LONG-TERM DEBT |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LONG-TERM DEBT | LONG-TERM DEBT The Company’s long-term debt consisted of the following (in thousands):
(1) The unamortized debt issuance costs related to the Term Loan is presented as a reduction of the carrying amount of the corresponding debt balance on the accompanying condensed consolidated balance sheets. Unamortized debt issuance costs related to the PNC Credit Facility are presented within other assets on the accompanying condensed consolidated balance sheets.
On August 5, 2021, the Company entered into a new senior secured term loan to borrow an aggregate of $100.0 million (the “Term Loan”). Borrowings under the Term Loan mature on August 5, 2026. Principal is payable at a rate per annum equal to (a) 2.5% of the original principal balance thereof during the first year following the closing date of the Term Loan and (b) 5% of the original principal balance thereof thereafter. Principal and interest payments are payable on a quarterly basis.
On April 25, 2022, the Company entered into amendments to the Term Loan and the PNC Credit Facility (the “April 2022 Amendments”). The April 2022 Amendment, among other things, (a) amended the total net leverage ratio financial covenant and the minimum liquidity financial covenant commencing with the fiscal quarter ended June 30, 2022; and; (b) replaced the benchmark rate for LIBOR Rate Loans with a rate based on the Secured Overnight
Financing Rate ("SOFR"). The April 2022 Amendments were accounted for as modifications. The Company incurred $0.4 million in costs related to amendment to the Term Loan which is reflected as a reduction to the carrying amount of the Term Loan and amortized to interest expense over the remaining loan term.
On June 1, 2023, the Company entered into amendments to the Term Loan and the PNC Credit Facility (the “June 2023 Amendments”). The June 2022 Amendments, among other things, (a) amended the total net leverage ratio financial covenant commencing with the fiscal quarter ended June 30, 2023; (b) amended the minimum liquidity financial covenant to adjust the minimum liquidity level; and (c) amended the “EBITDA” definition to increase the add-back cap on non-recurring items including restructuring charges during the fiscal years ended March 31, 2024 and 2025. The June 2023 Amendments to the Term Loan also provided an advance of $15.0 million in additional Term Loan borrowings (the “2023 Term Loan”) and incurred $0.9 million in original issuance discount and origination fees which have been recorded as a reduction to the carrying amount of the June 2023 Term Loan and amortized to interest expense over the remaining loan term. The terms of the 2023 Term Loan are substantially similar to the terms of the existing term loans, as amended by the Term Loan Amendment, including in relation to maturity and security, except that, among other things, (a) the applicable margin (i) for any 2023 Term Loan designated an “ABR Loan” is 9.00% per annum and (ii) for any 2023 Term Loan designated as a “SOFR Loan” is 10.00% per annum, (b) accrued interest on the 2023 Term Loan is payable in kind, and is capitalized and added to the principal amount of the 2023 Term Loan at the end of each interest period applicable thereto, (c) the 2023 Term Loan does not amortize prior to the maturity date thereof, and (d) the 2023 Term Loan may not be prepaid prior to the payment in full of the existing term loans.
In connection with the June 2023 Term Loan, the Company issued warrants to purchase an aggregate of 1.25 million shares (the “2023 Term Loan Warrants”) of the Company’s common stock, at an exercise price of $1.00 per share. The exercise price and the number of shares underlying the warrant are subject to adjustment in the event of specified events, including dilutive issuances at a price lower than the exercise price of the warrant (the “Down Round Feature”), a subdivision or combination of the common stock, and a reclassification of the common stock or specified dividend payments. The 2023 Term Loan Warrants are exercisable until June 1, 2033. Upon exercise, the aggregate exercise price may be paid, at each warrant holder’s election, in cash or on a net issuance basis, based upon the fair market value of the Company’s common stock at the time of exercise.
We have accounted for warrants in accordance with ASC 480, Distinguishing Liabilities from Equity and ASC 815, Derivatives and Hedging and concluded that the warrants are to be classified as equity and therefore recorded the fair value of the warrants as a component of additional paid in capital in stockholders’ deficit. The Company determined that the fair value of the warrants was $1.2 million using the Black-Scholes-Merton option-pricing model. The assumptions used in the model are as follows: dividend rate of 0%; expected term of 10 years; volatility of 71.6%; and a risk-free rate of 3.61%.
The June 2023 Amendments to the Term Loan were accounted for as modifications. The value of the June 2023 Term Loan Warrants in addition to $0.7 million of fees paid to the lenders have been reflected as a reduction to the carrying amount of the June 2023 Term Loan and amortized to interest expense over the remaining loan term. The Company incurred $0.9 million of legal and financial advisory fees which were included in general and administrated expenses in the condensed consolidated statement of operations and comprehensive loss. The June 2023 Amendments to the PNC Credit Facility were accounted for as modifications and $0.7 million in related fees and expenses were recorded to other assets and are amortized to interest expense over the remaining term of the agreement.
As of June 30, 2023, the interest rate on the Term Loan was 11.16% and the interest rate on the PNC Credit Facility for Domestic Rate Loans and Swing Loans was 10.00%. As of June 30, 2023, the PNC Credit Facility had an available borrowing base of $34.4 million, of which $16.6 million was available to borrow at that date.
Amendment to Registration Rights Agreement
In connection with the June 2023 Amendments, the holders of warrants previously issued to certain lenders in December 2018 and June 2020 (the “Existing Warrants”) and the holder of the June 2023 Warrants entered into an amendment and joinder (the “Registration Rights Agreement Amendment”) to the Amended and Restated Registration Rights Agreement, dated as of June 16, 2020. The Registration Rights Agreement Amendment, among other things, amends the Registration Rights Agreement to grant certain registration rights for the shares of common stock issuable upon the exercise of the 2023 Term Loan Warrant, consistent with the registration rights granted to the holders of the Existing Warrants, including (i) the ability of a holder to request that the Company file a Form S-1 registration statement with respect to at least 40% of the registrable securities held by such holder as of the issuance date of the applicable 2023 Term Loan Warrants on or after June 1, 2023, (ii) the ability of a holder to request that the Company file a Form S-3 registration statement with respect to outstanding registrable securities if at any time the Company is eligible to use a Form S-3 registration statement, and (iii) customary piggyback registration rights, subject to certain customary limitations.
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