Scott's Liquid Gold - Inc. (Form: 8-K, Received: 12/21/2022 16:06:52)

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 15, 2022

SCOTT'S LIQUID GOLD-INC.

(Exact name of Registrant as Specified in Its Charter)


Colorado	001-13458	84-0920811
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

8400 E. Crescent Parkway Suite 450
Greenwood Village, Colorado		80111
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (303) 373-4860

(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:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

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 Material Definitive Agreement.

Amendment to Loan and Security Agreement

On December 15, 2022, Scott’s Liquid Gold-Inc., a Colorado corporation (the “Company”), entered into the Consent and Sixth Amendment to Loan and Security Agreement (the “Amendment”), amending its Loan and Security Agreement with UMB Bank, N.A., dated July 1, 2020 (as previously amended, the “Agreement”). The Amendment consents to the sale of Prell® assets (described below) and updates the borrowing base calculation under the Agreement. The foregoing description of the Amendment is a summary only and is qualified in its entirety by reference to the terms of the Amendment, which is attached hereto as Exhibit 10.1 and incorporated herein by reference.

Sale of Prell Assets

On December 15, 2022, Neoteric Cosmetics, Inc., a Colorado corporation, (“Neoteric”) and wholly owned subsidiary of Scott’s Liquid Gold Inc., entered into an Asset Purchase Agreement (the “Purchase Agreement”) with AFAM Concept, Inc, an Illinois corporation (“Buyer”), pursuant to which the Company agreed to sell to Buyer all of Neoteric’s right, title and interest in and to certain assets of the Prell® product line, which includes shampoo and conditioner (the “Business”), together with certain obligations and liabilities relating to the Business. The transactions contemplated by the Purchase Agreement were consummated on December 15, 2022.

Item 2.01. Completion of Acquisition or Disposition of Assets.

The description of the Disposition contained in Item 1.01 above is hereby incorporated by reference.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits: The following exhibits are filed as part of this report:


Exhibit No.		Description
10.1		Consent and Sixth Amendment to Loan and Security Agreement, dated December 15, 2022
104		Cover Page Interactive Data File

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.


			SCOTT'S LIQUID GOLD-INC.

Date:	December 21, 2022	By:	/s/ David M. Arndt
			David M. Arndt Chief Financial Officer

Exhibit 10.1

CONSENT AND SIXTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT

THIS CONSENT AND SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) dated as of December 15, 2022, is entered into by umb bank, n.a. (together with its successors and assigns, “Lender”), SCOTT’S LIQUID GOLD-INC., a Colorado corporation (“SLG”), SLG CHEMICALS, INC., a Colorado corporation (“Chemicals”), and NEOTERIC COSMETICS, INC., a Colorado corporation (“NC”, and together with SLG and Chemicals, collectively, “Borrowers” and each, a “Borrower”) and each of the undersigned guarantors (collectively “Guarantors” and together with Borrowers, “Obligors”), with reference to the following facts:

RECITALS

A. Lender and Borrowers are parties to a Loan and Security Agreement dated as of July 1, 2020 (as amended, supplemented, replaced, restated or otherwise modified, the “Loan Agreement”), pursuant to which Lender has provided certain credit facilities to Borrowers.

B. Borrowers have requested that Lender consent to the entry by NC and SLG into the Asset Purchase Agreement, dated as of December 15, 2022 (the “Prell APA”), with AFAM Concept, Inc. (“Prell Buyer”) and the sale of the Purchased Assets (as defined therein) (the “Prell Assets”).

C. Lender is willing to provide such accommodations to the Borrowers on the terms and conditions set forth below.

NOW, THEREFORE, the parties hereby agree as follows:

Defined Terms. Any and all initially capitalized terms used in this Amendment (including, without limitation, in the Recitals to this Amendment) without definition shall have the respective meanings assigned thereto in the Loan Agreement. The following defined terms in Section 1.1 of the Loan Agreement are hereby added or amended and restated in their entirety, as appropriate, to read as follows:

“‘Borrowing Base’ means, as of any date of determination, an amount equal to:

(a) 85% (or such lesser percentage as Lender may in its Permitted Discretion determine from time to time) of the Net Amount of Eligible Accounts; plus

(b) the least of:

(i) 50% minus the Inventory Advance Reduction Amount (or such lesser percentage as Lender may in its Permitted Discretion determine from time to time) of the Net Amount of Eligible Inventory;

(ii) 85% minus the Inventory Advance Reduction Amount (or such lesser percentage as Lender may in its Permitted Discretion determine from time to time) of the Net Orderly Liquidation Value of Eligible Inventory; plus; and

(iii) $1,838,000, minus

[Consent and Sixth Amendment to

Loan and Security Agreement]

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FILENAME \* MERGEFORMAT [SLG] Consent and Sixth Amendment 4875-6455-8147 v.1

Without limiting Lender’s Permitted Discretion to implement other Reserves, Lender shall have the option to institute Reserves with respect to Eligible Accounts in the event that dilution exceeds 5.00% such that the advance rate on such account shall be reduced by 1.00% for each percentage of dilution in excess of 5.00%.

