Note F - Debt

12 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Debt Disclosure [Text Block]

F. Debt

On

May 24, 2021,

we entered into a new credit facility with Wells Fargo Bank, N.A. to extend the maturity for our working line of credit from

November 1, 2022,

to

May 24, 2024.

This new credit facility provides total lending capacity of up to

$20.0

million and allows us to use the credit facility for working capital as well as potential acquisitions.

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 (iii) net income after taxes

not

less than

$1.00,

determined on a trailing

four

quarter basis with

no

two

consecutive quarterly losses, determined as of each quarter end. The credit agreement also includes a limitation on the amount of capital expenditures that can be made in a given fiscal year, with such limitation set at

$10.0

million for our fiscal year ending

June 30, 2022

and

$7.5

million for all fiscal years thereafter 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. There is an unused commitment fee of

0.125%

required as part of this new credit facility.

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.

On

June 30, 2021,

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

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

$10.0

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

June 30, 2020.

During

February 2021

we fully repaid the entire balance of our

$10.0

million credit line with Wells Fargo, bringing our debt under the line to zero. As of

June 30, 2021,

we had the full

$20.0

million available for borrowing under our credit facility with Wells Fargo Bank.