Item 1.01 Entry into a Material Definitive Agreement.
On December
2
9
, 2017,
Micron Products, Inc. (“Micron”), a wholly owned subsidiary of Micron Solutions, Inc. (NYSE:American MICR), (“Micron Solutions”, collectively the “Company”) entered into a new three-year $9,500,000
Asset Based
Credit and Security Agreement (the “Agreement”) with Rockland Trust Company (“Lender”), a Massachusetts trust company, replacing the Company’s previous lender. The terms and conditions outlined herein are merely summaries and subject to the full text of the Agreement and related documents.
The Agreement includes a revolving line of credit of up to $5.0 million (“Revolver”), a machinery and equipment term loan of $2.5 million (“Equipment Loan”) and a real estate term loan of $2.0 million (“Real Estate Loan” and together with the “Equipment Loan” the “Term Loans”).
The purpose of the financing is (a) to refinance the approximate $5.6 million of indebtedness owed to the Company’s previous lender, (b) to repay subordinated debt in the approximate amount of $450,000, plus interest, (c) to pay the expenses in respect of the financing, and (d) subject to the terms and conditions of the Agreement, for the future general corporate purposes of the Company.
The $5
.0 million
R
evolver
provides for borrowings up to:
|
|
(i)
Up to 85% of the face amount of eligible accounts (other than credit insured accounts),
plus
|
|
|
(ii)
Up to 90% of the face amount of credit insured accounts,
plus
|
|
|
(iii)
The least of (i) up to 60% of
the cost of eligible inventory
, (ii) up to 80% of the net orderly liquidation value of the cost of such eligible inventory, and (iii) $1,500,000 minus the amount of eligible consigned inventory included in the Borrowing Base,
plus
|
|
|
(iv)
The lesser of (i) up to 60% of the cost of eligible consigned inventory (as determined from an initial and subsequent periodic appraisals), and (ii) $400,000,
minus
|
|
|
(v)
Certain r
eserves established in Lender’s discretion.
|
The R
evolver
allows for interest only payments during the term of the facility with the full principal outstanding balance to be paid upon maturity on
December
29
, 2020
.
All borrowing
s of the R
evolver shall be at
Micron’s
option
of either
,
the Wall Street Journal prime rate plus 0.5%
,
or daily one-month LIBOR plus 3.25%
.
This
R
evolver carries a provision for a quarterly unused facility fee equal to 0.25% per annum of the average daily undisbursed face amount of the revolver during the three months immediately preceding the applicable due date and has no prepayment penalty.
The Equipment Loan requires monthly principal payments of
approximately
$29,762,
payable on the first day of each month commencing February 1, 2018.
The Equipment Loan is based upon an eighty-four (84) month amortization with a balloon payment of
approximately
$1,4
5
8,
333
due and payable in f
ull upon maturity on December 29
, 2020
or as specified in the Agreement
.
The Real Estate Loan requires monthly principal payments of
approximately
$8,333,
payable on the first day of each month commencing February 1, 2018. The Real Estate Loan
is based upon a
two hundred and forty (240)
month amortization with a balloon payment
of
approximately
$1,70
8
,
333
due
and payable in full upon maturity on December
29
, 2020
or as specified in the Agreement.
.
Interest on the Terms
Loans
shall be at such
Wall Street Journal
prime rate plus 0.75%, or daily one-month LIBOR plus 3.5%.
All interest
will
be calculated based upon a year of 360 days for actual days elapsed. All interest
will
accrue from the Closing Date and
will
be payable monthly in arrears in cash. Upon the occurrence and during the continuation of an Event of Default, all interest
will
be increased by 2% above the per annum rate otherwise applicable thereto.
The Term
Loans
carry a
prepayment
penalty
with respect to the prepa
yment of any portion of either Term L
oan equal to 3%, 2%, and 1% of the amount prepaid in the first, second, and third years, respectively, of the
Agreement
.
This
three
-year
Agreement
contains covenants related to various matters including certain financial covenants, prohibitions on further borrowings and security interests, merger or consolidation, acquisitions, guarantees, sales of assets other than in the normal course of business, leasing, and payment of dividends.
The lender has a security interest in all assets of Micron and a mortgage encumbering certain real property. Micron Solutions serves as Guarantor of all obligations of Micron.
A
portion
of the proceeds of the
Agreement
will be used to repay the Company’s subordinated promissory notes
(“Notes”) held by
six inve
s
tors totaling $450,000
, plus interest
. The
Notes
were part of a private offering in December 2013 which were refinanced in October 2016 to mature on December 31, 2018. Three
of such
investors are related parties:
REF Securities, LLP, and with Mr. Rodd E. Friedman, a director of the Company since July 21, 2017, a beneficial owner of approximately 13% of the Company’s common stock, invested $100,000 in the offering; the Chambers Medical Foundation (the “Foundation”), beneficial owner of approximately 10% of the Company’s common stock, invested $100,000 in the offering; and Mr. E. P. Marinos, director emeritus, invested $50,000 in the offering. The Company’s Chairman of the Board is a co-trustee of the Foundation but has held no dispositive powers since his appointment as such.
Forward-Looking Statements
Except for the historical information contained herein, the matters disclosed herein include forward-looking statements which are the Company’s current views with respect to future events and financial performance. These forward-looking statements are subject to many assumptions, risks and uncertainties that could cause actual results to differ significantly from historical results or those anticipated by the Company. The most significant of these risks are detailed from time to time in the Company’s filings and reports with the Securities and Exchange Commission including the Company’s annual report on Form 10-K for the year ended December 31, 2016 and the Company’s quarterly report on Form 10-Q for the three and nine months ended September 30, 2017. If one or more of these risks or uncertainties materializes, or if underlying assumptions prove incorrect, the Company’s actual results may vary materially from those expected, estimated or projected. Actual events or results may differ materially. It is advisable not to place undue reliance on any forward-looking statements. The Company undertakes no obligation to, and does not, publicly update or revise any forward-looking statements, except as required by federal securities laws, whether as a result of new information, future events or otherwise.