement (the “Fee Agreement”) with MILFAM, pursuant to which the Company agreed to pay MILFAM a commitment fee of

$108,000

and a monthly fee that shall accrue each calendar month during the term of the Amended Guaranty equal to

ten

percent of the commitment fee divided by twelve. The commitment fee and the accrued monthly fee shall be payable in cash by the Company upon the termination or expiration of the Amended Guaranty.

In order to satisfy certain conditions for Western Alliance Bank to lend additional funds under the Credit Facility and enter into the

August

Amendment, on

August 7, 2018,

MILFAM entered into a Fourth Amended and Restated Limited Guaranty (the “Fourth Amended Guaranty”) with Western Alliance. The Fourth Amended Guaranty increases the amount of the limited, non-revocable guaranty of the Company’s Credit Facility provided by MILFAM by

$2

million, from

$2

million to

$4

million.

Amendment to Guaranty Fee Agreement

Additionally, in connection with the Amended Guaranty, on

June 14, 2018,

the Company entered into an Amendment to Guaranty Fee Agreement (the “Fee Agreement Amendment”) with MILFAM, Mr. Miller’s estate and Alimco Financial Corporation, an affiliate of Mr. Miller’s estate (collectively, the “Guarantors”). The Fee Agreement Amendment, among other things, amends the Guaranty Fee Agreement, dated as of

June 1, 2017 (

the

“June 2017

Fee Agreement”), among the Company and the Guarantors, to eliminate the payment of certain shares of Company common stock in connection with any extension of the guarantees provided by the Guarantors under the

June 2017

Fee Agreement and replace such payment with a cash commitment fee of

$0.2

million plus a monthly fee equal to

ten

percent of such commitment fee divided by twelve.

Guaranty Fee Agreement

In connection with the Fourth Amended Guaranty, on

August 7, 2018,

the Company entered into a Guaranty Fee Agreement with MILFAM, pursuant to which the Company agreed to pay MILFAM a commitment fee of

$0.1

million and a monthly fee that shall accrue each calendar month during the term of the Fourth Amended Guaranty equal to

ten

percent of the commitment fee divided by twelve. The commitment fee and the accrued monthly fee shall be payable in cash by the Company upon the termination or expiration of the Fourth Amended Guaranty.

As of

December 31, 2018

and

March 31, 2018,

the Company owed

$14.5

million and

$12.1

million, respectively, under the Credit Facility, and

$0.5

million and

$0.9

million was available for future borrowings, respectively. The Company’s Credit Facility with Western Alliance contains certain financial covenants that require, among other things, the maintenance of an asset coverage ratio of

not

less than

2:00

to

1:00

 at the end of each month. During the

nine

months ended

December 31, 2018,

the Company met all the requirements and was in compliance with the financial covenants.