Note 6. Debt

Total outstanding debt of the Company as of September 30, 2011 and March 31, 2011 consisted of the following (in thousands):

	September 30, 2011		March 31, 2011
Bank term loan	$	999	$	687
Bank line of credit		494		494
MEDC/MSF loans		1,718		1,971
Debt to Related Parties		725		1,175
Total	$	3,936	$	4,327

Bank Debt –On September 25, 2008, the Company executed a loan agreement (the Loan Agreement) with The PrivateBank and Trust Company (the Lender). As part of this Loan Agreement, the Company has a term loan and a $3.0 million line of credit. On September 23, 2011, the Company entered into a 5th amendment to the Loan Agreement which established a $1.0 million term loan and extended the existing $3.0 million line of credit. The term loan is to be repaid in monthly principal payments of $20,833, plus interest at prime plus 0.5%, until maturity on October 1, 2015. The interest rate on the term loan on September 30, 2011 was 3.75%. The line of credit bears interest at prime plus 0.5% and any outstanding borrowings are due on September 25, 2014. The availability under the line of credit is determined by a calculation of a borrowing base that includes a percentage of accounts receivable and inventory.

The line of credit is guaranteed by each of API’s wholly-owned subsidiaries and the term loan is secured by a Security Agreement among API, its subsidiaries and The PrivateBank, pursuant to which API and its subsidiaries granted to The PrivateBank a first-priority security interest in certain described assets.

The Loan Agreement contains financial covenants (the Financial Covenants) including minimum Debt Service Coverage ratio, Adjusted EBITDA level, and Net Worth requirements (each as defined in the Loan Agreement). On May 29, 2009, the Company amended the Loan Agreement effective March 31, 2009 (the First Amendment). Pursuant to the First Amendment, (1) the Adjusted EBITDA level was measured on a year to date basis for the June 26, 2009, September 25, 2009, December 25, 2009 and March 31, 2010 test dates and thereafter was to be measured on a trailing four quarter basis, (2) the minimum Debt Service Coverage ratio was set at 1.0 to 1.0 for the first quarter of fiscal year 2010, 1.25 to 1.0 for the second quarter of fiscal year 2010 and 1.5 to 1.0 thereafter, and (3) the minimum Net Worth covenant was initially set at $15.5 million and would automatically increase by 10% of Net Income (as defined in the Loan Agreement) for each fiscal year that the Company reported net income.

At December 25, 2009 and March 31, 2010, the Company was not in compliance with the Financial Covenants. This constituted an event of default under the terms of the Loan Agreement which gave the Lender the ability to provide us with notice that they are exercising their rights under the Loan Agreement by demanding payment in full of the outstanding indebtedness under the Loan Agreement.

On June 25, 2010, the Company and the Lender entered into a second amendment to the Loan Agreement (the Second Amendment). The Second Amendment increased the interest rate from prime plus 1% to prime plus 2% and amended the Financial Covenants. Pursuant to the Second Amendment, (1) the minimum Debt Service Coverage ratio was set at 1.0 to 1.0 for the first three quarters of fiscal year 2011 and 1.2 to 1.0 thereafter, (2) the minimum Adjusted EBITDA level was measured on a trailing three month basis and was $190,000 for the July 2, 2010 test date, $190,000 for the October 1, 2010 test date, $260,000 for the December 31, 2010 test date, and $400,000 for the March 31, 2011 test date and thereafter on a trailing twelve month basis was $1,160,000 and (3) the minimum Net Worth requirement was set at $13.0 million for the first quarter of fiscal year 2011, $12.5 million for the second quarter of fiscal year 2011, $12.1 million for the third quarter of fiscal year 2011 and $11.8 million for the fourth quarter of fiscal year 2011.

