Quarterly report pursuant to Section 13 or 15(d)

Loan Payable

v3.5.0.2
Loan Payable
3 Months Ended
Oct. 31, 2016
Debt Disclosure [Abstract]  
Debt Disclosure [Text Block]

Note 6 - Loan Payable


On June 7, 2013, the Company entered into a secured Revolving Loan and Security Agreement (the “Credit Agreement”) among the Company and certain of its subsidiaries, with Enzo Therapeutics as a guarantor, and MidCap Financial LLC. (formerly Healthcare Finance Group, LLC). The Credit Agreement, which expired on December 7, 2016, provides for borrowings against eligible US receivables, as defined, of the Clinical Lab and Life Science segments up to $8.0 million at defined eligibility percentages and provides for additional borrowings of $4.0 million for increased eligible assets. Debt issuance costs of $281 are being amortized over the life of the Credit Agreement. The balance of unamortized debt issuance cost was $7 and $28 at October 31, 2016 and July 31, 2016, respectively, and is included in prepaid expenses. Interest on advances, payable monthly, is based on the three month LIBOR rate, with a floor of 1.25% plus an applicable margin of 4.0%. The nominal interest rate for the quarter ended October 31, 2016 and year ended July 31, 2016 was 5.25%. In the event of any default, the interest rate may be increased 3.0% over the current rate. The facility also carries a non-utilization fee of 0.50% per annum, payable monthly, on the unused portion of the credit line. The effective interest rate for the credit agreement was 12.1% for the quarter ended October 31, 2016 and 11.4% for the fiscal year ended July 31, 2016. The Credit Agreement requires a minimum borrowing of $2.0 million. At October 31, 2016 and July 31, 2016, the borrowings under the Credit Agreement related to the Clinical Labs and Life Sciences receivables aggregated $2.0 and $1.6 million, respectively, with an additional availability of $3.5 million at October 31, 2016.


The Credit Agreement expired and was repaid in full on December 7, 2016.


The Company’s obligations under the Credit Agreement were secured by primarily all the unencumbered U.S. assets of the Company, excluding buildings and intellectual property which the Lender has a negative pledge, and the capital stock of subsidiaries. The Credit Agreement includes customary affirmative and negative covenants and events of default and requires maximum levels of cash usage and minimum levels of liquidity, as defined, and provides for increased liquidity levels if operating results are not achieved. Negative covenants include among others, limitations on additional debt, liens, loans or investments, distributions, asset sales and affiliate transactions. Events of default include non-payment of principal and interest on debt outstanding, non-performance of covenants, material change in business, breach of representations, bankruptcy and insolvency, material judgments and changes in control. As of October 31, 2016, the Company is in compliance with the financial covenants.


The Credit Agreement includes customary affirmative and negative covenants and events of default. The terms of the debt covenants include:


o The minimum balance the Company must borrow at any time is $2.0 million. At October 31, 2016, the loan balance was approximately $2.0 million, with an additional availability of $3.5 million.

o The Company must maintain a Minimum Liquidity, as defined in the Credit Agreement, of not less than $3.0 million. At October 31, 2016, the Company’s Minimum Liquidity was $7.6 million.

o The quarterly Cash Burn, as defined in the Credit Agreement, must be greater than zero. During the three months ended October 31, 2016, the Cash Burn was positive in the amount of $0.8 million.

As of October 31, 2015, the Credit Agreement was amended to redefine Cash Burn and add a definition for Liquidity (the “amendment”). Under the amendment, the determination of Cash Burn during a fiscal quarter excludes capital expenditures provided that Liquidity exceeds $7 million as of the last day of the fiscal quarter. As of October 31, 2016, Liquidity as defined was $70.7 million.