Annual report pursuant to Section 13 and 15(d)

Note 7 - Accounts Receivable Line of Credit

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Note 7 - Accounts Receivable Line of Credit
12 Months Ended
Mar. 25, 2017
Notes to Financial Statements  
Debt Disclosure [Text Block]
7
Accounts Receivable Line of Credit
 
On
June 1, 2015,
the Company entered a
$2.5
million Revolving Accounts Receivable Line of Credit agreement with Bridge Bank. The credit facility agreement replaced the line of credit with Silicon Valley Bank which expired
April 15, 2015.
The agreement provides for a maximum borrowing capacity of
$2.5
million of which
$2.0
million is subject to a borrowing base calculation and
$500,000
is non-formula based.
 
The loan is secured by all assets of the Company including intellectual property and general intangibles and provides for a borrowing capacity equal to
80%
of eligible accounts receivable. The loan matured on
May 6, 2017
but was renewed through
May, 6, 2019 (
see Note
20,
Subsequent Event) and bears an interest rate equal to
1.5%
over the bank’s prime rate of interest (which was
3.75%
March 25, 2017
resulting in an interest rate of
5.25%
). Interest is payable monthly with principal due upon maturity. The Company paid a commitment fee of
$12,500.
The loan agreement contains financial and non-financial covenants that are customary for this type of lending and includes a covenant to maintain an asset coverage ratio of at least
135%
(defined as unrestricted cash and cash equivalents maintained with Bridge Bank, plus eligible accounts receivable aged less than
90
days from the invoice date, divided by the total amount of outstanding principal of all obligations under the loan agreement).
 
As of
March 25, 2017,
the Company was in compliance with all the financial covenants under the agreement. The line of credit requires a lockbox arrangement, which provides for receipts to be swept daily to reduce borrowings outstanding at the discretion of Bridge Bank. This arrangement, combined with the existence of the subjective acceleration clause in the line of credit agreement, necessitates the line of credit be classified as a current liability on the balance sheet. The acceleration clause allows for amounts due under the facility to become immediately due in the event of a material adverse change in the Company’s business condition (financial or otherwise), operations, properties or prospects, or ability to repay the credit based on the lender's judgment. As of
March 25, 2017,
the Company’s total outstanding borrowings and remaining borrowing capacity under the Bridge Bank line of credit were
$582,000
and
$234,000,
respectively.