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Line of Credit
 6 Months Ended
Dec. 31, 2023
Line of Credit  
Line of Credit

Note 3.   Line of Credit

The Company entered into a Loan and Security Agreement with Silicon Valley Bank (“SVB”) on July 23, 2010, which, as amended, provides for a revolving line of credit for the lesser of $2,500,000, or 80% of eligible accounts receivable. The line of credit matures on February 28, 2024, and is subject to certain financial and performance covenants with which we were in compliance as of December 31, 2023. Financial covenants include maintaining an adjusted quick ratio of unrestricted cash and net accounts receivable, divided by current liabilities plus debt less deferred revenue of at least 1.15 to 1.0. The line of credit bears interest at an annual rate equal to the greater of 1% above the prime rate and

5.0%. The interest rate on the line of credit was 9.5% as of December 31, 2023. The line of credit is secured by the Company’s consolidated assets.

Pursuant to the Amended and Restated Loan and Security Agreement dated October 31, 2017 among the Company, Reprints Desk, Inc. and SVB (the “SVB LSA”), the Company was required to direct account debtors to deliver or transmit all proceeds of accounts remitted to the Company and its subsidiaries into a lockbox account as specified by SVB, and to maintain its and its subsidiaries’ primary operating and other deposit accounts with SVB.  

There were no outstanding borrowings under the line as of December 31, 2023 and June 30, 2023, respectively. As of December 31, 2023, there was approximately $2,426,000 of available credit. On March 27, 2023, First Citizens BancShares, Inc. (“FCB”) entered into an agreement with the Federal Deposit Insurance Corporation (FDIC) to purchase all of the assets and liabilities of SVB. The Company has confirmed that the Loan and Security Agreement remains in effect post this transaction and that, it continues to have access to the revolving line of credit.

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SVB Bridge Bank agreed that the Company can lower its cash balance threshold requirement associated with the SVB LSA, reducing the required balances of its and its subsidiaries’ primary operating and other accounts with SVB, and the Company continues to evaluate the SVB LSA. The Company has established additional banking relationships with Bank of America, N.A. and PNC Bank, N.A. At December 31, 2023, the Company held cash at Bank of America, N.A. of $124,044 and at PNC Bank, N.A. of $136,730.

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Subsequent to September 30, 2023, FCB informed the Company of certain defaults under the SVB LSA resulting from the Company’s violation of certain covenants regarding retaining operating cash with SVB, obtaining deposit account control agreements with respect to such accounts and failing to maintain the required adjusted quick ratio. The Company became aware of additional technical defaults following FCB’s outreach, and such defaults substantially related to the Company’s moves to promptly diversify its cash position following the collapse of Silicon Valley Bank in March of 2023. On November 14, 2023, the Company, Reprints Desk and FCB entered into a Fifth Amendment to Amended and Restated Loan and Security Agreement, Consent and Forbearance Agreement (the “Fifth Amendment”) pursuant to which, among other matters, FCB agreed to forbear from exercising its remedies under the SVB LSA in connection with the existing events of default, and agreed to waive the existing events of default provided the Company regains compliance with the adjusted quick ratio covenant and the operating accounts covenants by January 30, 2024, no other events of defaults have occurred and no forbearance termination events (as listed in the Fifth Amendment) have occurred.

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