XML 23 R13.htm IDEA: XBRL DOCUMENT v3.22.0.1
Loans payable
 6 Months Ended
Dec. 31, 2021
Debt Disclosure [Abstract]  
Loans payable

Note 7 – Loans payable

 

Short-term loans

 

Revolving credit facility

 

On May 3, 2019, the Company entered into an agreement with WFC Fund LLC (“WFC") for a revolving loan of up to $2,000,000. The revolving loan bore interest equal to the prime rate plus 4.25% per annum on the outstanding amount. On May 26, 2020, the Loan and Security Agreement was amended and restated as a Receivable Purchase Agreement (the “Original RPA”). On November 16, 2020, the Original RPA was further amended and restated (the “Restated RPA”) to increase the credit limit of the revolving credit facility from $2,000,000 to $3,000,000. The Restated RPA bears a discount rate of 3.055555%, subject to a rebate of 0.0277% per day. This revolving credit facility is secured by all of the Company’s assets and guaranteed by Chenlong Tan, the CEO and one of the Company’s major shareholders and founders. Pursuant to the agreement, all purchases of accounts receivable are without recourse to the Company, and WFC assumes the risk of nonpayment of the accounts receivable due to a customer’s financial inability to pay the accounts receivable or the customer’s insolvency but not the risk of non-payment of the accounts receivable for any other reason. The Company is obligated to collect the accounts receivables and to repurchase or pay back the amount drawn down if the accounts receivable are not collected.

 

During the three months ended September 30, 2021, the Company terminated the Restated RPA and paid off the balance due to WFC.

 

As of December 31, 2021 and June 30, 2021, the outstanding balance due under the RPA was $0 and $162,769, respectively.

 

Long-term loan

 

SBA loan payable

 

On April 18, 2020, the Company entered into an agreement with the U.S. Small Business Administration (“SBA”) for a loan of $500,000 under Section 7(b) of the Small Business Act pursuant to which we issued a promissory note (the “SBA Note”) to the SBA. The SBA Note bears interest at the rate of 3.75% per annum and matures 30 years from the date of the SBA Note. Monthly installment payments, including principal and interest, will begin twelve months from the date of the SBA Note. As of December 31, 2021 and June 30, 2021, the outstanding balance of the SBA Note was $470,756 and $487,815, which included a current portion of $29,244 and a non-current portion of $441,512 and $458,571, respectively.

 

Asset-based revolving loan

 

On November 12, 2021, the Company entered to a Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, issuing bank and swingline lender, for an asset-based revolving loan (“ABL”) of up to $25 million with key terms listed as follows:

 

  · Borrowing base equal to the sum of

 

  Ø Up to 90% of eligible credit card receivables

 

  Ø Up to 85% of eligible trade accounts receivable

 

  Ø Up to the lesser of (i) 65% of cost of eligible inventory or (ii) 85% of net orderly liquidation value of eligible inventory
  · Interest rates of between LIBOR plus 2% and LIBOR plus 2.25% depending on utilization
  · Undrawn fee of between 0.25% and 0.375% depending on utilization
  · Maturity Date of November 12, 2024
         

In addition, the ABL includes an accordion feature that allows the Company to borrow up to an additional $25 million. To secure complete payment and performance of the secured obligations, the Company granted a security interest in all of its right, title and interest in, to and under all of the Company’s assets as collateral to the ABL. Upon closing of the ABL, the Company paid $796,035 financing fees including 2% of $25.0 million or $500,000 paid to its financial advisor. The financing fees are recorded as debt discount and to be amortized over three years, the term of the ABL. For the three and six months ended December 31, 2021, the Company recorded $44,203 of amortization of debt discount and $30,909 of interest expense. As of December 31, 2021, the outstanding amount of the long-term revolving loan payable, net of debt discount, was $6,963,551 and the interest payable was $30,909, which is paid monthly.