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Credit Facility
12 Months Ended
Feb. 28, 2013
Credit facility [Abstract]  
Credit facility

4. Credit facility

The Company maintained agreements with FCC, LLC, d/b/a First Capital, and its subsidiary for a $10 million credit facility through December 11, 2012. The facility with First Capital consisted of a factoring arrangement for the Company’s receivables with an 80% advance rate up to $10 million of available credit and a secured credit line tied to the Company’s finished goods inventory of up to $3 million of available credit, subject to the overall credit limit of $10 million. The interest rate for advances against the facility was initially set at LIBOR plus 5.5%, subject to a LIBOR floor of 2.25%. The agreements also contained unused line fees, minimum factoring commissions, early termination fees and other customary terms and conditions. No amount was outstanding under this facility at February 29, 2012.

On December 11, 2012, the Company entered into an Amended and Restated Factoring and Security Agreement with First Capital which reduced the advance rate to seventy-five percent (75.0%) of the aggregate net invoice amount of domestic accounts receivable outstanding and limited advances to $3 million at any one time. No advances on foreign accounts were provided for under the Agreement. The Agreement also did not provide for advances on inventory. Fees under the Agreement consisted of a factoring commission equal to seven-tenths of one percent (0.70%) of the gross invoice amount of each account and a facility fee in the amount of two thousand dollars ($2,000) per month. The original term of the Agreement was two years but could be terminated by either party with 45 days notice and could be terminated immediately by First Capital in the event of a default, as defined in the Agreement.

On December 28, 2012, the Company terminated its Amended and Restated Factoring and Security Agreement First Capital and entered into a Financing Agreement (the “Rosenthal Agreement” or “Agreement”) with Rosenthal & Rosenthal, Inc. (“Rosenthal”).

The Rosenthal Agreement provides for advances of up to (i) seventy percent (70.0%) of the Net Amount of Eligible Receivables arising from sales made to customers located in the United States of America and Canada and (ii) 50% of the Net Amount of Eligible Receivables arising from sales made to customers outside the United States of America and Canada, provided that in the case of such sales are subject to a credit insurance policy, less any reserves as Rosenthal may deem, in its sole discretion, to be necessary from time to time.

Advances under the Rosenthal Agreement incur interest at the prime rate publicly announced in New York City by JPMorgan Chase Bank plus four percent. A minimum of $3,000 per month in interest will be paid according to the Agreement. A facility fee in the amount of 1% was paid to Rosenthal on the closing date and will be paid on each anniversary thereof. An administration fee of $1,000 per month is also payable during the Agreement.

The Rosenthal Agreement continues through November 30, 2015 and from year to year thereafter unless terminated by either party. The Company or Rosenthal can terminate the Agreement with at least 60 days, and not more than 120 days, written notice except in cases of a Default, at which time Rosenthal can terminate the Agreement at any time and the Company will pay to Rosenthal an amount equal to (a) three percent of the Maximum Credit Facility then in effect, if such termination occurs prior to the first anniversary of the Closing Date; (b) two percent of the Maximum Credit Facility then in effect, if such termination occurs on or after the first anniversary of the Closing Date but prior to the second anniversary of the Closing Date; and (c) one percent of the Maximum Credit Facility then in effect if such termination occurs on or after the second anniversary of the Closing Date.

No amount was owed to First Capital when the First Capital Agreement was terminated, and no termination fees were incurred as a result of the termination of the First Capital Agreement. Rosenthal advanced approximately $1.6 million to the Company subsequent to entering into the Agreement, which constituted the full amount of availability under the Agreement at that time.

At February 28, 2013, the Company had approximately $40 thousand of remaining availability on its credit facility in addition to the balance owed of approximately $371 thousand.