9. Notes payable, related parties
|6 Months Ended|
Mar. 31, 2019
|Debt Disclosure [Abstract]|
|Note Payable, Related Party||
Note 9: Notes Payable, Related Parties
Appliance Recycling Centers of America, Inc. Note
On December 30, 2017, ASH entered into a Stock Purchase Agreement (the “Agreement”) with Appliance Recycling Centers of America, Inc. (the “Seller”) and ApplianceSmart, Inc. (“ApplianceSmart”), a subsidiary of the Seller. Pursuant to the Agreement, ASH purchased (the “Transaction”) from the Seller all of the issued and outstanding shares of capital stock of ApplianceSmart in exchange for $6,500,000 (the “Purchase Price”). ASH was required to deliver the Purchase Price, and a portion of the Purchase Price was delivered, to the Seller prior to March 31, 2018. Between March 31, 2018 and April 24, 2018, ASH and the Seller negotiated in good faith the method of payment of the remaining outstanding balance of the Purchase Price.
On April 25, 2018, ASH delivered to the Seller that certain Promissory Note (the “ApplianceSmart Note”) in the original principal amount of $3,919,494 (the “Original Principal Amount”), as such amount may be adjusted per the terms of the ApplianceSmart Note. The ApplianceSmart Note is effective as of April 1, 2018 and matures on April 1, 2021 (the “Maturity Date”). The ApplianceSmart Note bears interest at 5% per annum with interest accruing from April 1, 2018, payable at maturity, April 1, 2021, in arrears. ApplianceSmart has agreed to guaranty repayment of the ApplianceSmart Note. The remaining $2,580,506 of the Purchase Price was paid in cash by ASH to the Seller. ASH may reborrow funds, and pay interest on such re-borrowings, from the Seller up to the Original Principal Amount. As of March 31, 2019 and September 30, 2018, there was $3,721,507 and $3,821,507 outstanding on the ApplianceSmart Note, respectively.
On December 26, 2018, ASH and the Seller amended and restated the ApplianceSmart Note to, among other things, grant the Seller a security interest in the assets of ASH and ApplianceSmart in accordance with the terms of separate security agreements entered into between ASH and ApplianceSmart, respectively, and the Seller. In addition, ASH and the Seller modified the terms of when interest and principal would be due. Outstanding principal and accrued and un-paid interest at 5% per annum is now all due and payable on April 1, 2021.
On March 15, 2019, the ApplianceSmart entered into agreements with the Seller and Cross Roads Financial pursuant to which the Seller agreed to subordinate the payment of indebtedness under the ApplianceSmart Note and the Seller’s security interest in the assets of ApplianceSmart and other related parties in exchange for up to $1,200,000. ApplianceSmart paid $1,200,000 to the Seller $100,000 on March 29, 2019, $250,000 on April 5, 2019 and $850,000 on April 15, 2019 as principal payments on the ApplianceSmart Note – see Note 18.
Isaac Capital Fund Note
In connection with the acquisition of Marquis by the Company, the Company entered into a mezzanine loan in the amount of up to $7,000,000 with Isaac Capital Fund (“ICF”), a private lender whose managing member is Jon Isaac, our President and Chief Executive Officer. The ICF mezzanine loan bears interest at 12.5% per annum with payment obligations of interest each month and all principal due in January 2021. As of March 31, 2019, and September 30, 2018, there was $2,000,000 outstanding on this mezzanine loan.
Notes payable, related parties as of March 31, 2019 and September 30, 2018 consisted of the following:
Future maturities of notes payable, related parties at March 31, 2019 are as follows: