RMG Networks Holding Corp - 10-K filing on 2016-03-10

Notes Payable and Debt Financing	12 Months Ended
Dec. 31, 2015
Debt Disclosure [Abstract]
Notes Payable	4. Notes Payable and Debt Financing Senior Credit Agreement On April 19, 2013, the Company entered into a Credit Agreement (the “Senior Credit Agreement”) by and among it and certain of its direct and indirect domestic subsidiaries party thereto from time to time (including RMG and Symon) as borrowers (the “Borrowers”), certain of its direct and indirect domestic subsidiaries party thereto from time to time as guarantors (the “Guarantors” and, together with the Borrowers, collectively, the “Loan Parties”, and the financial institutions from time to time party thereto as lenders (the “Senior Lenders”). The Senior Credit Agreement provided for a five-year $24,000 senior secured term loan facility (the “Senior Credit Facility”), which was funded in full on April 19, 2013. The Senior Credit Facility is guaranteed jointly and severally by the Guarantors, and was secured by a first-priority security interest in substantially all of the existing and future assets of the Loan Parties (the “Collateral”). The Senior Credit Facility bore interest at a rate per annum equal to the Base Rate plus 7.25% or the LIBOR Rate plus 8.5%, at the election of the Borrowers. If an event of default occurred and was continuing under the Senior Credit Agreement, the interest rate applicable to borrowings under the Senior Credit Agreement would automatically be increased by 2% per annum. The “Base Rate” and the “LIBOR Rate” were defined in a manner customary for credit facilities of this type. The LIBOR Rate was subject to a floor of 1.5%. On November 14, 2013, the Second Amendment to Credit Agreement was executed. The Second Amendment amended certain provisions of the Senior Credit Agreement and provided for a new $8,000 term loan facility (the “Term Loan Facility”). Pursuant to the terms of Second Amendment, the Term Loan Facility bore interest at a rate per annum equal to the Base Rate plus 6.25% or the LIBOR Rate plus 7.5%, at the election of the Borrowers. The Company was no longer required to make quarterly principal amortization payments, and the entire unpaid portion of the Term Loan Facility was due on the termination date (April 19, 2018). The Second Amendment also included, among other things, revisions to the financial covenants contained in the Senior Credit Agreement. Prior to the amendment, the Company’s former senior lender, Comvest Capital II, L.P., sold its interest in the Senior Credit Facility to a new lender group that included the Company’s Executive Chairman and the Company’s largest shareholder. After acquiring the Senior Credit Facility, the new lender group entered into a Third Amendment to the Credit Agreement and funded a $4,000 increase in the Senior Credit Facility. On July 16, 2014 the Company amended its Senior Credit Facility to increase the amount borrowed under the facility to $12,000, adding approximately $3,400 in net cash proceeds to its Balance Sheet. The amendment also eliminated financial covenants until at least mid-year 2015. The amended Senior Credit Facility, which was to mature in July 2017, accrued interest at a fixed rate of 12% and continued to defer principal payments until maturity. The balance was $14,000 at December 31, 2014 and an additional $1,000 was borrowed during the first quarter of 2015, all of which was converted to Series A Preferred Stock on March 26, 2015, as described in Note 9 Preferred Stock. Revolving Facility Effective November 2, 2015, the Company and certain of its subsidiaries (collectively, the “Borrowers”) entered into a loan and security agreement (the “Loan Agreement”) with Silicon Valley Bank (the “Bank”), pursuant to which the Bank agreed to make a revolving credit facility available to the Borrowers in the principal amount of up to $7.5 million (the “Revolving Facility”). The Revolving Facility has an effective date (the “Effective Date”) of October 13, 2015, and matures on October 13, 2017. Availability under the Revolving Facility is tied to a borrowing base formula. Interest on advances under the Revolving Facility (the “Advances”) will accrue on the unpaid principal balance of such Advances at a floating per annum rate equal to either 1.25% above the prime rate or 2.25% above the prime rate, depending on whether certain conditions are satisfied. During an event of default, the rate of interest would increase to 5% above the otherwise applicable rate, until such event of default is cured or waived. All accrued and unpaid interest is payable monthly on the last calendar day of each month. In connection with the closing of the Revolving Facility, the Borrowers paid the Bank a commitment fee of $38, and the Borrowers will be required to pay the Bank an additional commitment fee of $38 on the first anniversary of the Effective Date. If the Borrowers terminate the Loan Agreement prior to the first anniversary of the Effective Date, the Borrowers will be required to pay the Bank a termination fee equal to 1% of the Revolving Facility, unless the Revolving Facility is replaced with a new facility from the Bank. The Loan Agreement contains customary affirmative covenants regarding the operations of Borrowers’ business and customary negative covenants that, among other things, limit the ability of the Borrowers to incur additional indebtedness, grant certain liens, make certain investments, merge or consolidate, make certain restricted payments, including dividends, and engage in certain asset dispositions, including a sale of all or substantially all of their property. In addition, the Borrowers must maintain, on a consolidated basis, certain minimum amounts of adjusted EBITDA, as measured at the end of each month. The Loan Agreement contains customary events of default including, among others, Borrowers’ breach of payment obligations or covenants, defaults in payment of other outstanding debt, material misrepresentations, a material adverse change and bankruptcy and insolvency events of default. The Bank’s remedies upon the occurrence of an event of default include, among others, the right to accelerate the debt and the right to foreclose on the collateral securing the Revolving Facility. The Revolving Facility is secured by a first priority perfected security interest in substantially all of the assets of the Borrowers. The Company did not draw on the Revolving Facility at the closing of the Loan Agreement. At December 31, 2015 the Company had $400 in borrowings and $3,008 in unused availability under the Revolving Facility. Borrowings under the Revolving Facility are available for the Company’s working capital and general business requirements, as may be needed from time to time.

