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Senior Credit Facilities
 12 Months Ended
Jun. 30, 2025
Debt Disclosure [Abstract]  
Senior Credit Facilities

 

5.   Senior Credit Facilities

  

In September 2024 we entered into a Fourth Amendment to the Third Amended and Restated Loan and Security Agreement (the “Amendment”) with Silicon Valley Bank (“SVB”), pertaining to our then-existing term loan and revolving credit facility (together, the “Senior Credit Facilities”), which amended that certain Third Amended and Restated Loan and Security Agreement, dated as of August 2, 2021, as amended by the First Amendment to Third Amended and Restated Loan and Security Agreement, dated as of October 21, 2021, as amended by the Second Amendment to Third Amended and Restated Loan and Security Agreement, dated as of February 15, 2022, as amended by the Third Amendment to Third Amended and Restated Loan and Security Agreement, dated as of September 7, 2022, by and among Lantronix and SVB (collectively with the Amendment, the “Third Amended and Restated Loan Agreement”).

 

The Amendment, among other things, extended the maturity date of our Senior Credit Facilities from August 2, 2025 to August 2, 2026. The Senior Credit Facilities bore interest at the Term Secured Overnight Financing Rate (“SOFR”) or the Prime Rate, at the option of Lantronix, plus a margin that ranged from 3.10% to 4.10% in the case of Term SOFR and 1.50% to 2.50% in the case of the Prime Rate, depending on our total leverage with a Term SOFR floor of 1.50% and a Prime Rate floor of 3.25%. The minimum liquidity requirement under the Senior Credit Facilities was $4,000,000. The Senior Credit Facilities were secured by substantially all of our assets.

 

In April 2023, we entered into a Letter Agreement (the “Letter Agreement”) with SVB, which, among other matters, amended the Third Amended and Restated Loan Agreement to reduce the former requirement to hold 85% of our company-wide cash balances at SVB to 50%, and provided a waiver of any event of default under the Third Amended and Restated Loan Agreement for any failure to comply with this covenant prior to the date of the Letter Agreement.

 

The following table summarizes our outstanding debt under the Senior Credit Facilities:

          
   June 30, 
   2025   2024 
   (In thousands) 
Outstanding borrowings on Senior Credit Facilities  $11,829   $16,341 
Less: Unamortized debt issuance costs   (75)   (120)
Net Carrying amount of debt   11,754    16,221 
Less: Current portion   (3,070)   (3,002)
Non-current portion  $8,684   $13,219 

 

During the year ended June 30, 2025, we recognized $1,238,000 of interest expense in the accompanying consolidated statement of operations related to interest and amortization of debt issuance associated with the borrowings under the Senior Credit Facilities.

  

The Senior Credit Facilities required Lantronix to comply with a minimum liquidity test, a maximum leverage ratio and a minimum fixed charge coverage ratio. We were in compliance with all financial covenants as of June 30, 2025.

 

Liquidity

 

The Senior Credit Facilities require that we maintain a minimum liquidity of $4,000,000 at SVB, as measured at the end of each month.

 

Maximum leverage ratio

 

The Senior Credit Facilities required that we maintain a maximum leverage ratio, calculated as the ratio of funded debt to the consolidated trailing 12-month earnings before interest, taxes, depreciation and amortization, and certain other allowable exclusions of 2.00 to 1.00 as measured at the end of each calendar quarter.

 

Minimum fixed charge coverage ratio

 

The Senior Credit Facilities required that we maintain a minimum fixed charge coverage ratio, calculated as the ratio of consolidated trailing 12-month earnings before interest, taxes, depreciation and amortization, and certain other allowable exclusions, less capital expenditures and taxes paid, to the trailing twelve month principal and interest payments on all funded debt of 1.25 to 1.00 as measured at the end of each calendar quarter.

 

In addition, the Senior Credit Facilities contained customary representations and warranties, affirmative and negative covenants, including covenants that limit or restrict Lantronix and its subsidiaries’ ability to incur liens, incur indebtedness, dispose of assets, make investments, make certain restricted payments, merge or consolidate and enter into certain speculative hedging arrangements. The Senior Credit Facilities included a number of events of default, including, among other things, non-payment defaults, covenant defaults, cross-defaults to other materials indebtedness, bankruptcy and insolvency defaults and material judgment defaults. If any event of default were to occur (subject, in certain instances, to specified grace periods), the principal, premium, if any, interest and any other monetary obligations on all the then outstanding amounts under the Senior Credit Facilities could become due and payable immediately.

 

New Financing Arrangements

 

On August 15, 2025, we entered into a Fourth Amended and Restated Loan and Security Agreement with SVB (the “Loan Agreement”), which effectively refinanced our outstanding term loan with an asset-backed revolving line of credit secured by our accounts receivable. The new line provides us with a revolving credit facility of up to $15,000,000, subject to customary borrowing base limitations. The revolving credit facility is scheduled to mature on August 1, 2028. Borrowings under the revolving credit facility will bear interest on the outstanding principal equal to the greater of (i) 5.0% and (ii) the Prime Rate plus a margin of 0.0% to 0.5%, with the applicable margin depending on our liquidity.

 

The Loan Agreement requires us to comply with a minimum liquidity test. The Loan Agreement also includes customary representations and warranties and affirmative and negative covenants, including covenants that limit or restrict our ability to incur liens or indebtedness, dispose of assets, make investments, make restricted payments, merge or consolidate, and enter into certain transactions with our affiliates. The Loan Agreement includes customary events of default, including, among other things, non-payment defaults, covenant defaults, bankruptcy and insolvency defaults, and material judgment defaults. If any event of default under the Loan Agreement occurs (subject, in certain instances, to specified grace or cure periods), the principal, interest and any other monetary obligations on all the then outstanding amounts may become due and payable immediately.