Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Term Loan

v3.20.4
Note 4 - Term Loan
9 Months Ended
Dec. 26, 2020
Notes to Financial Statements  
Long-term Debt [Text Block]
(
4
)
       Term Loan
 
On
April 27, 2017,
the Company entered into a
$1.5
million loan agreement with Partners For Growth (“PFG”), which was funded on
April 28, 2017 (
the “PFG Loan Agreement”). The PFG Loan Agreement originally provided for interest only payments during the term of the loan with principal and any accrued interest and fees due upon maturity, originally
April 27, 2019.
The PFG Loan Agreement bears interest at a fixed aggregate rate equal to
16%
per annum, of which
9.5%
per annum is payable monthly in cash and
6.5%
per annum is accrued monthly and due upon maturity. In addition, the Company agreed to pay PFG a cash fee of up to
$100,000
on maturity (the “back-end fee”),
$76,000
of which was earned on
April 27, 2017,
and
$24,000
of which was earned at the rate of
$1,000
per month on the
first
day of each month thereafter provided any amount of the loan principal was outstanding during any day of the prior month.
 
In
December 2018,
the Company and PFG agreed to modify the PFG Loan Agreement to extend the maturity date from
April 27, 2019
to
November 1, 2019,
to require the Company to pay all accrued interest on
May 1, 2019
and to require the Company to make monthly prepayments of principal of
$75,000
and accrued interest from
May 1, 2019
until maturity. The effectiveness of the modification was conditioned on the Company raising
$500,000
in additional equity capital. The Company satisfied this condition on
March 30, 2019.
 
On
March 11, 2019,
the Company and PFG agreed to further modify the PFG Loan Agreement to extend the maturity date to
March 1, 2020
and to add financial covenants requiring the Company to maintain a minimum tangible net worth and minimum revenues.
 
On
June 28, 2019,
the Company and PFG agreed to further modify the PFG Loan Agreement to adjust the financial covenants requiring the Company to maintain a minimum tangible net worth and minimum revenues. At
December 28, 2019,
the Company did
not
meet a covenant in the amended PFG Loan Agreement requiring the Company to achieve minimum cumulative revenues of
$11
million for the
first
three
quarters of its
2020
fiscal year, which constituted an event of default under the agreement. PFG waived this default on
January 31, 2020.
 
On
January 31, 2020,
the Company and PFG further amended the PFG Loan Agreement to, among other things, extend the maturity date from
March 1, 2020
to
March 1, 2021,
to require the Company make a single principal payments of
$75,000
on
February 1, 2020
and monthly principal payments of
$57,700
thereafter until maturity, and to modify and extend the minimum revenue financial covenant through the new maturity date. The PFG Loan Agreement continues to provide for an annual interest rate of
16%,
of which
9.5%
is payable monthly and
6.5%
is deferred until maturity or payoff. Based on the current payment schedule, the remaining balance at maturity would be less than
$200,000.
 
As of
December 26, 2020
and
March 28, 2020,
the Company's total outstanding loan balances were
$273,000
and
$792,300,
respectively, and are included in Loans payable, net of discounts and issuance costs on the Condensed Consolidated Balance Sheet.
 
At
December 26, 2020,
the Company did
not
meet a covenant in the amended PFG Loan Agreement requiring the Company to achieve minimum cumulative revenues of
$11
million for the
first
three
quarters of its
2021
fiscal year, which constituted an event of default under the agreement. PFG waived this default in
January 2021.