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Debt | 3 Months Ended
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Sep. 30, 2021
Debt |
Debt | 16. Debt The Neos Revolving Loan. On October 2, 2019, Neos entered into a senior secured credit agreement with Encina Business Credit, LLC (“Encina”) as agent for the lenders (the “Loan Agreement”). Under the Loan Agreement, Encina will extend up to $25.0 million in secured revolving loans to Neos (the “Revolving Loans”), of which up to $2.5 million may be available for short-term swingline loans, against 85% of eligible accounts receivable. The Revolving Loans bear variable interest through maturity at the one-month London Interbank Offered Rate (“LIBOR”), plus an applicable margin of 4.50%. In addition, Neos is required to pay an unused line fee of 0.50% of the average unused portion of the maximum revolving facility amount during the immediately preceding month. Interest is payable monthly in arrears, upon a prepayment of a loan and on the maturity date. The maturity date under the Loan Agreement is May 11, 2022. In the event that, for any reason, all or any portion of the lender’s commitment to make revolving loans is terminated prior to the scheduled maturity date, in addition to the payment of the principal amount and all unpaid accrued interest and other amounts due thereon, Neos is required to pay to the lender a prepayment fee equal to (i) 1.0% of the revolving loan commitment if such event occurs on or before October 2, 2021, and (ii) 0.5% of the revolving loan commitment if such event occurs after October 2, 2021 but before May 11, 2022. Neos may permanently terminate the revolving loan facility by prepaying all outstanding principal amounts and all unpaid accrued interest and other amounts due thereon, subject to at least five business days prior notice to the lender and the payment of a prepayment fee as described above. The Agreement contains customary affirmative covenants, negative covenants and events of default, as defined in the Loan Agreement, including covenants and restrictions that, among other things, require Neos to satisfy certain capital expenditure and other financial covenants, and restrict Neos’ ability to incur liens, incur additional indebtedness, engage in mergers and acquisitions or make asset sales without the prior written consent of the Lenders. A failure to comply with these covenants could permit the Lenders to declare Neos’ obligations under the Loan Agreement, together with accrued interest and fees, to be immediately due and payable, plus any applicable additional amounts relating to a prepayment or termination, as described above. In connection with the closing of the Neos Merger, Neos and Encina entered into a Consent, Waiver and First Amendment to the Loan Agreement, dated as of March 19, 2021 (the “Encina Consent, Waiver and Amendment”). Pursuant to the Consent, Waiver and First Amendment, Encina (i) irrevocably waives the right to impose the default rate of interest solely to the extent resulting from the inclusion of a "going concern" qualification in the audited financial statements of Neos on a consolidated basis for the fiscal year ending December 31, 2020 (the “Specified Default), (ii) the right to impose the Default Rate of interest under Section 3.1 of the Loan Agreement, or to collect interest accruing at such Default Rate that Lenders had a lawful right to collect or apply with respect to any such Specified Default, and (iii) makes certain other modifications to the Encina Loan Agreement to reflect the consummation of the Neos Merger and the status of Neos as a wholly-owned subsidiary of Aytu, in each case subject to the terms and conditions of the Encina Consent, Waiver and Amendment. The interest expense was $0.1 million for the three months ended September 30, 2021. As of September 30, 2021 $4.5 million borrowing was outstanding under the Revolving Loan and Neos was in compliance with the covenants under the Loan Agreement as amended. The Neos Senior Secured Credit Facility. On May 11, 2016, Neos entered into a $60.0 million senior secured credit facility (the “Facility”) with Deerfield Private Design Fund III, L.P. (66 2/3% of Facility) and Deerfield Partners, L.P. (33 1/3% of Facility) (collectively, “Deerfield”). As of March 19, 2021, the date of the Neos Merger, the remaining principal on the Facility was $15.6 million, with $0.6 million due on April 11, 2021 and with a final payment of principal, interest and all other obligations under the