Notes Payable and Debt Financing

12 Months Ended

Dec. 31, 2015

4. Notes Payable and Debt Financing

Senior Credit Agreement

On April 19, 2013, the Company entered into a Credit Agreement (the “Senior Credit Agreement”) by and among it and certain of its direct and indirect domestic subsidiaries party thereto from time to time (including RMG and Symon) as borrowers (the “Borrowers”), certain of its direct and indirect domestic subsidiaries party thereto from time to time as guarantors (the “Guarantors” and, together with the Borrowers, collectively, the “Loan Parties”, and the financial institutions from time to time party thereto as lenders (the “Senior Lenders”).

The Senior Credit Agreement provided for a five-year $24,000 senior secured term loan facility (the “Senior Credit Facility”), which was funded in full on April 19, 2013. The Senior Credit Facility is guaranteed jointly and severally by the Guarantors, and was secured by a first-priority security interest in substantially all of the existing and future assets of the Loan Parties (the “Collateral”).

The Senior Credit Facility bore interest at a rate per annum equal to the Base Rate plus 7.25% or the LIBOR Rate plus 8.5%, at the election of the Borrowers. If an event of default occurred and was continuing under the Senior Credit Agreement, the interest rate applicable to borrowings under the Senior Credit Agreement would automatically be increased by 2% per annum. The “Base Rate” and the “LIBOR Rate” were defined in a manner customary for credit facilities of this type. The LIBOR Rate was subject to a floor of 1.5%.

On November 14, 2013, the Second Amendment to Credit Agreement was executed. The Second Amendment amended certain provisions of the Senior Credit Agreement and provided for a new $8,000 term loan facility (the “Term Loan Facility”). Pursuant to the terms of Second Amendment, the Term Loan Facility bore interest at a rate per annum equal to the Base Rate plus 6.25% or the LIBOR Rate plus 7.5%, at the election of the Borrowers. The Company was no longer required to make quarterly principal amortization payments, and the entire unpaid portion of the Term Loan Facility was due on the termination date (April 19, 2018). The Second Amendment also included, among other things, revisions to the financial covenants contained in the Senior Credit Agreement.

Prior to the amendment, the Company’s former senior lender, Comvest Capital II, L.P., sold its interest in the Senior Credit Facility to a new lender group that included the Company’s Executive Chairman and the Company’s largest shareholder. After acquiring the Senior Credit Facility, the new lender group entered into a Third Amendment to the Credit Agreement and funded a $4,000 increase in the Senior Credit Facility.

On July 16, 2014 the Company amended its Senior Credit Facility to increase the amount borrowed under the facility to $12,000, adding approximately $3,400 in net cash proceeds to its Balance Sheet. The amendment also eliminated financial covenants until at least mid-year 2015. The amended Senior Credit Facility, which was to mature in July 2017, accrued interest at a fixed rate of 12% and continued to defer principal payments until maturity.

The balance was $14,000 at December 31, 2014 and an additional $1,000 was borrowed during the first quarter of 2015, all of which was converted to Series A Preferred Stock on March 26, 2015, as described in Note 9 Preferred Stock.

Revolving Facility

Effective November 2, 2015, the Company and certain of its subsidiaries (collectively, the “Borrowers”) entered into a loan and security agreement (the “Loan Agreement”) with Silicon Valley Bank (the “Bank”), pursuant to which the Bank agreed to make a revolving credit facility available to the Borrowers in the principal amount of up to $7.5 million (the “Revolving Facility”). The Revolving Facility has an effective date (the “Effective Date”) of October 13, 2015, and matures on October 13, 2017. Availability under the Revolving Facility is tied to a borrowing base formula. Interest on advances under the Revolving Facility (the “Advances”) will accrue on the unpaid principal balance of such Advances at a floating per annum rate equal to either 1.25% above the prime rate or 2.25% above the prime rate, depending on whether certain conditions are satisfied. During an event of default, the rate of interest would increase to 5% above the otherwise applicable rate, until such event of default is cured or waived. All accrued and unpaid interest is payable monthly on the last calendar day of each month.

In connection with the closing of the Revolving Facility, the Borrowers paid the Bank a commitment fee of $38, and the Borrowers will be required to pay the Bank an additional commitment fee of $38 on the first anniversary of the Effective Date. If the Borrowers terminate the Loan Agreement prior to the first anniversary of the Effective Date, the Borrowers will be required to pay the Bank a termination fee equal to 1% of the Revolving Facility, unless the Revolving Facility is replaced with a new facility from the Bank.

The Loan Agreement contains customary affirmative covenants regarding the operations of Borrowers’ business and customary negative covenants that, among other things, limit the ability of the Borrowers to incur additional indebtedness, grant certain liens, make certain investments, merge or consolidate, make certain restricted payments, including dividends, and engage in certain asset dispositions, including a sale of all or substantially all of their property. In addition, the Borrowers must maintain, on a consolidated basis, certain minimum amounts of adjusted EBITDA, as measured at the end of each month.

The Loan Agreement contains customary events of default including, among others, Borrowers’ breach of payment obligations or covenants, defaults in payment of other outstanding debt, material misrepresentations, a material adverse change and bankruptcy and insolvency events of default. The Bank’s remedies upon the occurrence of an event of default include, among others, the right to accelerate the debt and the right to foreclose on the collateral securing the Revolving Facility. The Revolving Facility is secured by a first priority perfected security interest in substantially all of the assets of the Borrowers.

The Company did not draw on the Revolving Facility at the closing of the Loan Agreement. At December 31, 2015 the Company had $400 in borrowings and $3,008 in unused availability under the Revolving Facility. Borrowings under the Revolving Facility are available for the Company’s working capital and general business requirements, as may be needed from time to time.