Note

: Debt

Debt is comprised of the following (in thousands):

	3 /31/20 20		6/30/2019
Short-term and current maturities
Loan and Security Agreement (Bytewise)	$	-	$	1,765
Loan and Security Agreement (Term Loan)		327		-
Brazil Loans		2,559		2,300
		2,886		4,065
Long-term debt (net of current portion)
Loan and Security Agreement (Bytewise)		-		2,641
Loan and Security Agreement (Term Loan)		6,211		-
Loan and Security Agreement (Line of Credit)		19,400		14,900
		25,611		17,541
	$	28,497	$	21,606

December 31, 2019,

the Company entered into the Tenth Amendment of its Loan and Security Agreement (“Tenth Amendment”). Under the revised agreement, the credit limit for the Revolving Loan was increased from

$23.0

million to

$25.0

million. In addition, the Company entered into a new

$10.0

million

-year Term Loan with a fixed interest rate of

4.0%.

The new Term Loan will require interest only payments for

months and will convert to a term loan requiring both interest and principal payments commencing

January 1, 2021.

Also, under the Tenth Amendment, the credit limit for external borrowing was increased from

$2.5

million to

$5.0

million.

Total debt increased

$5.7

million and

$6.9

million during the

three

months and

nine

months ending

March 31, 2020.

During the

three

months ended

March 31, 2020

the Company “retired”

$3.5

million of the Bytewise term loan (

November, 2011)

using the proceeds from borrowing

$6.5

million on the Loan and Security Agreement Term Loan. The line of credit balance increased

$2.5

million and Brazil loans increased

$0.2

million.

The financial covenants under the new agreement are:

) a Fixed Charge Coverage Ratio must exceed

1:15.

The Fixed Charge Coverage Ratio is based upon EBITDA less dividends, unfunded Capital Expenditures, less required pension payments divided by the current portion of term loans, excluding, the Line of Credit and external debt; and

) maintain consolidated Cash and available Credit Line of

not

less than

$7.5

million on the closing date of any quarter. The Company was in compliance with the covenants of the new Tenth Amendment as of

March 31, 2020.

Although the Company has remained compliant with all debt covenants for the

nine

months period ending

March 31, 2020,

the challenges presented by a drop in Sales related to the COVID-

pandemic increase the risk to jeopardize covenant compliance in the

June

and

September

quarters ahead and potentially beyond that. As a result, the Company has made an official request of its lender, TD Bank, to waive its covenants, particularly the “Fixed Charge Coverage Ratio” covenant, for the next

two

quarters with an additional review after that period. TD Bank has acknowledged the receipt of that request and is taking it under consideration. The Company's goal is to work with its lender throughout the quarter to reach a solution before the end of

June

quarter.

The obligations under the Tenth Amendment are unsecured unless a triggering event occurs. A triggering event would be failure on a quarterly basis to meet the thresholds of the Fixed Charge Coverage Ratio described above.

Prior to the Tenth Amendment, the Line of Credit and a Term Loan (“Credit Facility”), was last amended in

January 2018.

Borrowings under the Line of Credit were

not

to exceed

$23.0

million. The Line of Credit had an interest rate of LIBOR plus

1.5%,

and was to expire on

April 30, 2021.

The Tenth Amendment moved the expiration date to

April 30, 2022.

The effective interest rate on the Line of Credit under the Loan and Security Agreement for the

three

months ended

March 31, 2020

and

2019

was

3.5%

and

3.9%,

respectively. As of

March 31, 2020,

$19.4

million was outstanding on the Line of Credit.

Availability under the Line of Credit remains subject to a borrowing base comprised of accounts receivable and inventory. The Company believes that the borrowing base will consistently produce availability under the Line of Credit of

$25.0

million. A

0.25%

commitment fee is charged on the unused portion of the Line of Credit.

The financial covenants of the previous Loan and Security Agreement “Credit Facility” were:

) funded debt to EBITDA, excluding non-cash and retirement benefit expenses (“maximum leverage”),

not

to exceed

2.25

1.00,

) annual capital expenditures

not

to exceed

$15.0

million,

) maintain a Debt Service Coverage Rate of a minimum of

1.25

1.00,

and

) maintain consolidated cash of

not

less than

$10.0

million at any time. As of

March 31, 2020,

the Company was in compliance with all the financial debt covenants related to its Loan and Security Agreement.

The obligations under the previous Credit Facility were unsecured. In the event of certain triggering events, such obligations would have become secured by the assets of the Company’s domestic subsidiaries. A triggering event would have occurred when the Company failed to achieve any of the financial covenants noted above in consecutive quarters.

November 22, 2011,

in conjunction with the Bytewise acquisition, the Company entered into a

$15.5

million term loan (the “Term Loan”) under the then existing Loan and Security Agreement. The Term Loan was a

ten

-year loan bearing a fixed interest rate of

4.5%

and was payable in fixed monthly payments of principal and interest of

$160,640.

The Term Loan had a balance of

$3.5

million at

December 31, 2019.

During the

three

months ended

March 31, 2020

the Company “retired”

$3.5

million of the Bytewise term loan.

December 2017,

the Company’s Brazilian subsidiary entered into

two

short-term loans with local banks in order to support the Company’s strategic initiatives. The loans backed by the entity’s US dollar denominated export receivables were made with Santander Bank and Bradesco Bank. In

February 2019,

the Company’s Brazilian subsidiary, again, began refinancing debt among Santander, Bradesco and Brazil Bank as follows as of

March 31, 2020 (

in thousands):

Lending Institution	Interest Rate			Beginning Date	Ending Date	Outstanding Balance

Brazil Bank		3.10	%	February 2020	February 2021	$	500
Brazil Bank		2.40	%	March 2020	February 2021		300
Bradesco		4.00	%	April 2019	April 2020		259
Brazil Bank		3.11	%	September 2019	September 2020		500
Brazil Bank		6.05	%	March 2020	February 2021		1,000
						$	2,559