Note F - Debt |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Text Block] |
F. Debt
On May 18, 2026, we entered into a new domestic credit facility with Legacy Corporate Lending, LLC (“Legacy”). This new credit facility includes a new real estate term loan for $11.0 million and a working capital line of credit with a maximum borrowing capacity of $20.0 million subject to a borrowing-base calculation. The new credit facility is secured by all the assets of the Company, excluding NAIE's assets, and may be prepaid at any time. The new line of credit bears interest at a rate of 4.5% above the Term Secured Overnight Financing Rate (“Term SOFR”), while the real estate term loan was amortized over 15 years and initially bore interest at a fixed rate of 14.0% until such time as Legacy completed an appraisal and any necessary other documentation after which the interest rate reverted to 5.0% above . Effective July 14, 2026, NAI successfully completed the required appraisal and documentation thereby reducing the interest rate to 5% above Term SOFR. The credit facility also includes a 0.50% unused commitment fee and a one-time closing fee of 1.0% of the total committed credit amount. The term of this new credit facility is three years maturing on May 18, 2029. This credit facility contains covenants which restrict our ability to declare dividends to our shareholders and repurchase our common stock under the stock repurchase plan. The credit facility includes a fixed charge coverage ratio covenant requirement as defined in the Loan and Security Agreement that is based on only domestic operations and will first be measured for the nine months ending September 30, 2026. We anticipate we will not be able to comply with the covenant required under the Loan and Security Agreement as of September 30, 2026 due to one of our largest customer's material downward revisions to their forecast of projected orders and purchases from us during our fiscal year 2027 (Note O). We have informed Legacy of our pending non-compliance with the fixed charge coverage ratio, and there is no assurance that a waiver, amendment, or remedy will be available or what the difference in amount, cost or other factors may be.
On May 18, 2026, the new credit facility was used to extinguish all our prior indebtedness with Wells Fargo Bank and to repay $10.0 million on our prior line of credit and $8.7 million on our prior term loan thus releasing all our assets formally securing these debts.
As of June 30, 2026, we had $17.7 million available of the maximum borrowing capacity under the terms of our new credit line, of which we had outstanding borrowings of $7.7 million. We also owed $10.9 million on the new real estate term loan. As of June 30, 2025, we had $9.9 million available of the maximum borrowing capacity on our previous credit facility of which we had outstanding borrowings of $1.9 million. We also owed $8.9 million on the previous term loan. The future debt payments under the new term Note as of June 30, 2026 are as follows (in thousands):
For many years prior to our new credit facility with Legacy, we had a credit line with Wells Fargo Bank, N.A (“Wells Fargo”). The credit line had been amended, modified, and extended several times, most recently on June 20, 2025, when we entered into a Sixth Amendment to Credit Agreement. The Sixth Amendment waived all prior instances of non-compliance and preemptively waived anticipated non-compliance with covenants in the quarter ending June 30, 2025. With this amendment, the maximum borrowing limit was reduced to $10.0 million based on a borrowing base calculation and was secured by our accounts receivable and other rights to payment, general intangibles, inventory, equipment, and fixtures. Interest under this credit facility was equal to 3.25% above the applicable Secured Overnight Financing Rate (“SOFR”) and also included an unused commitment fee of 0.375%. We also had a Term Note with Wells Fargo that we entered into on August 16, 2021 to borrow part of the purchase price of our powder processing and warehouse property in Carlsbad, California. The Term Note had been secured by a first mortgage on that property. The Term Note was in the original principal amount of $10.0 million and was a -year note with payments fully amortized based on a twenty-five year assumed term. Amounts outstanding on this note during the term of the agreement bore interest at the rate of 1.8% above the SOFR rolling 30-day average. For the three and nine months ended March 31, 2026, we were not in compliance with the maximum net loss and fixed charge coverage ratio covenants of the Wells Fargo credit agreement.
We also have historically had a foreign currency hedging credit line with Wells Fargo to hedge foreign currency exposure up to 12 months in the future. As part of the above noted refinancing, Wells Fargo required us to extinguish and settle our remaining outstanding foreign currency hedge contracts. As a result, we net settled our remaining contracts as of May 11, 2026 resulting in a net settlement loss of $0.2 million, and we terminated our hedging line of credit with Wells Fargo. We are currently seeking a replacement hedging counterparty and are in discussions with several lenders.
On June 17, 2026, our subsidiary NAIE entered into a new Credit Agreement with UBS Switzerland AG (“UBS”). This new Credit Agreement is a line of credit with maximum borrowing capacity of CHF 2.0 million secured by NAIE’s accounts receivables. Variable rates of interest are determined by a currency-specific base rate plus a margin to be provided by UBS upon our request. As of June 30, 2026, NAIE was in compliance with the Credit Agreement. NAIE paid a one-time facility origination fee of CHF 15,000 to bind the Credit Agreement for an indefinite term. The Credit Agreement with UBS is filed as Exhibit 10.49 to this Annual Report on Form 10-K. |
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