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Loans Payable | 12 Months Ended
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Jun. 30, 2018
Debt Disclosure [Abstract] |
Loans Payable | Avidbank Note Amended LSA and Term Loan On December 21, 2016, the Company executed the Second Amended and Restated Loan and Security Agreement (the “Amended LSA”) with Avidbank for the acquisition term loan (the “Term Loan”) in the aggregate principal amount of $5 million and a working capital revolving line of credit (the “Revolving Line”). The Amended LSA amends and restates that certain Loan and Security Agreement between Avidbank and the Company dated September 30, 2013, as amended and restated pursuant to that certain Amended and Restated Loan and Security Agreement dated as of December 23, 2014, and as further amended pursuant to that certain First Amendment to Amended and Restated Loan and Security Agreement dated as of December 23, 2015. The Term Loan, which was paid in full on January 16, 2018, pursuant to the Second Amendment, as defined below, was for a five-year term. Pursuant to the Amended LSA, interest on the Term Loan began accruing on December 21, 2016 and was paid monthly for the first six months of the term of the Term Loan. Thereafter, both principal and interest was due and payable in fifty-four (54) monthly installments. The Term Loan bore interest at a per annum rate equal to two percent (2.0%) above the Prime Rate; provided, however, that at no time was the applicable rate permitted to be less than five and one-half percent (5.50%) per annum. Prepayment was permitted; however, in order to prepay the Term Loan, certain prepayment fees applied. Pursuant to the Amended LSA, Avidbank agreed, in its discretion, to make loan advances under the Revolving Line to us up to a maximum aggregate principal amount outstanding not to exceed the lesser of (i) One Million Dollars ($1,000,000) or (ii) eighty percent (80%) (the “Maximum Advance Rate”) of the aggregate balance of our eligible accounts receivable, as determined by Avidbank in accordance with the Amended LSA. Upon the occurrence and during the continuance of an event of default, Avidbank may, in its discretion, cease making advances and terminate the Amended LSA; provided, that at the time of termination, no obligations remain outstanding and Avidbank has no obligation to make advances under the Amended LSA. Avidbank also has the discretion to determine that certain accounts are not eligible accounts. Amounts borrowed under the Revolving Line may be repaid and re-borrowed at any time prior to the maturity date, at which time all amounts shall be immediately due and payable. The advances under the Revolving Line bear interest, on the outstanding daily balance, at a per annum rate equal to one percent (1%) above the Prime Rate; provided, however, that at no time shall the applicable rate be less than four and one-half percent (4.5%) per annum. Interest payments are due and payable on the last business day of each month. Payments received with respect to accounts upon which advances are made will be applied to the amounts outstanding under the Amended LSA. There were no borrowings under the Revolving Line during the fiscal years ended June 30, 2018 and 2017. As of June 30, 2018 and 2017, there was no outstanding balance under the Revolving Line. The Company’s obligations under the Amended LSA are collateralized by a first priority security interest (subject to permitted liens) in cash, U.S. inventory, accounts receivable, inventory and equipment. In addition, the Company’s wholly-owned subsidiary, Geltech, has guaranteed its obligations under the Amended LSA. The Amended LSA contains customary covenants, including, but not limited to: (i) limitations on the disposition of property; (ii) limitations on changing our business or permitting a change in control; (iii) limitations on additional indebtedness or encumbrances; (iv) restrictions on distributions; and (v) limitations on certain investments. Additionally, the Amended LSA requires us to maintain a fixed charge coverage ratio (as defined in the Amended LSA) of at least 1.15 to 1.00 and an asset coverage ratio (as defined in the Amended LSA) of at least 1.50 to 1.00. The fixed charge coverage ratio was amended for the quarters ended March 31, 2018 and June 30, 2018, pursuant to the Third Amendment, as defined below. As of June 30, 2018, we were not in compliance with the fixed charge coverage ratio; however, Avidbank provided a waiver of compliance pursuant to that certain Fourth Amendment to the Amended LSA, dated September 7, 2018, entered into between us and Avidbank (the “Fourth Amendment”), as discussed below. Late payments