RMG Networks Holding Corp - 10-Q filing on 2016-11-03

Revolving Facility	9 Months Ended
Sep. 30, 2016
Debt Disclosure [Abstract]
Debt Disclosure [Text Block]	2. 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”) originally accrued 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 thousand, and the Borrowers will be required to pay the Bank an additional commitment fee of $38 thousand 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. On March 9, 2016, a Second Amendment to the Loan Agreement was executed which modified, effective February 2016, the minimum amounts of adjusted EBITDA that the Borrowers are required to maintain pursuant to a covenant contained in the Loan Agreement. On September 30, 2016, a Third Amendment to the Loan Agreement was executed which modified, effective September 2016, the minimum amounts of adjusted EBITDA that the Borrowers are required to maintain pursuant to a covenant contained in the Loan Agreement, increased the floating per annum rate equal to either 1.75% above the prime rate or 2.75% above the prime rate, depending on whether certain conditions are satisfied, and provides that the minimum EBITDA covenant levels for January 2017 and thereafter are to be determined in the future. 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. 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 had no incremental borrowings against the Revolving Facility during the three months ended September 30, 2016. At September 30, 2016, the Company had $1.1 million in borrowings and $2.4 million in unused availability under the Revolving Facility. At December 31, 2015, the Company had $0.4 million in borrowings and $3.0 million 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.

Revolving Facility

9 Months Ended

Sep. 30, 2016

2. 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”) originally accrued 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 thousand, and the Borrowers will be required to pay the Bank an additional commitment fee of $38 thousand 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. On March 9, 2016, a Second Amendment to the Loan Agreement was executed which modified, effective February 2016, the minimum amounts of adjusted EBITDA that the Borrowers are required to maintain pursuant to a covenant contained in the Loan Agreement. On September 30, 2016, a Third Amendment to the Loan Agreement was executed which modified, effective September 2016, the minimum amounts of adjusted EBITDA that the Borrowers are required to maintain pursuant to a covenant contained in the Loan Agreement, increased the floating per annum rate equal to either 1.75% above the prime rate or 2.75% above the prime rate, depending on whether certain conditions are satisfied, and provides that the minimum EBITDA covenant levels for January 2017 and thereafter are to be determined in the future.

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. 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 had no incremental borrowings against the Revolving Facility during the three months ended September 30, 2016. At September 30, 2016, the Company had $1.1 million in borrowings and $2.4 million in unused availability under the Revolving Facility. At December 31, 2015, the Company had $0.4 million in borrowings and $3.0 million 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.