NOTES PAYABLE AND LONG-TERM DEBT

12 Months Ended

Jun. 30, 2021

On March 29, 2017, the Company entered into to a credit agreement with a commercial bank which was subsequently amended on June 29, 2018 and on December 28, 2020 (the "Credit Agreement"). The Credit Agreement, which expires on December 28, 2023, provides for a $14 million committed credit facility that can be increased to $18 million upon the Company's request. The proceeds of the Credit Agreement may be utilized as follows: (i) $6 million for working capital, letters of credit (up to $2.0 million) and general corporate purposes, (ii) $8 million for acquisitions and (iii) an additional $4 million for working capital, upon the Company's request. Indebtedness under the Credit Agreement is secured by substantially all of the Company’s assets with advances outstanding under the working capital portion of the credit facility at any time limited to a Borrowing Base (as defined in the Credit Agreement) equal to 80% of eligible accounts receivable plus the lesser of (i) 50% of eligible inventory and (ii) $3.0 million. Advances under the acquisition portion of the credit facility are limited to 75% of the purchase price of an acquired company and convert to a five-year term note at the time of the borrowing. Borrowings bear interest at the greater of (a) one-half percent or (b) the One Month ICE LIBOR plus a LIBOR Margin of 2.5%. The LIBOR Margin may increase to as high as 3.0% depending on the Company’s cash flow leverage ratio. The interest rate as of June 30, 2021 was approximately 3.0%. The Company pays a fee of 0.25% per annum on the unused amount of the credit facility.

On August 21, 2019, certain subsidiaries of the Company entered into a Construction and Term Loan Agreement and a Master Equipment Finance Agreement with its existing commercial bank (collectively, the “Loan Agreement”). The Loan Agreement provides for a five-year, $3.2 million facility, the proceeds of which are to be utilized for expenditures to facilitate future growth at the Company’s treatment facility in Carthage, Texas (the “Texas Treatment Facility”) as follows: (i) $2.0 million for planned improvements and (ii) $1.2 million for equipment. Indebtedness under the Loan Agreement is secured by the Company’s real estate investment and equipment at the Texas Treatment Facility. Advances under the Loan Agreement mature five years from the Closing Date (August 21, 2019) with monthly payments beginning in the month after the advancing period ends. The advancing period extended through January 15, 2021 and August 2020 for the real estate portion and the equipment portion of the Loan Agreement, respectively. Borrowings during the advancing period for the real estate portion and for the entire term of the equipment portion of the Loan Agreement bear interest computed at the One Month ICE LIBOR, plus two-hundred and fifty (250) basis points which was a rate of 2.73% on June 30, 2021. The Company has entered into a forward rate lock to fix the rate on the real estate portion of the Loan Agreement at the expiration of the advancing period at 4.15%.

On January 22, 2021, certain wholly owned subsidiaries of the Company entered into a real estate term loan agreement (the "Real Estate Loan Agreement" and together with the Credit Agreement and the Loan Agreement, the "Credit and Loan Agreements") with the Company's existing commercial bank. The Real Estate Loan Agreement provides for a five-year,

$0.9 million facility, the proceeds of which have been utilized to purchase the property in Pennsylvania which had previously been leased by the Company for its operations. The Real Estate Loan Agreement matures five-years from January 22, 2021 with monthly payments based on a 20-year amortization and bears interest at 4%.

On April 20, 2020, the Company received loan proceeds of $2.2 million under the Paycheck Protection Program (“PPP”) under a promissory note from its existing commercial bank (the “PPP Loan”). The PPP, established as part of the CARES Act, provides for loans to qualifying businesses for amounts up to 2.5 times the average monthly payroll expenses of the qualifying business. The loans and accrued interest may be forgivable after eight to twenty-four weeks providing that the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels.

On June 15, 2021, the Company received a notification from its existing commercial bank that the Small Business Administration ("SBA") fully approved the Company's PPP Loan forgiveness request and that the PPP Loan, reflected in the Company’s balance sheet as Long-Term Debt, was forgiven. The Company recognized the gain on forgiveness of PPP loan in the financial statements during the fourth quarter of the year ending June 30, 2021. Although the PPP Loan has been forgiven, records are to be maintained for at least six years following the date of forgiveness as the SBA may still audit the eligibility of the Company's receipt of the PPP Loan proceeds. To the extent the eligibility is challenged, the Company may have to repay all or part of the PPP Loan.

At June 30, 2021 and 2020, long-term debt consisted of the following (in thousands):


	June 30,
	2021		2020
Acquisition loan, monthly payments of $43; maturing March 2022.	$	431	$	948
Equipment loan, monthly payments of $17; maturing August 2024, net of debt issuance costs of $40	830		929
Real estate loans, monthly payments of $9; maturing August 2024 and January 2026	2,803		1,103
Paycheck Protection Program loan	—		2,183
Total long-term debt	4,064		5,163
Less: current portion	735		1,658
Long-term debt, net of current portion	$	3,329	$	3,505

The Company has availability under the Credit Agreement of $13.9 million ($5.9 million for the working capital portion and $8.0 million for the acquisitions) as of June 30, 2021 with the option to extend the availability up to $17.9 million. The Company also has $0.1 million in letters of credit outstanding as of June 30, 2021.

The Credit and Loan Agreements contain affirmative and negative covenants that, among other things, require the Company to maintain a maximum cash flow leverage ratio of no more than 3.0 to 1.0 and a minimum debt service coverage ratio of not less than 1.15 to 1.00. The Credit and Loan Agreements also contain customary events of default which, if uncured, may terminate the agreements and require immediate repayment of all indebtedness to the lenders. The leverage ratio covenant may limit the amount available under the Credit Agreement. The Company was in compliance with all the financial covenants under the Credit and Loan Agreements as of June 30, 2021.

Payments due on long-term debt subsequent to June 30, 2021 are as follows (in thousands):


Twelve Months Ending June 30,
2022	$	735
2023	316
2024	316
2025	2,041
2026	696

	$	4,104