11. LONG-TERM DEBT

6 Months Ended

Nov. 30, 2016

Long-term Debt, Unclassified [Abstract]

11. LONG-TERM DEBT

11. LONG-TERM DEBT

On April 10, 2015, the Company entered into a Convertible Note Purchase and Credit Facility Agreement (the “Purchase Agreement”) with QVT Fund LP and Quintessence Fund L.P. (the “Purchasers”) providing for (a) the Company’s sale to the Purchasers of $4,110,000 in aggregate principal amount of 9.0% Convertible Secured Notes due 2017 (the “Convertible Notes”) and (b) a secured revolving loan facility (the “Credit Facility”) in an aggregate principal amount of up to $2,000,000. On August 22, 2016 the Purchase Agreement was amended to extend the maturity date of the Convertible Notes to April 10, 2019, decrease the conversion price from $2.65 per share to $2.30 per share, decrease the forced conversion price from $7.50 per share to $6.51 per share, and allow for additional equity awards.

The Convertible Notes bear interest at an annual rate of 9.0% and will mature on April 10, 2019 unless repurchased or converted prior to that date. Interest is payable quarterly on March 1, June 1, September 1 and December 1 of each year. Debt issuance costs of $356,000, which are being accreted over the term of the original loan using the effective interest rate method, were offset against the loan balance. During the three and six months ended November 30, 2016, $44,000 and $89,000, respectively, of amortization costs were recognized as interest expense. Unamortized debt issuance costs of $59,000 were offset against the loan balance at November 30, 2016.

The conversion price for the Convertible Notes is $2.30 per share of the Company’s common stock and is subject to adjustment upon the occurrence of certain specified events. Holders may convert all or any part of the principal amount of their Convertible Notes in integrals of $10,000 at any time prior to the maturity date. Upon conversion, the Company will deliver shares of its common stock to the holder of Convertible Notes electing such conversion. The Company may not redeem the Convertible Notes prior to maturity.

On April 14, 2016, $900,000 drawn against the Credit Facility was converted to Convertible Notes. On July 17, 2016, $1,100,000 drawn against the Credit Facility was converted to Convertible Notes. At November 30, 2016 there was no remaining balance available on the Credit Facility.

The Company’s obligations under the Purchase Agreement are secured by substantially all of the assets of the Company.

Long-term debt, net of debt issuance costs (in thousands):

	November 30,			May 31,
	2016			2016
Principal	$	6,110		$	6,110
Unamortized debt issuance costs		(59	)		(148	)
	$	6,051		$	5,962