Note 2 - Related-party Transactions

6 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

2. Related Party Transactions

During the three and six months ended March 31, 2023, the Company incurred $10 thousand as legal expense to a law firm, a partner of which was a director of the Company until his resignation on November 15, 2022. The Company incurred similar fees of $30 thousand and $57 thousand during the three and six months, respectively, ended March 31, 2022. The Company had accrued liabilities for services to the same law firm of $25 thousand at September 30, 2022.

On November 16, 2022, the Company entered into a Loan and Security Agreement with Neltjeberg Bay Enterprises, LLC (“NBE”) whereby NBE loaned the Company $5,500,000 at a rate of 12% interest per annum due in 30 equal installments beginning on June 1, 2023. The facility also includes a 2% facility fee and a loan premium due at maturity equal to 20% of the amount loaned which is earned monthly based on the number of months the loan remains outstanding. The loan is secured by all assets of the Company and carries certain restrictions and financial covenants including 1) a debt coverage ratio of cash and accounts receivable to the NBE loan of not less than 1.15:1.0; 2) trailing six-month billings requirement of at least $12,000,000 for the September and December 2022 quarters, $11,000,000 for the March and June 2023 quarters and $12,000,000 for the September 2023 quarter and 3) a trailing six-month EBITDA burn requirement of less than $6,000,000 for the quarter ended September 2022, $6,500,000 for the quarter ending December 2022 and $7,000,000 for each of the quarters ending March, June and September 2023. The Managing Director of NBE is Frederick H. Kopko, Jr., a former member of the Company’s Board of Directors.

Simultaneously with the closing above, the Company closed a Security Agreement and Promissory Note with Mark Burish (“Burish”) for $3,000,000. The note carries the same interest rate and fees as the note with NBE and is subordinate to the NBE Loan and Security Agreement. On November 16, 2022, the Company entered into a Subscription Agreement with Burish whereby Burish purchased $1,200,000 of common stock at a price equal to the average closing bid price on the five days preceding the date of close (1,176,471 shares). In addition, on November 16, 2022, the Company entered into a Warrant whereby Burish received a warrant to purchase 511,765 shares of common stock at a price of $1.02. The warrant matures on November 16, 2027. On April 27, 2023, the Warrant was amended to require shareholder approval as a condition to exercising the warrant. 

At March 31, 2023 , Mr. Burish had warrants to purchase a total of 562,441 shares of common stock. 

Mr. Burish beneficially owns 40% of the Company’s common stock. Mr. Burish also serves as the Chairman of the Board of Directors. 

All transactions with Mr. Burish and NBE were approved by a Special Committee of Disinterested and Independent Directors.