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Loans Payable | 9 Months Ended
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Mar. 31, 2018
Debt Disclosure [Abstract] |
Loans Payable | AvidBank Note Amended LSA and Term Loan 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. 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, in order to prepay the Term Loan, certain prepayment fees applied. Pursuant to the Amended LSA, Avid Bank 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 March 31, 2018, 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 March 31, 2018, we were not in compliance with the fixed charge coverage ratio; however, AvidBank provided a waiver of compliance pursuant to that certain Third Amendment to the Amended LSA, dated May 11, 2018, entered into between us and AvidBank (the "Third 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, 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 20, 2017 to March 21, 2018, increased the maximum amoutn 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 financial institutions in Riga, Latvia to $1,000,000. Second Amendment to the Amended LSA and Term II Loan On January 16, 2018, we 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 us 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, with the remainder 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; provided, however, that at no time shall the applicable rate be less than five-and-one-half percent (5.50%) per annum. Prepayment by us is permitted; however, we 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 $13,700 is included in interest expense for the nine months ended March 31, 2018. Third Amendment to the Amended LSA Subsequent to the quarter ending March 31, 2018, we entered into 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 we, and each of our domestic subsidiaries, maintain all of our domestic depository and operating accounts with AvidBank begining on June 1, 2018 and to prohibit us 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 we maintain a fixed charge coverage ratio, as measured on the June 30, 2018, of at least 1.10 to 1.00, and thereafter, begining with the quarter ending on September 30, 2018, to maintian a fixed charge coverage ratio of at least 1.15 to 1.00. Additionally, pursuant to the Third Amendment, AvidBank granted us a waiver of default arising prior to the Third Amendment from our failure to comply with the fixed charge coverage ratio measured on March 31, 2018. Based on the waiver, we are no longer in default of the Term II Loan or Revolving Line. Sellers Note 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 14, Note Satisfaction and Securities Purchase Agreement, 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 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, we paid interest semi-annually in arrears solely during the Initial Period. The Sellers Note originally had a five-year term. We 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 acconmpanying unaudited Consolidated Balance Sheet. 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 Sellers Note, this amount was reduced to zero and the resulting gain is in the accompanying unaudited Consolidated Statements of Comprehensive Income in the line item entitled “Interest expense – debt costs.” 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, |  |  |  |  |  |  |  |  |
2018 |  | $ | 364,700 |  |  | $ | (5,627 | ) |  | $ | 359,073 |
2019 |  |  | 1,458,800 |  |  |  | (22,500 | ) |  |  | 1,436,300 |
2020 |  |  | 1,458,800 |  |  |  | (22,500 | ) |  |  | 1,436,300 |
2021 |  |  | 1,458,800 |  |  |  | (22,500 | ) |  |  | 1,436,300 |
2022 |  |  | 1,458,800 |  |  |  | (22,500 | ) |  |  | 1,436,300 |
2023 |  |  | 850,967 |  |  |  | (16,875 | ) |  |  | 834,092 |
Total payments |  | $ | 7,050,867 |  |  | $ | (112,502 | ) |  | $ | 6,938,365 |
Less current portion |  |  | (1,458,800 | ) |  |  |  |  |  |  |  |
Non-current portion |  | $ | 5,479,565 |  |  |  |  |  |  |  |  |

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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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