Facility due May 11, 2022. In addition, upon the payment in full of the Obligations (whether voluntarily, in the connection with a Change of Control or an Event of Default and whether before, at the time of or after the Maturity Date), the Company shall pay to Deerfield a non-refundable exit fee in the amount of approximately $1.0 million, which shall be due and payable in cash. Interest is due quarterly beginning in June 2021, at a rate of 12.95% per year. Borrowings under the Facility are collateralized by substantially all of Neos’ assets, except assets under finance lease. If all or any of the principal are prepaid or required to be prepaid prior to December 31, 2021, then the Company shall pay, in addition to such prepayment and accrued interest thereon, a prepayment premium equal to 6.25% of the amount of principal prepaid. The terms of the Facility require the Company to maintain cash on deposit of not less than $5.0 million. Long-term debt consists of the following; ​
​ | ​ | ​ | ​
​ |  | September 30, 2021
​ | ​ | (In thousands)
Neos senior secured credit facility, due on May 11, 2022 | ​ | $ | 15,000
Exit fee | ​ | ​ | 1,000
Unamortized premium | ​ | ​ | 404
Financing leases, maturing through May 2024 | ​ | ​ | 258
Total debt | ​ | ​ | 16,662
Less: current portion | ​ | ​ | (16,508)
Long-term debt | ​ | $ | 154
​ In connection with the Neos Merger, Neos and Deerfield entered into a Consent, Waiver and Sixth Amendment to the Facility, dated as of March 19, 2021 (the “Deerfield Consent, Waiver and Amendment”). Pursuant to the Consent, Waiver and Sixth Amendment, Deerfield (i) consented to certain amendments to the Encina loan documents, (ii) irrevocably waive the Going Concern Conditions as described in the Deerfield Consent, Waiver and Amendment and their right to impose the default rate of interest as provided for in the Facility as of May 11, 2016, or to collect interest accruing at such default rate of interest, that the Lenders had a lawful right to collect or apply with respect to any such Event of Default for failure to satisfy such Going Concern Condition, (iii) subject the Company and its subsidiaries to certain restrictive covenants including limitations on the incurrence of debt, granting of liens and transfers of assets of the Company and its subsidiaries and (iv) makes certain other modifications to the Facility to reflect the consummation of the Neos Merger and the status of Neos as a wholly-owned subsidiary of the Company. Such modifications also include the prepayment of $15.0 million by the Company of the principal of the loan that was otherwise due on May 11, 2021 plus any accrued interest thereon through March 19, 2021, plus a make-whole payment equal to the interest that would otherwise have been due on that $15.0 million for the period beginning March 19, 2021 through May 11, 2021. The Sixth Amendment also eliminated the right of Deerfield to convert outstanding amounts of the loans into conversion shares and the right of Neos to make payments to Deerfield in the form of shares of common stock. The Company is a guarantor under the Facility. Pursuant to the terms of the Facility, as amended, the $15.0 million principal prepayment was paid in cash on March 19, 2021, and the carrying amount of the remaining outstanding debt was $16.6 million. As the Neos Merger was accounted for as a business combination under Topic 805, Neos evaluated and determined that the fair value of the remaining outstanding debt was $17.4 million as of March 20, 2021. Accordingly, Neos recorded a premium of $0.8 million, which is the difference between carrying amount and the fair value of the debt and is being amortized into interest expense using the effective interest method over the remaining term of the debt. As of September 30, 2021, the Company was in compliance with the covenants under the Facility as amended. Total interest expense on the Facility, net of premium amortization, was $0.3 million for the three months ended September 30, 2021. Future principal payments of long-term debt, including financing leases, are as follows: ​
​ | ​ | ​ | ​
​ |  | September 30,
​ | ​ | (In thousands)
2022 | ​ | $ | 16,104
2023 | ​ | ​ | 92
2024 | ​ | ​ | 62
Future principal payments | ​ | ​ | 16,258
Add unamortized premium | ​ | ​ | 404
Less current portion | ​ | ​ | (16,508)
Long-term debt | ​ | $ | 154
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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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