Note 11 - Long-term Debt

9 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Long-Term Debt [Text Block]

Note 11 - Long-term Debt

Avenue Capital Loan

On January 26, 2022 (“Closing Date”), the Company entered into a Loan and Security Agreement (the “Avenue Capital Agreement”) with Avenue Venture Opportunities Fund, L.P. (“Avenue”) and Avenue Venture Opportunities Fund II, L.P. (Avenue 2”) as lenders (the “Avenue Capital Lenders”), and Avenue Capital Management II, L.P. as administrative agent (the “Avenue Capital Agent”, and collectively with the Avenue Capital Lenders, “Avenue Capital”), pursuant to which the Avenue Capital Lenders provided the Company and certain of its subsidiaries with a secured $15.0 million loan. The interest rate on the loan is the greater of the prime rate or 3.25%, plus 7.4%, payable monthly in arrears. The maturity date of the loan is January 26, 2025.

Pursuant to the Avenue Capital Agreement, the Company made interest only payments for the first 18 months following the Closing Date (“Interest-Only Period”). In June 2023, the Company achieved certain defined milestones extending the Interest-Only Period through the maturity date.

In the event the Company prepays the outstanding principal prior to the maturity date, the Company will pay Avenue Capital a fee equal to 1.0% of the loan. In addition, upon the payment in full of the obligations, the Company shall pay to Avenue Capital a fee in the amount of $0.6 million (“Final Payment”). The Company accounted for the Final Payment as additional obligations on the debt, with the corresponding charge being recorded as a debt discount.

The Company’s obligations under Avenue Capital Agreement are secured by substantially all of the Company’s assets, with a first priority lien in favor of the Avenue Capital Agent on the Term Loan Priority Collateral, and a second priority lien in favor of the Avenue Capital Agent on the ABL Priority Collateral, as each is defined in the Intercreditor Agreement, as defined in the Avenue Capital Agreement.

The Avenue Capital Agreement contains customary affirmative covenants, negative covenants and events of default, as defined in the agreement, including covenants and restrictions that, among other things, require the Company to satisfy certain capital expenditure limitations and other financial covenants, and restricts the Company’s ability to incur liens, incur additional indebtedness, make certain dividends and distributions with respect to equity securities, engage in mergers and acquisitions or make asset sales without the prior written consent of the Avenue Capital Lenders. A failure to comply with these covenants could permit the Avenue Capital Lenders to declare the Company’s obligations under the 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. As of March 31, 2024, the Company was in compliance with the covenants under the Avenue Capital Agreement.

On January 26, 2022 (“Issuance Date”), as consideration for entering into the Avenue Capital Agreement, the Company issued warrants to the Avenue Capital Lenders to purchase shares of common stock at an exercise price equal to $24.20 per share (the “Avenue Capital Warrants”). The Avenue Capital Warrants provided that in the event the Company were to engage in an equity offering at a price lower than $24.20 prior to June 30, 2022, the exercise price would be adjusted to the effective price of such equity offering, and the number of shares of common stock to be issued under the Avenue Capital Warrants would be adjusted as set forth in the agreement. The Avenue Capital Warrants are immediately exercisable and expire on January 31, 2027. The Company accounted for the Avenue Capital Warrants as a liability as the number of warrants was not fixed at the Issuance Date. The fair value of the Avenue Capital Warrants at issuance was approximately $0.6 million.

On March 7, 2022, the Company closed on an equity offering of shares of common stock and warrants at an offering price of $25.00 per share. As the Avenue Capital Agreement precluded the Company from pursuing any equity financing prior to July 7, 2022, and the effective price of the March 7, 2022, offering was more than the exercise price of the Avenue Capital Warrants, the number of shares of common stock issuable upon exercise of the Avenue Capital Warrants were set to 43,388 at an exercise price of $24.20.

On October 25, 2022, the Company entered into an agreement with Avenue to extend the Interest-Only Period of its existing senior secure loan facility held with Avenue. The amendment to the original loan agreement, which was executed in January 2022, extended the Interest-Only Period to January 2024. In exchange for this extension of the Interest-Only Period, the Company and Avenue agreed to reset the exercise price of the warrants issued in conjunction with the original loan agreement to $8.60, corresponding to the warrant exercise price associated with the Company’s August 2022 equity financing.

In addition to the debt discount discussed above, the Company incurred $0.4 million in loan origination, legal and other fees. The debt discount and issuance costs are being amortized over the term of the loan, using the effective interest method resulting in an effective rate of 19.6%. Total interest expense, including debt discount amortization, was $0.7 million for both the three months ended March 31, 2024, and 2023, and $2.2 million and $2.0 million for the nine months ended March 31, 2024, and 2023, respectively.

Long-term debt consists of the following:

	March 31,			June 30,
	2024			2023
	(in thousands)
Long-term debt, due on January 26, 2025	$	15,000		$	15,000
Long-term, final payment fee		638			638
Unamortized discount and issuance costs		(519	)		(925	)
Financing leases, maturing through May 2024		16			85
Total debt		15,135			14,798
Less: current portion		(15,135	)		(85	)
Non-current portion of debt	$	—		$	14,713

Future principal payments of long-term debt, including financing leases, are as follows:

	March 31,
	(in thousands)
2024 (remaining 3 months)	$	16
2025		15,638
Future principal payments		15,654
Less: unamortized discount and issuance costs		(519	)
Less: current portion		(15,135	)
Non-current portion of debt	$	—