DEBT

9 Months Ended

Jun. 30, 2021

DEBT

DEBT

8.           DEBT

Credit Facility

On April 30, 2021, the Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with First Internet Bank of Indiana (“FIB”) to, among other things, secure additional debt financing in order to fund portions of the consideration for the HistoTox Labs Acquisition and the merger of one of the Company’s wholly owned subsidiaries with Bolder BioPATH, Inc. (“Bolder BioPATH”), respectively. The Credit Agreement included eleven term loans (the “Term Loans” ), an equipment draw loan (the “Equipment Loan”), and a revolving line of credit (the “Revolving Facility”). On May 26, 2021, the Company and FIB entered into an amendment to the Credit Agreement to, among other things, provide a new term loan facility to finance the acquisition and refurbishment of the Company’s St. Louis facility, which it had previously leased.  The material terms of each of the loans under the Credit Agreement, as amended, are described below.

Included in the Credit Agreement is a requirement that the Company maintain certain financial covenants, including maintaining a senior funded debt to adjusted EBITDA ratio (as defined in the Credit Agreement) of not greater than (i) 5.25 to 1.00 as of the date of the Credit Agreement and as of June 30, 2021, (ii) 4.75 to 1.00 as of September 30, 2021, (iii) 4.50 to 1.00 as of December 31, 2021, (iv) 4.25 to 1.00 as of March 31, 2022, (v) 4.00 to 1.00 as of June 30, 2022, and (vi) 3.50 to 1.00 as of September 30, 2022 and as of each fiscal quarter end thereafter.

Also included in the Credit Agreement is a requirement that the Company maintain a fixed charge coverage ratio (as defined in the Credit Agreement) of not less than (i) 1.20 to 1.00, commencing as of September 30, 2021, and continuing as of each fiscal quarter end thereafter up to and including June 30, 2022, and (ii) 1.25 to 1.00 as of September 30, 2022 and as of each fiscal quarter end thereafter.

Upon an event of default, which includes certain customary events such as, among other things, a failure to make required payments when due, a failure to comply with covenants, certain bankruptcy and insolvency events, and defaults under other material indebtedness, FIB may cease advancing funds, increase the interest rate on outstanding balances, accelerate amounts outstanding, terminate the agreement and foreclose on all collateral.

The obligations of the Company under the Credit Agreement are secured by all of the assets of the Company and are guaranteed by each of its subsidiaries and secured by the assets thereof.  The Company has also obtained a life insurance policy in an amount not less than $5,000 for its President and Chief Executive Officer and provided FIB an assignment of such life insurance policy as collateral.

(a) Terms of the Equipment Loan.

The Company may borrow under the Equipment Loan on or before April 30, 2022 in the aggregate principal amount of up to $3,000 (the “Equipment Loan Commitment”). The Equipment Loan Commitment will automatically terminate upon the earlier of (x) any funding of the maximum amount of the Equipment Loan Commitment and (y) 5:00 p.m., Indianapolis time, on April 30, 2022.  Until April 30, 2022, the Company must pay interest on the amount outstanding under the Equipment Loan at a fixed annual rate of 4.00%. On April 30, 2022, all amounts outstanding under the Equipment Loan will be converted to a term loan and repaid monthly in installments of principal based on a five (5) year amortization schedule together with the interest that will accrue thereon. A final installment representing the entire unpaid principal of the Equipment Loan, and all accrued and unpaid interest thereon and all fees and charges in connection therewith, will be due and payable on April 30, 2027. Advances under the Equipment Loan will be used to fund equipment needs of the Company as approved by FIB.

(b) Terms of the Revolving Facility.

The Revolving Facility provides a line of credit for up to $5,000, which the Company may borrow from time to time, subject to the terms of the Credit Agreement, including as may be limited by the amount of the Company’s outstanding eligible receivables. The Revolving Facility requires monthly accrued and unpaid interest payments only until maturity at a floating per annum rate equal to the greater of (a) 4.00%, or (b) the Prime Index (as defined in the Credit Agreement). The Company did not have an outstanding balance on the Revolving Facility as of June 30, 2021. Advances under the Revolving Facility will be used for general working capital purposes of the Company.

(c) Terms of the Term Loans:

	Principal Amount
	as of date of Credit				Monthly
	Agreement		Annual		Payment
	April 30, 2021		Interest		Amount
Loan Name	(000)		Rate		(000)		Maturity Date	Use of Proceeds
Term Loan 1	$	3,980	5.20	%	$	36	March 28, 2025	Funded expansion of building on real property in Mount Vernon, IN
Term Loan 2	$	3,571	5.06	%	$	78	July 2, 2023	Funded a portion of the cash consideration for the Seventh Wave Laboratories acquisition
Term Loan 3	$	1,076	5.20	%	$	32	March 28, 2025	Funded equipment needs associated with expansion of real property in Mount Vernon, IN
Term Loan 4	$	1,001	4.63	%	$	20	November 1, 2025	Funded the cash consideration for the Smithers Avanza acquisition
Term Loan 5	$	810	4.00	%	$	17	June 30, 2025	Funded certain capital expenditures
Term Loan 6	$	2,865	4.25	%	$	56	December 31, 2025	Funded certain capital expenditures
Term Loan 7	$	1,263	4.00	%	$	28	June 1, 2025	Financed aspects of the Pre-Clinical Research Services and related real property acquisitions
Term Loan 8	$	1,853	4.00	%	$	12	December 1, 2024	Financed aspects of the Pre-Clinical Research Services and related real property acquisitions
Term Loan 9	$	10,000	3.85	%	$	184 (a)	April 30, 2026	Funded a portion of the cash consideration of the Bolder BioPATH merger
Term Loan 10	$	5,000	3.85	%	$	92 (a)	April 30, 2026	Funded a portion of the cash consideration of the HistoTox Labs acquisition
Term Loan 11	$	3,622	3.99	%	$	33	June 23, 2022	Refinanced debt with The Huntington Bank for general business purposes
Term Loan 12	$	4,832 (b)	3.85	%	$	10 (c)	December 26, 2026	Financed the acquisition of the St. Louis facility and associated expansion