In addition to amending the Financial Covenants and as described in the Debt to Related Parties section of this footnote, the Second Amendment required the Company to amend the four-year promissory notes issued to Robin Risser, the Company’s COO, and Steve Williamson, the Company’s CTO (collectively, the Note Holders) in connection with the 2005 acquisition of Picometrix, LLC (f/k/a Picometrix, Inc.) (the Picometrix Notes) by August 25, 2010 to defer the December 1, 2010 and March 1, 2011 installment payments owed under the Picometrix Notes (the Amendment Undertaking). Failure to amend the Picometrix Notes by August 25, 2010 would constitute an event of default under the Loan Agreement.

On August 27, 2010, the Company executed a third amendment to the Loan Agreement with the Lender (the Third Amendment). The Third Amendment (1) increased the amount of proceeds from equity issuances that the Company may use to make payments in respect of the Company’s existing indebtedness under the Picometrix Notes and (2) extended the deadline set forth in the Second Amendment for satisfying the Amendment Undertaking.

On November 30, 2010, the Company executed a Fourth Amendment to the Loan Agreement with the Lender, effective as of November 30, 2010 (the Fourth Amendment). Among other things, the Fourth Amendment (1) deleted the Amendment Undertaking, (2) approved the amendments to the Picometrix Notes described in the Related Parties Debt section of this footnote and the payment of a restructuring fee in connection therewith, (3) amended the definition of “Adjusted EBITDA” to add back a portion of the restructuring fee to the calculation of the “Adjusted EBITDA” and (4) amended the definition of “Debt Service Coverage Ratio” to exclude the proceeds raised pursuant to a securities purchase agreement by and among the Company and the Note Holders (the SPA) from the calculation of the “Debt Service Coverage Ratio”.

On September 23, 2011, the Company executed a Fifth Amendment to the loan agreement with the Lender, effective as of September 23, 2011. Among other things, the Fifth Amendment (1) eliminated the minimum compensating balance requirement; (2) amended the definition of “ Base Net Worth ” to provide that Base Net Worth will initially be set at $16.2 million; (3) amended the definition of “ Borrowing Base Amount ” to increase the potential availability of borrowings under the line of credit (as defined in the Loan Agreement); (4) amended the definition of “ Net Worth ” to permit the Company to add back certain non-cash goodwill or intangible asset impairment charges when calculating “Net Worth”; (5) decreased the amount of the term loan to $1.0 million; and (6) required the Company to maintain (i) a minimum Debt Service Coverage Ratio of 1.1 to 1.0 until September 30, 2013 and 1.2 to 1.0 from December 31, 2013 and thereafter, (ii) Adjusted EBITDA of not less than $1,500,000 on a trailing twelve month basis, and (iii) a minimum Net Worth of not less than the Base Net Worth. The Company was in compliance with its Financial Covenants as of September 30, 2011.

Interest payments made to the Lender during the three and six month periods ended September 30, 2011 were approximately $9,000 and $29,000, respectively. Interest payments made to the Lender during the three and six month periods ended October 1, 2010 were approximately $33,000 and $69,000, respectively.

MEDC/MSF Loans - The Michigan Economic Development Corporation (MEDC) entered into two loan agreements with Picometrix, one in fiscal 2005 (MEDC-loan 1) and one in fiscal 2006 (MEDC-loan 2). Both loans are unsecured.

The MEDC-loan 1 was issued in the original principal amount of $1,025,000. Under the original terms of the MEDC–loan 1, the interest rate was 7% and interest accrued but unpaid through October 2008 would be added to then outstanding principal balance of the promissory note issued pursuant to the MEDC- loan 1 and the restated principal would be amortized over the remaining four years (September 15, 2012). Effective September 23, 2008, the MEDC-loan 1 was amended and restated to change the start date of repayment of principal and interest from October 2008 to October 2009.