are subject to a late fee equal to the lesser of five percent (5%) of the unpaid amount or the maximum amount permitted to be charged under applicable law. Amounts outstanding during an event of default accrue interest at a rate of five percent (5%) above the interest rate applicable immediately prior to the occurrence of the event of default. The Amended LSA contains other customary provisions with respect to events of default, expense reimbursement, and confidentiality. First Amendment to the Amended LSA On December 20, 2017, the Company executed the First Amendment to the Amended LSA (the “First Amendment”). The First Amendment amended, among other items, the maturity date of the Revolving Line from December 21, 2017 to March 21, 2018, increased the maximum amount of indebtedness collateralized by permitted liens from $600,000 to $800,000 in the aggregate, and increased the aggregate amount the Company may maintain in accounts with financial institutions in Riga, Latvia from $500,000 to $1,000,000. The maturity date of the Revolving Line was extended to December 21, 2018, pursuant to the Second Amendment (as defined below). Second Amendment to the Amended LSA On January 16, 2018, the Company entered into a Second Amendment to the Amended LSA (the “Second Amendment”) relating to the Term Loan. Pursuant to the Second Amendment, Avidbank paid a single cash advance to the Company in an original principal amount of $7,294,000 (the “Term II Loan”). The proceeds of the Term II Loan were used to repay all amounts owing with respect to the Term Loan, which was approximately $4.4 million, with the remaining $2.9 million in proceeds used to repay the amounts owing under the Sellers Note. As of January 16, 2018, the Term Loan was deemed satisfied in full and terminated. The Term II Loan is for a five-year term. Pursuant to the Second Amendment, interest on the Term II Loan accrues starting on January 16, 2018 and both principal and interest is due and payable in sixty (60) monthly installments beginning on the tenth day of the first month following the date of the Second Amendment (or February 10, 2018), and continuing on the same day of each month thereafter for so long as the Term II Loan is outstanding. The Term II Loan bears interest at a per annum rate equal to two percent (2.0%) above the Prime Rate, or 7.0% as of June 30, 2018; provided, however, that at no time shall the applicable rate be less than five-and-one-half percent (5.50%) per annum. Prepayment by the Company is permitted; however, the Company must pay a prepayment fee in an amount equal to (i) 0.75% of the Excess Prepayment Amount if prepayment occurs on or prior to January 16, 2019, or (ii) 0.5% of the Excess Prepayment Amount if prepayment occurs after January 16, 2019 but on or before January 16, 2020, or (iii) 0.25% of the Excess Prepayment Amount if prepayment occurs after January 16, 2020 but on or prior to January 16, 2021, or (iv) 0.10% of the Excess Prepayment Amount if such prepayment occurs after January 16, 2021 but on or prior to January 16, 2022. For purposes of the Second Amendment, the “Excess Prepayment Amount” equals the amount of the Term II Loan being prepaid in excess of $2,850,000. The Second Amendment amended, among other items, (1) certain definitions related to the fixed charge coverage ratio, and (2) the maturity date of the Revolving Line from March 21, 2018 to December 21, 2018. Costs incurred of approximately $72,000 were recorded as a discount on debt and will be amortized over the five-year term of the Term Loan. Additional costs of approximately $60,000 were incurred in conjunction with the Second Amendment and were also recorded as a discount on debt, and the combined costs will be amortized over the five-year term of the Term II Loan. Amortization of approximately $19,700 and $7,700 is included in interest expense for the years ended June 30, 2018 and 2017, respectively. Third Amendment to the Amended LSA On May 11, 2018, the Company and Avidbank entered into the Third Amendment to the Amended LSA (“the Third Amendment”). The Third Amendment (i) amends the definition of “Permitted Indebtedness” and (ii) amends Section 6.8(a) of the Amended LSA to require that the Company, and each of its domestic subsidiaries, maintain all of its domestic depository and operating accounts with Avidbank beginning on June 1, 2018 and to prohibit the Company from maintaining a domestic account balance outside of Avidbank that exceeds Ten Thousand Dollars ($10,000) during the transition period. The Third Amendment also amends Section 6.9(a) of the Amended LSA to require that the Company maintain a fixed charge coverage ratio, as measured on June 30, 2018, of at