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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of report (Date of earliest event reported): December
13, 2023
ELECTROMED, INC.
(Exact
Name of Registrant as Specified in Its Charter)
| Minnesota |
001-34839 |
41-1732920 |
|
(State or Other Jurisdiction of
Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification
Number) |
500
Sixth Avenue NW
New
Prague, MN 56071
(Address of Principal Executive Offices)
(Zip Code)
(952)
758-9299
(Registrant’s Telephone Number, Including
Area Code)
Not
Applicable
(Former Name or Former Address, if Changed
Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Common
Stock, $0.01 par value |
|
ELMD |
|
NYSE American LLC |
| (Title of each class) |
|
(Trading Symbol) |
|
(Name of each exchange
on which registered) |
Indicate by check mark whether the registrant is an emerging
growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
Emerging
growth company ☐
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
| |
Item 1.01 |
Entry into a Mater Definitive Agreement. |
On December 13, 2023, Electromed, Inc. (the "Company") renewed its
$2,500,000 revolving line of credit with Choice Financial Group pursuant to a supplemental rider to the existing Business Loan Agreement
(Asset Based) dated December 18, 2019. The rider provides that the line of credit will be extended for an additional two years and is
now scheduled to mature on December 18, 2025. Interest on borrowings on the line of credit, if any, will remain at prime rate less 1.00%,
with no interest rate floor and payable monthly. The amount eligible for borrowing on the line of credit will remain limited to the lesser
of $2,500,000 or 57.00% of eligible accounts receivable. Payment obligations under the line of credit remain secured by a security interest
in substantially all the tangible and intangible assets of the Company.
The foregoing description of the line of credit, as renewed,
is qualified by reference to the text of the loan agreement and rider, copies of which are attached to this Current Report on Form 8-K
as Exhibits 10.1 and 10.2, respectively, and incorporated by reference into this Item 1.01.
| |
Item 2.03 |
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information set forth in response to Item 1.01 of
this Current Report on Form 8-K is incorporated by reference into this Item 2.03.
| |
Item 9.01 |
Financial Statements and Exhibits. |
(d) Exhibits:
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: December 15, 2023 |
By: |
/s/ Bradley M. Nagel |
|
| |
Name: |
Bradley M. Nagel |
|
| |
Title |
Chief Financial Officer |
|
Exhibit 10.2
RIDER TO BUSINESS LOAN AGREEMENT (ASSET
BASED)
AND RELATED DOCUMENTS
This Rider to Business Loan Agreement (Asset
Based) (“Rider”) is attached to and made a part of that certain Business Loan Agreement (Asset Based) dated
December 18, 2019 (as amended, restated, supplemented or otherwise modified from time to time, including by this Rider, the “Business
Loan Agreement”), referring to that certain original Promissory Note # 15695 dated December 18, 2019 (as amended, restated,
supplemented, extended, renewed, replaced or otherwise modified from time to time, including by this Rider and by the Change in
Terms Agreement dated on or about the date hereof, the “Note”), in each case between Electromed, Inc. (“Borrower”)
and Choice Financial Group (“Lender”). In the event of any inconsistency between this Rider, the Business Loan
Agreement or any of the Related Documents as defined in the Business Loan Agreement (including any Change of Terms Agreement executed
concurrently herewith), the terms of this Rider shall control. Terms used herein and not otherwise defined shall have the meanings
given such terms in the Business Loan Agreement. Accordingly, notwithstanding any provisions of the Business Loan Agreement or
any of the Related Documents:
1. Lender
does not require any opinions of counsel to Borrower in connection with the Loan or any Advance.
2. Borrower’s
representations and warranties with respect to Hazardous Substances are made to the best of its knowledge, based upon reasonable
investigation, and subject to any matters disclosed in any environmental site assessments obtained by or delivered to Lender. Lender
acknowledges and agrees that the Collateral has been used for the storage, use and generation of hazardous substances as customary
in Borrower’s business in compliance with all applicable laws and may in the future be used for such purposes in compliance
with all applicable laws. Further, inspections, tests and assessments of the Collateral by Lender to determine compliance with
the provisions of the Business Loan Agreement and Related Documents relating to Hazardous Substances shall be at Borrower’s
expense only if Lender has reasonable cause to believe Borrower is in violation of such provisions.