During the fourth quarter of fiscal 2010, the Company began negotiations with the MEDC to further amend the MEDC-loan 1 promissory note. The Company and the MEDC agreed that the payment of restated principal and accrued interest was to be suspended until the negotiations were completed. In May 2010, the Company entered into a debt conversion agreement with the MEDC whereby the MEDC would convert the accrued and unpaid interest as of November 30, 2009 totaling $324,669 into 601,239 unregistered shares of the Class A Common Stock of the Company at a price per share of $0.54 (market value of the stock on the day of conversion). In addition, the Company granted the MEDC a put option to sell back to the Company the shares received pursuant to the debt conversion agreement in the event of a trigger event as defined in the debt conversion agreement. In conjunction with the debt conversion agreement, the Company amended the MEDC-loan 1 promissory note to retroactively change the interest rate from 7% to 4% beginning in December 2009, and to change the repayment terms of the outstanding principal and interest such that beginning in October 2010, the Company is to repay the remaining principal and accrued interest on a monthly basis through maturity in November 2014.

MEDC-loan 2, which was assigned to the Michigan Strategic Fund (MSF) in June 2010, was issued in the original principal amount of $1.2 million. Under the original terms of the MEDC – loan 2, the interest rate was 7% and interest accrued, but unpaid in the first two years of this agreement was added to the then outstanding principal of the promissory note issued pursuant to the MEDC-loan 2. During the third year of this agreement, the Company was to pay interest on the restated principal of the promissory note until October 2008, at which time the Company was to repay the restated principal over the remaining three years (September 15, 2011). Effective January 26, 2009, the MEDC-loan 2 was amended and restated to change the start date of repayment of principal and interest from October 2008 to November 2009 and to extend the repayment period to October 2012.

During the fourth quarter of fiscal 2010, the Company began negotiations with the MEDC to further amend the MEDC-loan 2 promissory note. The Company and the MEDC agreed that the payment of restated principal and accrued interest was to be suspended until the negotiations were completed. In May 2010, the Company entered into a debt conversion agreement with the MEDC whereby the MEDC would transfer the MEDC-loan 2 promissory note to the MSF which would convert the accrued and unpaid interest as of October 31, 2009 totaling $237,667 into 440,124 unregistered shares of the Class A Common Stock of the Company at a price per share of $0.54 (market value of the stock on the day of conversion). In addition, the Company granted the MSF a put option to sell back to the Company the shares received pursuant to the debt conversion agreement in the event of a trigger event as defined in the debt conversion agreement. In conjunction with the debt conversion agreement, the Company amended the MEDC-loan 2 promissory note to retroactively change the interest rate from 7% to 4% beginning in November 2009, and to change the repayment terms of the outstanding principal and interest such that beginning in July 2010, the Company is to repay the remaining principal and accrued interest on a monthly basis through maturity in September 2014.

The Company performed an assessment of the amendments made to the MEDC and MSF loans during the second quarter of fiscal 2011 to determine whether or not the amendments constituted a “troubled debt restructuring” or a “substantial modification” in accordance with FASB guidance and concluded that the amendments did not constitute either a troubled debt restructuring or a substantial modification. Furthermore, the Company performed an assessment of the balance sheet classification of the common shares issued as part of the debt conversion agreements in light of the put options granted and determined that equity classification of the shares is appropriate since the trigger event related to the put option is considered to be in the control of the Company.

Interest payments made to the MEDC/MSF were approximately $12,000 and $38,000 during the three and six month periods ended September 30, 2011, respectively. Interest payments made to the MEDC/MSF were approximately $51,000 and $77,000 during the three and six month periods ended October 1, 2010, respectively.

Debt to Related Parties - As a result of the 2005 acquisition of Picotronix LLC, the Company issued the Picometrix Notes to the Note Holders. API has the option of prepaying the Picometrix Notes without penalty. On November 30, 2009, the Company and the Note Holders entered into the fourth amendments to the Picometrix Notes to extend the due date for the remaining principal balance of the Picometrix Notes (in the aggregate amount of $1,400,500) to March 1, 2011 payable in two installments as follows:

Payment Date	Principal Payment
December 1, 2010	$	450,000
March 1, 2011	$	950,500

