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Loans Payable | 6 Months Ended
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Dec. 31, 2017
Debt Disclosure [Abstract] |
Loans Payable | 13. Loans Payable On December 21, 2016, we executed the Second Amended and Restated Loan and Security Agreement (the “Amended LSA”) with AvidBank for 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 us 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. On December 20, 2017, we 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 secured by permitted liens from $600,000 to $800,000 in the aggregate, and increased the aggregate amount we may maintain in accounts with foreign financial institutions to $1,000,000. On January 16, 2018, the maturity date on the Revolving Line was extended further to December 21, 2018, as disclosed in Note 16, Subsequent Event, to these unaudited Consolidated Financial Statements. The Term Loan 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, or 6.5% at December 31, 2017; 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, we must pay a prepayment fee in an amount equal to (i) 1% of the principal amount of the Term Loan if prepayment occurs on or prior to December 21, 2017, or (ii) 0.75% of the principal amount of the Term Loan if such prepayment occurs after December 21, 2017 but on or prior to December 21, 2018, or (iii) 0.50% of the principal amount of the Term Loan if such prepayment occurs after December 21, 2018 but on or prior to December 21, 2019, or (iv) 0.25% of the principal amount of the Term Loan if such prepayment occurs after December 21, 2019 but on or prior to December 21, 2020. 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. Amortization of approximately $7,700 is included in interest expense for the six months ended December 31, 2017. Pursuant to the Amended LSA, Avidbank will, in its discretion, 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 December 21, 2018, 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 period. As of December 31, 2017, there was no outstanding balance under the Revolving Line. Our obligations under the Amended LSA are collateralized by a first priority security interest (subject to permitted liens) in cash, U.S. inventory and accounts receivable. In addition, our wholly-owned subsidiary, Geltech, has guaranteed our 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. As of December 31, 2017, we were in compliance with all covenants. 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. On December 21, 2016, we 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 16, Subsequent Events, to these unaudited 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 will accrue 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 will accrue 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 (as discussed in Note 16, Subsequent Events, to these unaudited Consolidated Financial Statements), we paid interest semi-annually in arrears solely during the Initial Period. The Sellers Note was for a five-year term, and any unpaid interest and principal, together with any other amounts payable under the Sellers Note, would have been due and payable on December 21, 2021, the maturity date. We had right to prepay the Sellers Note in whole or in part without penalty or premium. If during the term of the Sellers Note, we did not pay any amount payable when due, whether at the maturity date, by acceleration, or otherwise, such overdue amount would have bore interest at a rate equal to twelve (12%) per annum from the date of such non-payment until such amount was paid in full. The Sellers Note was valued based on the present value of expected cash flows, using a risk-adjusted discount rate of 7.5%. 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 consolidated balance sheet. As of December 31, 2017 approximately $140,000 was added to the fair value premium and was amortized. As of December 31, 2017 the amount outstanding under the Sellers Note was $5.7 million, after applying the approximately $293,000 working capital adjustment, as discussed in Note 3, Acquisition of ISP Optics Corporation, to these unaudited Consolidated Financial Statements. There was no payment defaults or other events of defaults as of December 31, 2017, or 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:
|  |  |  |  |  |  | Sellers Note |  |  |  |  |  |  |  |  |
Year ending June 30, |  |  |  | Avidbank Note |  |  |  | Principal |  |  |  | Fair Value Adjustment |  |  |  | Unamortized Debt Costs |  |  |  | Total |
2018 |  |  |  | 555,500 |  |  |  |  |  |  |  | (6,648 | ) |  |  | (7,224 | ) |  |  | 541,629 |
2019 |  |  |  | 1,111,000 |  |  |  |  |  |  |  | 123,452 |  |  |  | (14,445 | ) |  |  | 1,220,007 |
2020 |  |  |  | 1,111,000 |  |  |  |  |  |  |  | 132,751 |  |  |  | (14,445 | ) |  |  | 1,229,306 |
2021 |  |  |  | 1,111,000 |  |  |  |  |  |  |  | 142,749 |  |  |  | (14,445 | ) |  |  | 1,239,304 |
2022 |  |  |  | 555,500 |  |  |  | 5,707,184 |  |  |  | 75,364 |  |  |  | (7,223 | ) |  |  | 6,330,825 |
Total payments |  |  | $ | 4,444,000 |  |  | $ | 5,707,184 |  |  | $ | 467,668 |  |  | $ | (57,782 | ) |  | $ | 10,561,071 |
Less current portion |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1,111,500 |
Non-current portion |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 9,449,571 |

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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