11.  Revolving Credit Facility

 

Former Credit Facility  The Company maintained two Credit and Security Agreements, as amended, with Wells Fargo, which provided the Company with a line of credit of up to $20.0 million in the aggregate. As of December 31, 2016 and March 31, 2017, $8.7 million and $11.5 million in borrowings were outstanding, respectively, under the former credit facility. Interest expense related to the former credit facility during the nine months ended December 31, 2017 was $0.2 million, which includes $0.1 million in amortization of deferred financing costs. Interest expense related to the former credit facility during the three months ended December 31, 2016 was $0.1 million, which includes $43,800 in amortization of deferred financing costs. Interest expense related to the former credit facility during the nine months ended December 31, 2016 was $0.4 million, which includes $0.1 million in amortization of deferred financing costs. The Company’s borrowing rate was 4.9% at March 31, 2017. Upon closing the Bridge Bank Credit Agreements with Bridge Bank the Company’s existing credit facilities with Wells Fargo were paid off in full.

New Credit Facility   On June 2, 2017, the Company entered into the Bridge Bank Credit Agreements with Western Alliance Bank through Bridge Bank, with credit support provided by the Export-Import Bank of the United States through its working capital guarantee program. Under the terms of the Bridge Bank Credit Agreements, the Company may borrow up to $12.0 million on a revolving basis depending on, among other factors, the amount of its eligible inventory and accounts receivable. The Bridge Bank Credit Agreements are for a two-year period ending June 2, 2019.

Total borrowings, letter of credit obligations and the then aggregate committed amount of cash management services under the Bridge Bank Credit Agreements may not exceed 85% of the sum of unrestricted cash and the amount of cash collateral held at Bridge Bank. As a condition of the Bridge Bank Credit Agreements, the Company has restricted $5.0 million of cash equivalents as additional security for the credit facility. Borrowings under the Bridge Bank Credit Agreements will bear per annum interest at the prime rate plus 1.5 percent, subject to increase during the occurrence of an event of default. Obligations under the Bridge Bank Credit Agreements are secured by all of the Company’s assets, including intellectual property and general intangibles. The Company has incurred $0.2 million in origination fees. These fees have been recorded under the caption “Prepaid expenses and other current assets” in the accompanying condensed consolidated balance sheets and amortized to interest expense through June 2019. As of December 31, 2017, $11.0 million in borrowings were outstanding and $1.0 million borrowings available under the new credit facility. Interest expense related to the new credit facility during the three months ended December 31, 2017 was $0.2 million, which includes $34,300 in amortization of deferred financing costs. Interest expense related to the new credit facility during the nine months ended December 31, 2017 was $0.3 million, which includes $0.1 million in amortization of deferred financing costs. The Company’s borrowing rate was 6.0% at December 31, 2017.

The Bridge Bank Credit Agreements include affirmative covenants as well as negative covenants that prohibit a variety of actions without Bridge Bank’s consent, including covenants that limit the Company’s ability to (a) incur or guarantee debt, (b) create liens, (c) enter into any merger, recapitalization or similar transaction or purchase all or substantially all of the assets or stock of another entity or (d) sell, assign, transfer or otherwise dispose of the Company’s assets. 

The financial covenants of the domestic credit agreement with Bridge Bank (the “Domestic Facility”), which is included in the Bridge Bank Credit Agreements, requires the Company not to exceed specified levels of losses relative to its financial model and the outstanding line of credit advances may not exceed 85% of the sum of unrestricted cash and the amount of cash collateral held at Bridge Bank. The Domestic Facility also defines an event of default to include a material adverse effect on the Company’s business. An event of default for this or any other reason, if not waived, could have a material adverse effect on the Company. As of December 31, 2017 we were in compliance with the covenants contained in the Bridge Bank Credit Agreements for Fiscal 2018.