AATI » Topics » 3. BORROWING ARRANGEMENTS AND NOTES PAYABLE

This excerpt taken from the AATI 10-K filed Mar 8, 2006.

3. BORROWING ARRANGEMENTS AND NOTES PAYABLE

Under the terms of the Company’s loan and security agreement with a primary bank in the United States, as amended, and restated agreement, the Company has access to a revolving line of credit of $20.0 million if the Company’s net cash, or the sum of cash and cash equivalents less indebtedness, is at least $40.0 million. This revolving line of credit will be reduced to $15.0 million if the Company’s net cash is between $30.0 million and $40.0 million. Under the terms of the agreement, the Company must maintain a net cash balance of at least $30.0 million. The annual interest rate on amounts borrowed under this line of credit will be the greater of either 5.75% or 0.25% over the bank’s prime rate. This line of credit will terminate in August 2006. In connection with the loan and security agreement, the Company provided the bank with a first priority security interest in substantially all of the Company’s assets, excluding intellectual property. To date, the Company has not borrowed any amounts under this loan and security agreement.

 

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Table of Contents

ADVANCED ANALOGIC TECHNOLOGIES INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years Ended December 31, 2005, 2004 and 2003

 

In February 2003, the Company issued a convertible promissory note in the aggregate principal amount of $2,013,734. The note had an interest rate of 6% per annum. The outstanding principal amount together with all accrued and unpaid interest was converted pursuant to its terms into fully paid and nonassessable shares of the Company’s Series E preferred stock at $2.40 per share in October 2003. In conjunction with the issuance of the note, the Company granted the note holder warrants to purchase 41,953 shares of Series E preferred stock at $2.40 per share. The Series E preferred stock warrants are exercisable at any time up to four years from the date of issuance. The fair value of the Series E preferred stock warrant was determined based on the Black-Scholes option pricing model using the following assumptions: an expected life equal to four years; 70% expected volatility; 2.35% risk-free interest rate and no dividend during the expected life. The fair value of the warrants, $54,228, was recorded as interest expense in fiscal 2003. The intrinsic value of the conversion option of the note, $52,806, was expensed to interest expense in 2003. The intrinsic value was computed based on the effective conversion price based on the proceeds received from the issuance of the convertible promissory note and warrant on a relative fair value basis.

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