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Note 4 - Credit Facility
12 Months Ended
Jun. 30, 2013
Debt Disclosure [Abstract]  
Debt Disclosure [Text Block]
Note 4 - Credit Facility

Our previous $35 million credit facility for borrowings and letters of credit was set to expire in August 2015 and bore interest at either the daily three-month LIBOR rate plus 3.75% or a fixed LIBOR rate for three months plus 3.75%.  The facility was amended various times in fiscal 2013 to waive our failure to satisfy a fixed charge coverage ratio covenant for certain months, eliminate the ratio covenant going forward, adjust the minimum excess availability requirement, extend the time period required to deliver certain post-close deliverables and title matters related to real property, to modify certain definitions used in the credit agreement, and to extend the deadline to pay the indebtedness in full or raise additional cash equity.  At June 30, 2013, we had outstanding letters of credit totaling $230,000 and $9.1 million outstanding borrowings under the facility.  In order to provide higher borrowing capacity so that we could fund our inventory purchases for holiday 2013, the facility was terminated on July 24, 2013 and all borrowings were paid and obligations were fulfilled.

Effective July 24, 2013, we along with our subsidiaries, (1) H. A. Sheldon Canada, Ltd. (“HA Sheldon”) and (2) TBAC Investment Trust, a Pennsylvania business trust (“TBAC Trust”), each as guarantors, entered into a new credit agreement (the “Credit Agreement”) with Salus Capital Partners, LLC, as lender, administrative agent and collateral agent (“Salus”).  The Credit Agreement provides for senior financing in an aggregate principal amount of up to $29.0 million at any one time outstanding.  The facility is comprised of a revolving credit facility in the amount of $27.5 million and a first-in, last-out term loan facility in the amount of $1.5 million, and expires in July 2015 (the “Credit Facility”).  Under the Credit Facility, borrowings bear interest at either 0.75% per annum or the rate per annum for LIBOR as published for an interest period of thirty days, plus (i) 8.50% with respect to the revolver, and (ii) 11.25% with respect to the term loan.

The Credit Facility is guaranteed by HA Sheldon and TBAC Trust and is secured by a first priority lien on substantially all of our assets, excluding certain goods and related accounts receivable financed pursuant to the King Trade Facility (see “King Trade Facility” below), for which Salus will have a second priority lien.  The Credit Facility contains covenants which establish minimum consolidated EBITDA requirements, account concentration limitations, budgeted expenses and accounts payable to inventory ratios.  The Credit Facility also permits Salus, as agent, to establish reserves with respect to inventory, availability, real estate and accounts receivable in determining the borrowing base under the Credit Agreement.  The borrowing base is generally determined by calculating (i) the cost of eligible finished goods inventory, net of reserves, multiplied by the product of the applicable appraisal percentage multiplied by the appraised value of eligible finished goods, plus (ii) the lesser of (a) the cost of eligible piece goods inventory, net of reserves, multiplied by the product of the applicable appraisal percentage multiplied by the appraised value of eligible piece goods inventory, or (b) the costs of eligible piece goods inventory, net of reserves, multiplied by the applicable advance rate , plus (iii) the applicable receivables advance rate multiplied by the face amount of eligible trade receivables, net of applicable reserves, plus (iv) the applicable real estate advance rate multiplied by the appraised value of eligible real estate.  The following amounts are then subtracted from that calculation: the reserve for the term loan, an availability block of $900,000, and the amount of any other availability reserves deemed applicable by the agent in certain circumstances.

The Credit Agreement contains customary representations and warranties and, pursuant to the Credit Agreement, we have agreed to certain customary affirmative covenants, including reporting requirements, insurance maintenance requirements, engagement of a financial advisor, compliance with laws and the maintenance of records.  The Credit Agreement provides for certain fees in connection with unused commitments and early termination of the agreement, as well as other fees.  The Credit Agreement also contains customary negative covenants which limit our ability to engage in certain actions without the lender’s consent, including creating additional liens on its properties, making certain investments, guaranteeing or incurring certain debt, repurchasing our common stock, entering into certain mergers or consolidations, paying dividends, making certain investments in other entities, prepaying debt, and making certain property transfers.  The Credit Agreement also provides for customary events of default.

Effective July 24, 2013, we also entered into a Master Agreement (“Master Agreement”) with EPK Financial Corporation, d/b/a King Trade Capital (“King Trade”) that provides for a purchase and sale facility (the “King Trade Facility”).  This facility provides us with additional financing to purchase certain inventory related to our holiday 2013 seasonal gifts business.

In order to receive financing under the King Trade Facility, we must present the transaction to King Trade for its consideration.  King Trade reserves the right to accept or reject proposed transactions.  The King Trade Facility is guaranteed by HA Sheldon and TBAC Trust and is secured by (i) a first priority lien on the goods and related accounts receivable financed by the Company under the King Trade Facility, and (ii) a second priority lien on substantially all of our other assets.

The Master Agreement contains representations and warranties and covenants that are customary for such financing arrangements.  The maximum aggregate amount permitted to be outstanding under the King Trade Facility is $11.5 million, unless King Trade otherwise agrees.  The amounts payable under the King Trade Facility bear interest at varying rates which depend primarily on the length of time such amounts are outstanding, the amount advanced for each transaction and the aggregate of all amounts advanced.

Interest expense includes interest incurred on our outstanding borrowings, amortization of costs incurred in connection with our credit facilities over the periods of the facilities (2013 - $389,000; 2012 - $196,000).  At June 30, 2013, the remaining debt costs to be amortized were $323,000.

In connection with our new facilities, we incurred $1.3 million in debt costs which will be amortized over the terms of each of the facilities.