least 1.10 to 1.00, and thereafter, beginning with the quarter ending on September 30, 2018, to maintain a fixed charge coverage ratio of at least 1.15 to 1.00. Additionally, pursuant to the Third Amendment, Avidbank granted the Company a waiver of default arising prior to the Third Amendment from its failure to comply with the fixed charge coverage ratio measured on March 31, 2018. Fourth Amendment to the Amended LSA On September 7, 2018, the Company entered into the Fourth Amendment. Pursuant to the Fourth Amendment, Avidbank granted the Company a waiver of default arising prior to the Fourth Amendment from its failure to comply with the fixed charge coverage ratio covenant measured on June 30, 2018. Based on the waiver, the Company is no longer in default on the Term II Loan or Revolving Line. The Fourth Amendment also provides for the restriction of $1 million of the Company’s cash, which will be released upon two consecutive quarters of compliance with the fixed charge coverage ratio covenant, and so long as no event of default has occurred that is continuing on that date. The Fourth Amendment also provides that during the restrictive period, the calculation of the fixed charge coverage ratio will be determined as if the outstanding principal amount of the Term II Loan is $1,000,000 less than the actual outstanding principal amount of the Term II Loan. As a result, the Term II Loan is classified in the Consolidated Balance Sheets according to the original minimum maturity schedule. Sellers Note On December 21, 2016, the Company also entered into the Sellers Note in the aggregate principal amount of $6 million. The Sellers Note was fully satisfied on January 16, 2018, as discussed in Note 19, Note Satisfaction and Securities Purchase Agreement, to these Consolidated Financial Statements. Pursuant to the Sellers Note, during the period commencing on December 21, 2016 (the “Issue Date”) and continuing until the fifteen-month anniversary of the Issue Date (the “Initial Period”), interest accrued on only the principal amount of the Sellers Note in excess of $2.7 million at an interest rate equal to ten percent (10%) per annum. After the Initial Period, interest would have accrued on the entire unpaid principal amount of the Sellers Note from time to time outstanding, at an interest rate equal to ten percent (10%) per annum. Given that the Sellers Note was satisfied in full in January 2018, the Company paid interest semi-annually in arrears solely during the Initial Period. The Sellers Note originally had a five-year term. The Company had the right to prepay the Sellers Note in whole or in part without penalty or premium. The Sellers Note was valued based on the present value of expected cash flows. The fair value of the Sellers Note was determined to be approximately $6,327,200 based on the present value of expected future cash flows, using a risk-adjusted discount rate of 7.5%. The Sellers Note is included in loans payable, less current portion on the accompanying Consolidated Balance Sheet as of June 30, 2017. As of January 16, 2018, the date the note was satisfied in full, the fair value adjustment liability was approximately $467,000. Upon satisfaction of the note, this amount was reduced to zero and the resulting gain in extinguishment of debt is in the accompanying Consolidated Statements of Comprehensive Income in the line item entitled “Interest expense, net.” There were no payment defaults or other events of default prior to the Sellers Note being paid in full on January 16, 2018. If a payment default, or any other “event of default,” such as a bankruptcy event or a change of control of the Company had occurred, the entire unpaid and outstanding principal balance of the Sellers Note, together with all accrued and unpaid interest and any and all other amounts payable under the Sellers Note, would have been immediately be due and payable. Future maturities of loans payable are as follows:
|  | Avidbank Note |  |  | Unamortized Debt Costs |  |  | Total |
Year ending June 30, |  |  |  |  |  |  |  |  |
2019 |  | $ | 1,458,800 |  |  | $ | (22,924 | ) |  | $ | 1,435,876 |
2020 |  |  | 1,458,800 |  |  |  | (22,924 | ) |  |  | 1,435,876 |
2021 |  |  | 1,458,800 |  |  |  | (22,924 | ) |  |  | 1,435,876 |
2022 |  |  | 1,458,800 |  |  |  | (22,924 | ) |  |  | 1,435,876 |
2023 |  |  | 850,967 |  |  |  | (15,875 | ) |  |  | 835,092 |
Total payments |  | $ | 6,686,167 |  |  | $ | (107,571 | ) |  | $ | 6,578,596 |
Less current portion |  |  |  |  |  |  |  |  |  |  | (1,458,800 | )
Non-current portion |  |  |  |  |  |  |  |  |  | $ | 5,119,796 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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