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Loans Payable | 3 Months Ended
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Sep. 30, 2025
Loans Payable |
Loans Payable | 13. Loans Payable As of September 30, 2025, loans payable consisted of two equipment loans and the Acquisition Notes, as defined in Note 3, Acquisition of G5 Infrared. Acquisition Notes On February 18, 2025, in connection with the acquisition of G5 Infrared, we executed and delivered the Acquisition Notes, effective as of the G5 Acquisition Date. The Acquisition Notes accrue interest at the rate between 10-12% per annum (12% as of September 30, 2025), based on the ratio of indebtedness to EBITDA of the Company, unless an event of default (as defined in the Acquisition Notes) occurs, at which time the Acquisition Notes would accrue interest at 15% per annum. We determined the embedded features related to the payment of variable interest and upon an event of default are clearly and closely related to the Acquisition Notes, and are therefore not bifurcated from the Acquisition Notes. At September 30, 2025, the net carrying value of the convertible promissory notes is $4.7 million, including unamortized debt discount and issuance costs of $0.5 million, and had an effective interest rate of 5.7%. The estimated fair value (Level 3) of the convertible promissory notes approximates its book value as of September 30, 2025. The Acquisition Notes will mature on February 18, 2027, the second anniversary of the issuance date. The Acquisition Notes will automatically convert into shares of Series G Convertible Preferred Stock, which are in turn convertible into shares of Class A Common Stock (as converted, the “Conversion Shares”), if the EBITDA reported by the Company for the calendar year ending December 31, 2025, is less than approximately $4.9 million (the “Automatic Note Conversion”). We determined that the Automatic Note Conversion did not require bifurcation from the Acquisition Notes as the Automatic Note Conversion is (i) indexed to the Company’s own stock, (ii) settled in shares instead of cash, and (iii) only exercisable into a fixed number of shares at a fixed exercise price of $1,000 per share once it is triggered to convert and the conversion price can only be adjusted for standard antidilution provisions. All or part of the Acquisition Notes may, unless converted under the Automatic Note Conversion, be redeemed by the Company prior to the maturity date at a redemption price equal to the portion of principal so redeemed plus all accrued and unpaid interest thereon, provided that if the funds used for redemption were not generated internally by Company operations, the redemption amount will be multiplied by 102%. In addition, following an event of default or upon a change of control, the purchaser may require the Company to redeem all or any portion of the Acquisition Notes. Notwithstanding anything to the contrary, upon any bankruptcy event of default, the Company will immediately pay the holder an amount in cash representing all outstanding principal and accrued and unpaid interest. The Company determined that these redemption features did not require bifurcation from the Acquisition Notes as these are clearly and closely related to the Acquisition Notes. The Acquisition Notes include customary affirmative and negative covenants and events of default. Additionally, the Acquisition Notes include financial covenants requiring the Company to maintain a Total Leverage Ratio (as defined in the Acquisition Notes) of not greater than 4.00:1:00 and a Fixed Charge Covered Ratio (as defined in the Acquisition Notes) of greater than 1.20:1.00 for each fiscal quarter beginning with the fiscal quarter ending December 31, 2025. Bridge Promissory Note On August 6, 2024, we entered into the Bridge Note with Lytton-Kambara Foundation (the “Lender” and also the “Class A Purchaser”) pursuant to which the Lender extended a loan to the Company in the principal amount of $3.0 million (the “Loan”). The Loan is subject to an original issue discount of 7%. After deducting the original issue discount, fees paid to our placement agent, and certain expenses, the Company received net proceeds of $2.7 million. The Bridge Note was unsecured, bore interest at the rate of 12.5% per annum and had a 1-year term, maturing on August 6, 2025, at which time the entire principal amount of the Bridge Note and all accrued but unpaid interest would have been due and payable in full. The Bridge Note and related accrued interest were settled on February 18, 2025, in conjunction with financing for the acquisition of G5 Infrared. Equipment Loans In December 2020, ISP Latvia received an equipment loan from a third party (the “2020 Equipment Loan”), which party is also a significant customer. The 2020 Equipment Loan was collateralized by certain equipment. The initial advance under the 2020 Equipment Loan was 225,000 EUR (or approximately USD $0.3 million), payable in equal installments over 60 months, the proceeds of which were used to make a prepayment to a vendor for equipment to be delivered at a future date. An additional 225,000 EUR (or approximately USD $0.3 million) was drawn in September 2021, which proceeds were paid to the vendor for the equipment, payable in equal installments over 52 months. The 2020 Equipment Loan bears interest at a fixed rate of 3.3%. In May 2023, ISP Latvia entered into an equipment loan with a third party financial institution (the “2023 Equipment Loan”). The 2023 Equipment Loan is collateralized by certain equipment. The initial advances under the 2023 Equipment Loan was 260,258 EUR (or approximately USD $0.3 million), the proceeds of which were used to make a prepayment to a vendor for equipment to be delivered at a future date. The final advance for the final payment to the equipment vendor was 132,674 EUR (or approximately USD $0.1 million). The 2023 Equipment Loan is payable over 48 months, with monthly installments that began on January 1, 2024. The 2023 Equipment Loan bears interest at the six-month EURIBOR rate, plus 2.84% (4.94% as of September 30, 2025). Future maturities of loans payable are as follows:
|  | Acquisition Notes |  |  | Equipment Loans |  |  | Total |
Fiscal year ending: |  |  |  |  |  |  |  |  |
June 30, 2026 |  | $ | — |  |  | $ | 115,283 |  |  | $ | 115,283 |
June 30, 2027 |  |  | 5,195,205 |  |  |  | 115,439 |  |  |  | 5,310,644 |
June 30, 2028 |  |  | — |  |  |  | 76,959 |  |  |  | 76,959 |
Total payments |  | $ | 5,195,205 |  |  | $ | 307,681 |  |  | $ | 5,502,886 |
Unamortized discount to fair value |  |  |  |  |  |  |  |  |  |  | (207,229 | )
Unamortized loan issuance costs |  |  |  |  |  |  |  |  |  |  | (284,216 | )
Loans payable |  |  |  |  |  |  |  |  |  |  | 5,011,441 |
Less current portion |  |  |  |  |  |  |  |  |  |  | (144,143 | )
Non-current portion |  |  |  |  |  |  |  |  |  | $ | 4,867,298 |

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