Line of Credit

9 Months Ended

Mar. 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 March 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% as of March 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.  In compliance with the foregoing covenants the Company and its subsidiaries maintained with SVB substantially all of the dollar value of the Company’s and its subsidiaries’ accounts. At February 28, 2023, the Company held cash at SVB of $10,832,880, of which we estimate $9,738,292 was in excess of government insured limits.    

On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver and SVB was subsequently transferred into a new entity, Silicon Valley Bridge Bank, N.A. (“SVB Bridge Bank”). On March 12, 2023, the U.S. Treasury Department, the Federal Reserve and the FDIC jointly announced enabling actions that fully protect all SVB depositors’ insured and uninsured deposits, and that such depositors would have access to all of their funds starting March 13, 2023. On March 14, 2023, the Company was able to access its full deposits with SVB Bridge Bank. At March 31, 2023, the

Company held cash at SVB Bridge Bank of $10,474,449, of which we estimate $9,406,136 was in excess of government insured limits.

There were no outstanding borrowings under the line as of March 31, 2023 and June 30, 2022, respectively. As of March 31, 2023, there was approximately $2,500,000 of available credit.

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. At March 31, 2023, the Company also held cash at Bank of America, N.A. of $750,000 and at PNC Bank, N.A. of $905,510. The Company continues to re-allocate its cash position across all three banks and explore an overall banking diversification strategy as well as additional access to lending facilities.