Note F - Debt

3 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

F

. Debt

On

July 1, 2019,

we executed an amendment to our credit facility with Wells Fargo Bank, N.A. to extend the maturity date for our working line of credit from

February 1, 2021,

to

November 1, 2022.

The Credit Agreement provides us with a credit line of up to

$10.0

million. The line of credit

may

be used to finance working capital requirements. There was

no

commitment fee required as part of this amendment.

Under the terms of the Credit Agreement, borrowings are subject to eligibility requirements including maintaining (i) a ratio of total liabilities to tangible net worth of

not

greater than

1.25

to

1.0

at any time; and (ii) a ratio of total current assets to total current liabilities of

not

less than

1.75

to

1.0

at each fiscal quarter end. Any amounts outstanding under the line of credit will bear interest at a fixed or fluctuating interest rate as elected by us from time to time; provided, however, that if the outstanding principal amount is less than

$100,000

such amount shall bear interest at the then applicable fluctuating rate of interest. If elected, the fluctuating rate per annum would be equal to

1.25%

above the daily

one

month LIBOR rate as in effect from time to time. If a fixed rate is elected, it would equal a per annum rate of

1.25%

above the LIBOR rate in effect on the

first

day of the applicable fixed rate term. Any amounts outstanding under the line of credit must be paid in full on or before the maturity date. Amounts outstanding that are subject to a fluctuating interest rate

may

be prepaid at any time without penalty. Amounts outstanding that are subject to a fixed interest rate

may

be prepaid at any time in minimum amounts of

$100,000,

subject to a prepayment fee equal to the sum of the discounted monthly differences between payment under a fixed rate versus payment under the variable rate for each month from the month of prepayment through the month in which the then applicable fixed rate term matures. On

September 30, 2020,

we were in compliance with all of the financial and other covenants required under the Credit Agreement.

Our obligations under the Credit Agreement are secured by our accounts receivable and other rights to payment, general intangibles, inventory, equipment and fixtures. We also have credit approval with Wells Fargo Bank, N.A. which allows us to hedge foreign currency exposures up to

30

months in the future. We also have credit approval with Bank of America which allows us to hedge foreign currency exposures up to

24

months in the future.

In light of the global economic uncertainty related to COVID-

19

and as a preventative measure to provide our business with potentially necessary liquidity, and out of an abundance of caution, we withdrew

$10

million from our credit facility with Wells Fargo during the fiscal year ended

June 30, 2020.

While we have

not

yet experienced any significant negative effects related to COVID-

19

and notwithstanding our belief that our cash position and working capital excluding this

$10.0

million borrowing is sufficient to support our ongoing operations, we deemed it prudent to borrow against our line of credit to ensure that such funds would be available to us if and when we need them. As of

September 30, 2020,

we did

not

have any remaining availability under our credit facilities.