3. Lender’s
request for additional information and insurance coverage shall be reasonable for the type of business and type of property constituting
the Collateral. Borrower shall not have the obligation to have the Collateral appraised for insurance purposes during the term
of the Loan.
4. Borrower
shall not have the obligation to notify Lender of defaults under any agreements other than the Business Loan Agreement or Related
Documents unless such defaults are material.
5. Borrower
shall not have the obligation to notify Lender of management changes other than executive management changes.
6. Lender
shall give Borrower reasonable notice prior to inspection of the tangible Collateral or Borrower’s books and records.
7. Lender
shall not have the right to exercise any of the remedies (including
the right of setoff and the right to freeze accounts of Borrower) provided for under the Business Loan Agreement or
Related Documents except upon the occurrence of an Event of Default as defined therein and during the continuance of such Event
of Default.
8. Failure
of the Borrower to make any payment when due under the Loan shall not constitute an Event of Default under the Business Loan Agreement
or any of the Related Documents until five (5) days after written notice thereof is given to Borrower.
Exhibit 10.2
9. Lender will promptly notify Borrower if it makes any expenditures or takes any action pursuant to the paragraph labeled “LENDER’S
EXPENDITURES.”
10. Borrower shall have the right to incur indebtedness and grant related liens to
other lenders and to enter into equipment leases from third party vendors or finance companies to finance equipment acquisitions
not to exceed $100,000 per year without the consent of Lender.
11. The filing of any involuntary bankruptcy or insolvency petition against Borrower shall not constitute an Event of Default unless the
Borrower fails to have such filing dismissed within thirty days after such filing is made or the court grants the petition tor
relief.
12. A change in ownership of Borrower’s stock shall not constitute a default.
13. A
material adverse change in Borrower’s financial condition, or Lender believing the prospect of payment or performance is
impaired, or the Lender otherwise believing itself insecure, shall not constitute an event of default so long as no other event
of default has occurred and is continuing.
14. A
default under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor
of any other creditor or person shall not constitute an Event of Default unless such default involves indebtedness in excess of
$1,000,000 and would materially affect Borrower’s property or Borrower’s ability to repay the Loans or perform its
obligations under the Business Loan Agreement or any other Related Document.
15. Borrower
shall have the right to sell obsolete equipment or fixtures constituting part of the Collateral without the consent of Lender.
16. Lender
shall not sell the Loan to another lender or sell participation interests in the Loan without Borrower’s prior consent, except
in the event of the sale or transfer of substantially all the assets of Lender.
17. There
are no guarantors of the Loan, and no affiliates of Borrower shall be required to provide Collateral.
18. The
definition of “Eligible Accounts” is hereby modified to include (i) foreign accounts that are secured by a letter of
credit issued by a U.S. state or federal bank acceptable to Lender, and (ii) accounts that are conditional but are carried on Borrower’s
books in accordance with GAAP. Further, Lender shall not unreasonably disqualify accounts as Eligible Accounts based upon the creditworthiness
or financial condition of the Account Debtor.
19. The
Commercial Security Agreement dated December 18, 2019 shall secure only the Note and the obligations under the Related Documents.
20. Borrower
may maintain deductib1es under its insurance policies up to $20,000. Borrower shall not have the obligation to notify Lender and
shall have the right to adjust and receive insurance proceeds upon damage to the Collateral not exceeding $50,000, so long as Borrower
promptly repairs and restores such damage. The occurrence of casualty damage or other loss which is insured (other than a reasonable
deductible) shall not constitute an Event of Default.
21. Lender
waives the obligation of Borrower to make monthly payments into reserves for payment of insurance unless and until an Event of
Default occurs and a written notice requiring such reserve payments be made is delivered by Lender to Borrower.
Exhibit 10.2
22. Lender
will not require direct payment of accounts to Lender or into a lock box unless and until an Event of Default occurs and a written
notice requiring such lock box use is delivered by Lender to Borrower.
23. Borrower
has a corporate seal but it is not required for effective execution of the Business Loan Agreement or any of the Related Documents.
24.
The immediate termination of all commitments pursuant to the paragraph labeled “EFFECT
OF AN EVENT OF DEFAULT” will not trigger the mandatory loan prepayment obligation of Borrower pursuant to the paragraph
labeled “Mandatory Loan Repayments” unless and until Lender elects to accelerate the Indebtedness.