As described above in the Bank Debt section of this footnote, the Loan Agreement with the Lender required that the Company amend the Picometrix Notes to defer the December 1, 2010 and March 1, 2011 installment payments (the Amendment Undertaking). In compliance with the Amendment Undertaking, on November 29, 2010, the Company and the Note Holders entered into the fifth amendments to the Picometrix Notes (the Fifth Amendment). The Fifth Amendment required the Company to pay the related parties a restructuring fee of $156,312 (11%) and extended the due dates for the remaining principal balance payments on the Picometrix Notes (in the aggregate amount of $1,400,500) to September 1, 2012 per the payment schedule below:

Payment Date	Principal Payment
December 1, 2010	$	150,000
March 1, 2011	$	75,000
June 1, 2011	$	75,000
September 1, 2011	$	150,000
December 1, 2011	$	225,000
March 1, 2012	$	225,000
June 1, 2012	$	225,000
September 1, 2012	$	275,500

The interest rate on the Picometrix Notes was increased from prime plus 1% to prime plus 2% (5.25% at September 30, 2011), and interest is to be paid quarterly through the maturity date. The balance outstanding under the Picometrix Notes was $725,500 at September 30, 2011. The Company received Board approval to pay both the September 1, 2011 and December 1, 2011 principal payments on September 1, 2011. The Picometrix Notes are secured by all of the intellectual property of Picometrix.

Interest payments made to Related Parties during the three and six month periods ended September 30, 2011 were approximately $15,000 and $31,000, respectively. Interest payments made to Related Parties during the three and six month periods ended October 1, 2010 were approximately $15,000 and $30,000, respectively.

In conjunction with the Fifth Amendment to the Picometrix Notes, on November 15, 2010, the Company and the Note Holders entered into a security purchase agreement (the SPA), which was subsequently amended and restated on November 29, 2010, in its entirely to reflect certain structural changes in the transaction as originally agreed upon by the parties to the SPA. As amended and restated, the SPA provided for the Company to issue and sell to the Note Holders in exchange for an aggregate payment of $78,156 (the Purchase Price) the number of units of the Company’s securities (Units) determined by dividing the Purchase Price by the per share closing price of the Company’s Class A Common Stock on NYSE Amex on the day preceding the closing (the Formula Price). Each Unit was to consist of one share of Common Stock and a five-year warrant to purchase four shares of Class A Common Stock at an exercise price equal to 120% of the Formula Price (the 2010 Warrants). The closing of the purchase and sale transactions contemplated by the SPA was subject to the receipt of NYSE Amex approval of an additional listing application covering the Units (the Note Holder Additional Listing Application) and other closing conditions customary for transactions of this nature. On November 30, 2010, NYSE Amex approved the Note Holder Additional Listing Application and the parties to the SPA satisfied the other closing conditions. The Formula Price was determined to be $1.17 and accordingly, the Company issued the Note Holders 66,799 Units comprised of (i) 66,799 shares of Class A Common Stock and (ii) 2010 Warrants to purchase an aggregate of 267,196 shares of Class A Common Stock at an exercise price of $1.404 per share pursuant to separately executed warrant agreement (collectively, the Warrant Agreements) upon the closing of the SPA on November 30, 2010. While the exercise price of the 2010 Warrants is subject to adjustment as defined in the Warrant Agreement, such adjustment cannot reduce the exercise price below $1.17 per share.

The Company performed an assessment of the Fifth Amendment made to the Picometrix Notes and determined that the Fifth amendment constituted a “substantial modification” in accordance with FASB guidance as the present value of future cash flows under the terms of the Fifth Amendment, combined with the fair value of the consideration given as part of the SPA, was more than 10% different than the present value of cash flows under the prior amendment to the Picometrix Notes. As a result, the Company recorded a loss on debt extinguishment of $317,725 during the third quarter of fiscal 2011, which is equal to the $156,312 restructuring fee and the fair value of the warrants issued in conjunction with the SPA which was $161,413 at November 30, 2010. See Note 7 to the Consolidated Financial Statements for additional information on the Warrants.