Item 1.01. Entry into a Material Definitive Agreement.
On July 6, 2022, CLR Roasters, LLC (“CLR”), a wholly owned subsidiary of Youngevity International, Inc. (the “Company”), entered into a loan and security agreement (the “Loan and Security Agreement”) with GemCap Solutions, LLC (“GemCap”) pursuant to which CLR issued to GemCap a secured revolving loan promissory note in the principal sum of up to $4,000,000 (the “Note”). The Loan and Security Agreement provides for a line of credit in an amount equal to the lesser of (a) $4,000,000 or (b) the Borrowing Base, which is defined as the sum of (A) the product obtained by multiplying the outstanding amount of all eligible accounts receivable, net of all taxes, discounts, allowances and credits given or claimed, by up to 80%, plus (B) the lesser of (i) the product obtained by multiplying the cost of then-existing eligible inventory by 70% and (i) the sum of (x) which is the product obtained by multiplying the lower of cost or market price of then-existing eligible green coffee inventory by 60% and (y) the product obtained by multiplying the lower of cost or market price of then-existing eligible roasted inventory by 70%.
The outstanding principal balance of the line of credit bears interest based upon a 360-day year with interest charged for each day the principal amount is outstanding including the date of actual payment. The interest rate is a rate equal to the greater of (a) 7.50% or (b) the sum of the prime rate plus 3.50%. At closing, the GemCap line of credit was used to pay off CLR’s line of credit balance with Crestmark Bank of approximately $1,717,000.
As collateral security for the payment and performance of the obligations, CLR granted and conveyed to GemCap a first priority continuing security interest in and lien upon all owned and hereafter acquired or created property and assets of CLR and the proceeds and products thereof, which property, assets and proceeds, together with all other collateral security for the obligations granted to or otherwise acquired by GemCap, is considered collateral, such as, accounts receivables, inventory, deposit accounts, property and equipment and intangible assets.
The Loan and Security Agreement contains certain financial and nonfinancial covenants with which the Company must comply to maintain its borrowing availability and avoid penalties, such as a prohibition on additional indebtedness and other liens. The Note matures in June 2024. In addition, pursuant to a Secured Continuing Guarantee, dated July 6, 2022 (the “Guarantee”), the Company’s Chief Executive Officer and Chief Operating Officer personally guaranteed CLR’s obligations to GemCap under the Loan and Security Agreement.
The Loan and Security Agreement contains customary representations, warranties, conditions and indemnification obligations of the parties. The representations, warranties and covenants contained in the Loan and Security Agreement were made only for purposes of such agreement and as of a specific date, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties.
The foregoing descriptions of the terms of the Loan and Security Agreement, the Note and the Guarantee are qualified in their entirety by reference to the full text of the Loan and Security Agreement, the Note and the Guarantee, copies of which are filed as Exhibits 10.1, 10.2 and 10.3, respectively, to this Current Report on Form 8-K and incorporated herein by reference.