25. Borrower
may sell inventory in the ordinary course of business without the prior written consent of the Lender. Borrower may also compromise,
settle, adjust or extend payment under or with regard to Accounts in the ordinary course of business using prudent business practices,
provided the Borrower promptly remedies any noncompliance with the Borrowing Base following such action.
26. All
representations and warranties made by Borrower related to Collateral ownership, title and Security Interests, as well as all
conditions precedent to Advances and covenants of Borrower related to the foregoing, are amended to specifically permit the existence
of and allow the continuance of Permitted Liens.
27. The
terms set forth in the Business Loan Agreement (as modified and controlled by this Rider) control in the event of any inconsistency
between the Business Loan Agreement (as modified and controlled by this Rider) and any Related Document.
28. Borrower
shall only be obligated to reimburse or make payment to Lender for reasonable costs, expenditures and expenses incurred by Lender;
provided, however, that in the event of an enforcement action or proceeding, Borrower shall be obligated to reimburse Lender for
all costs, expenditures and expenses.
29. A
default will not arise in respect of any representations, warranties or covenants made by or binding on Borrower related to compliance
with laws, ordinances, rules and regulations unless the Borrower has failed to comply with such laws, ordinances, rules and regulations
in a manner that has or could have, in the reasonable opinion of the Lender, a material adverse effect on Borrower’s operations
or properties.
30. For
the avoidance of doubt:
(a)
it is understood that all references to a “Restated Agreement” contained
in the Business Loan Agreement are references to the Business Loan Agreement dated as of December 18, 2019 and all references
to an “Existing Agreement” contained in the Business Loan Agreement are references to the Business Loan Agreement
dated as of December 18, 2018, and the Restated Agreement amends and restates in its entirety the Existing Agreement;
(b) it
is understood that all references to a “Restated Agreement” contained in the Note are references to the Promissory
Note dated December 18, 2019 as amended by the Change in Terms Agreement dated November 27, 2023, and all references to an “Existing
Agreement” contained in the Note are references to the Promissory Note dated December 18, 2013 in the original principal
amount of $2,500,000, and the Restated Agreement amends and restates in its entirety the Existing Agreement, as described in the
paragraph titled “PRIOR NOTE”; and
Exhibit 10.2
(c) it
is understood that Commercial Security Agreement dated as of December 18, 2019 amends and restates any prior security agreement
executed by Borrower in favor of Lender, and all references to any Commercial Security Agreement contained in the Business Loan
Agreement or any other Related Agreement are references to the Commercial Security Agreement dated as of December 18, 2019.
31. To
the extent that any payment is required to be made on a day that is not a Business Day, such payment shall, notwithstanding the
date set forth in the applicable agreement or document, be required to be made on the next following day that is a Business Day.
32. Notwithstanding
any reference in any other document executed in connection therewith in December 2018, Borrower and Lender hereby acknowledge
and agree that (a) no replacement or new Business Loan Agreement was executed by the parties in December 2018 and (b) each reference
to the “Business Loan Agreement” contained in the Change in Terms Agreement dated December 18, 2019 or any other related
documents shall be a reference to the Business Loan Agreement (Asset Based) dated December 18, 2016 (as amended by the Change
in Terms Agreement).
33. Notwithstanding
any reference in the Note or any other Related Document, principal and interest outstanding under the Note are due and payable
in full on the maturity date stated therein (or upon the earlier exercise by Lender of its rights and remedies in accordance with
the terms thereof), and are not and shall not be payable upon demand.
34. Borrower
and Lender acknowledge and agree that this Rider amends and restates and replaces that certain prior Rider to Business Loan Agreement
(Asset Based) and Related Documents dated on or about December 18, 2021.
Signature
page follows
IN
WITNESS WHEREOF, the parties hereto have caused this Rider to be duly executed effective as of December 13, 2023.
| |
CHOICE FINANCIAL GROUP |
| |
|
|
|
| |
By: |
/s/ Kevin P. Doyle |
|
| |
Name: |
Kevin P. Doyle |
|
| |
Title: |
Senior Vice President |
|
| |
ELECTROMED, INC. |
| |
|
|
|
| |
By: |
/s/ Bradley M. Nagel |
|
| |
Name: |
Bradley M. Nagel |
|
| |
Title: |
Chief Financial Officer |
|
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