Bank Loan

3 Months Ended

Dec. 31, 2019

(5)

Bank Loan

The Company has an outstanding term loan agreement with U.S. Bank National Association (“U.S. Bank”). The term loan agreement requires monthly payments of $364,583 plus interest calculated based on one of the following, at the Company’s option:

(1)

the sum of

(a) a margin that ranges from 2.25% to 2.75%, depending on the Company’s ratio of consolidated debt to consolidated earnings before interest, taxes, depreciation, and amortization (excluding, among other things, certain

non-cash

gains and losses) (“EBITDA”),

plus

(b) the LIBOR rate; or

(2)

the sum of

(a) a margin that ranges from 0.25% to 0.75%, depending on the Company’s ratio of consolidated debt to consolidated EBITDA,

plus

(b) the highest rate out of the following three rates: (i) the prime rate set by U.S. Bank from time to time; (ii) the Federal Funds Rate plus 0.50%; or (iii) the

one-month

LIBOR rate plus 1.00%.

The Company currently uses a

one-month

LIBOR rate contract, which must be renewed monthly. As of December 31, 2019, the effective rate under the term loan agreement was 3.947%, which comprised the

one-month

LIBOR rate of 1.697% as of December 2, 2019, plus a margin of 2.25% based on the Company’s ratio of consolidated debt to consolidated EBITDA as of September 30, 2019. The Company intends to renew the LIBOR rate contract on a monthly basis as long as it remains the most favorable option. The Company has amended the term loan agreement to address possible LIBOR changes as discussed in the section entitled “Risk Factors” in its Annual Report on

Form 10-K

for the fiscal year ended September 30, 2019.

All borrowings under the term loan agreement are secured by substantially all of the Company’s assets. The final installment of the

then-outstanding

principal plus accrued interest is due May 9, 2022. As of December 31, 2019, the principal amount outstanding under the term loan agreement was $16.4 million ($16.3 million net of debt issuance costs).

The term loan agreement includes certain reporting requirements and loan covenants requiring the maintenance of certain financial ratios. The Company was in compliance with its loan covenants for the periods ended December 31, 2019 and 2018.

In connection with securing the term loan agreement, the Company incurred $0.49 million in loan costs ($0.38 million of which has been expensed in previous periods). The balance of $0.11 million is being amortized on a straight-line basis, which approximates the effective interest basis, over the 36 months beginning May 2019. Amortization expense during the three months ended December 31, 2019 and 2018, was $0.01 million and $0.04 million, respectively. The unamortized balance of the loan fees was $0.11 million as of December 31, 2019.

In accordance with Accounting Standards Update

(“ASU”)

2015-03,

the amortization expense of the debt issuance cost is included in interest expense.