Note D - Debt

6 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Debt Disclosure [Text Block]

NOTE D — DEBT

On

December 12, 2018,

the Company entered into a loan agreement for a

$5,000,000

revolving line of credit facility (the “Credit Facility”) with Citizens National Bank, which changed its name to VeraBank on

January 14, 2019 (

the “Bank”). The Credit Facility expires on

December 12, 2019

and is collateralized by the Company’s tubular segment accounts receivable and inventory. Borrowings under the credit facility bear interest at the Bank’s prime rate minus

0.55%

resulting in an applicable interest rate of

4.45%

as of

September 30, 2019.

Interest payments on amounts advanced are due monthly and principal payments

may

be made at any time without penalty. All outstanding principal and accrued interest is due upon expiration of the Credit Facility. Access to funds under the Credit Facility is subject to a borrowing base requirement. The borrowing base is calculated as

80%

of eligible tubular segment accounts receivable plus

40%

of eligible tubular segment inventory. The total amount contributed to the borrowing base by eligible inventory shall

not

exceed

$3,000,000.

The Credit Facility contains financial covenants that require the Company to

not

permit: (

1

) total shareholders’ equity to be less than

$50.0

million at any time, (

2

) total liabilities to exceed

50%

of total shareholders’ equity at any time and (

3

) debt service coverage ratio, measured as of the end of each calendar quarter, to be less than

2.00

to

1.00.

The debt service coverage ratio is calculated on a trailing

twelve

month period as the ratio of earnings before interest, taxes, depreciation and amortization (“EBITDA”) to the sum of interest expense for such period, scheduled principal payments for such period on all indebtedness for money borrowed and capital leases, and the aggregate amount payable during such period under any operating leases. At

September 30, 2019,

the borrowing base calculation would allow the Company access to approximately

$4,988,000

under the Credit Facility; however, the Company was in violation of the debt service coverage ratio covenant. The covenant violation constitutes an event of default which would prohibit the Company from accessing funds unless the Bank waives the covenant violation. The Company did

not

obtain a waiver of the violation from the Bank due to the Company having

no

borrowings during or subsequent to the

September 30, 2019

quarter and

no

anticipated need for funds through the expiration date of the Credit Facility.