^(a) See Mandatory Prepayments information below.

^(b)  Principal amount as of May 26, 2021.

^(c) The monthly payment amount increases to $29 on January 1, 2022.

(d) Mandatory Prepayments.

Commencing with the fiscal year ending September 30, 2021 and for each fiscal year thereafter until the Term Loan 9 and/or Term Loan 10, in each case, are paid in full, the Company is required to prepay Term Loan 9 and Term Loan 10 on a pro rata basis on the following January 31^st, in an amount equal to 50% of the excess cash flow of the Company (as defined in the Credit Agreement) for such fiscal year (in each case, an “Excess Cash Flow Payment”), provided that, for the fiscal year ending September 30, 2021, the Excess Cash Flow Payment, if any, will be calculated only for the period from April 30, 2021 through September 30, 2021. Excess Cash Flow will be calculated for each fiscal year based on (a) the Company’s adjusted EBITDA (as defined in the Credit Agreement), minus (b) cash interest expense, minus (c) cash taxes paid or cash distributions made for payment of taxes, minus (d) principal payments paid in respect of long-term indebtedness (excluding any principal reduction on Term Loan 9 or Term Loan 10, in each case, with respect to Excess Cash Flow and excluding principal payments on the Revolving Facility), minus (e) capital expenditures not funded by advances under the Equipment Loan as specified under the Credit Agreement.

Acquisition-related Debt

In addition to the indebtedness under the Credit Agreement, certain of the Company’s subsidiaries have issued unsecured notes as partial payment of the purchase prices of certain acquisitions as described herein.  Each of these notes is subordinated to the indebtedness under the Credit Agreement.

As part of the Smithers Avanza acquisition, the Company’s BASi Gaithersburg subsidiary issued an unsecured subordinated promissory note payable to the Smithers Avanza seller in the initial principal amount of $810, which is guaranteed by the Company. The promissory note bears interest at a rate of 6.5% per annum with monthly payments of principal and interest and a maturity date of May 1, 2022 and is guaranteed by the Company.

As part of the PCRS Acquisition, the Company’s Bronco Research Services subsidiary issued an unsecured subordinated promissory note payable to the PCRS seller in the initial principal amount of $800. The promissory note bears interest at a rate of 4.5% per annum with monthly payments of principal and interest and a maturity date of December 1, 2024.

As part of the acquisition of Boulder BioPATH, the Company’s Inotiv Boulder subsidiary, Inotiv Boulder, LLC, issued unsecured subordinated promissory notes payable to the former shareholders of Boulder BioPath in an aggregate principal amount of $1,500.  The promissory notes bear interest at a rate of 4.5% per annum, with monthly payments of principal and interest and a maturity date of May 1, 2026.

PPP Loan

On April 23, 2020, the Company was granted a loan (the “PPP Loan”) from Huntington National Bank in the aggregate amount of $5,051, pursuant to the Paycheck Protection Program under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The terms of the PPP Loan call for repayment of the principal and accrued interest under the Loan in eighteen installments of $283 beginning on November 16, 2020 and continuing monthly until the final payment is due on April 16, 2022. However, the bank is not requiring payments of principal or interest pending the loan forgiveness decision. The Company applied for forgiveness of the loan in the amount of $4,851, and on July 16, 2021, received notice from Huntington Bank that the SBA had approved the application for forgiveness of the PPP Loan in the full amount requested.

Long term debt as of June 30, 2021 and September 30, 2020 is detailed in the table below.

	As of:
	June 30, 2021		September 30, 2020
Term Loan #1	$	3,943	$	4,230
Term Loan #2		3,446		4,004
Term Loan #3		1,031		1,266
Term Loan #4		969		1,115
Term Loan #5		781		920
Term Loan #6		2,728		—
Term Loan #7		1,216		1,425
Term Loan #8		1,842		1,891
Term Loan #9		9,850		—
Term Loan #10		4,925		—
Term Loan #11		3,559		3,748
Term Loan #12		2,088		—
Subtotal Term Loans		36,378		18,599
Seller Note – Bolder BioPath		1,500		—
Seller Note – Smithers Avanza		385		650
Seller Note – Preclinical Research Services		702		752
Paycheck protection program loan		5,051		5,051
		44,016		25,052
Less: Current portion		(14,752)		(5,991)
Less: Debt issue costs not amortized		(564)		(235)
Total Long-term debt	$	28,700	$	18,826