‘Prell APA’ means the Asset Purchase Agreement, dated as of December 15, 2022, among NC, SLG and AFAM Concept, Inc.

‘Prell Royalty Payments’ means all Royalty Payments (as defined in the Prell APA) paid by AFAM Concept, Inc.

‘Prell Sale Reserve” means $339,000 plus the amount of any Prell Royalty Payments.”

Consent to Sale. Lender is willing to consent to sale of the Prell Assets on the condition that (a) 100% of the net proceeds from the sale of the Prell Assets (including, without limitation, all Prell Royalty Payments) (the “Prell Net Proceeds”) are paid to Lender, (b) the proceeds are used to pay down the Revolving Loans (which amounts may be readvanced on the terms and conditions set forth in the Loan Agreement, as amended hereby).

Third Party Deliverables. Upon Lender’s receipt of a countersigned copy of this Amendment, Lender will execute and deliver the attached Consent to Sale Free and Clear of Liens in favor of Buyer.

Renewal and Extension of Security Interests and Liens. Each Obligor hereby (a) renews and affirms the Liens created and granted in the Loan Documents, and (b) agrees that this Amendment shall in no manner affect or impair the Liens securing the Obligations, and that such Liens shall not in any manner be waived, the purposes of this Amendment being to modify the Loan Agreement as herein provided, and to carry forward all Liens securing the same, which are acknowledged by such Obligor to be valid and subsisting.

Integration. This Amendment, and the documents referred to herein constitute the entire agreement of the parties in connection with the subject matter hereof and cannot be changed or terminated orally. All prior agreements, understandings, representations, warranties and negotiations regarding the subject matter hereof, if any, are merged into this Amendment.

Counterparts. This Amendment may be executed in multiple counterparts, each of which when so executed and delivered shall be deemed an original, and all of which, taken together, shall constitute but one and the same agreement. The parties agree that the electronic signature of a party to this Amendment shall be as valid as an original manually executed signature of such party and shall be effective to bind such party to this Agreement.

Release. Each of the Obligors (for purposes of this Section, each a “Releasing Party” and collectively, the “Releasing Parties”) releases, acquits and forever discharges Lender, UMB Financial Corporation and their respective past, present and future directors, officers, employees, agents, attorneys, affiliates, successors, administrators and assigns (collectively, the “Released Parties”) of and from any and all claims, actions, causes of action, demands, rights, damages, costs, loss of service, expenses and compensation whatsoever, heretofore or hereafter arising from any events or occurrences, or anything done, omitted to be done, or

[Consent and Sixth Amendment to

Loan and Security Agreement]

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FILENAME \* MERGEFORMAT [SLG] Consent and Sixth Amendment 4875-6455-8147 v.1

allowed to be done by any of the Released Parties on or before the date of execution of this Amendment, WHICH DO OR MAY EXIST, WHETHER KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED, FORESEEN OR UNFORESEEN (collectively, the “Released Matters”). In furtherance of this general release, Releasing Parties each acknowledge and waive the benefits of California Civil Code Section 1542 (and all similar ordinances and statutory, regulatory, or judicially created laws or rules of any other jurisdiction), which provides:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.”

Acknowledgment of Guarantor. Each Guarantor hereby acknowledges and agrees to the terms and conditions of this Amendment, acknowledges and reaffirms its/his/her obligations owing to Lender under its/his/her Guaranty, and each other Loan Document to which such Guarantor is a party, and agrees that the Guaranty and other Loan Documents are and shall remain in full force and effect. Although each Guarantor has been informed of the matters set forth herein and has acknowledged and agreed to the same, each Guarantor understands and acknowledges that Lender has no obligation to inform Guarantors of such matters in the future or to seek any Guarantor’s acknowledgement or agreement to future amendments, and nothing herein shall create such a duty.

Costs and Expenses. Borrowers agree to pay upon demand all of Lender’s expenses, including without limitation reasonable, reasonably documented attorneys’ fees, charges and disbursements of outside counsel for Lender, incurred in connection with the preparation, negotiation, review, analysis, administration, enforcement or modification of, and collection and other litigation relating to, or arising out of the Loan Agreement or any other Loan Document, or any amounts owing thereunder. Lender may pay someone else to help collect such amounts and to enforce the Loan Agreement or any other Loan Document, and Borrowers will pay that amount. This includes, subject to any limits under applicable law, reasonable, reasonably documented Lender’s attorneys’ fees and legal expenses, whether or not there is a lawsuit, including attorneys’ fees for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), foreclosure costs, appeals, and any anticipated post-judgment collection services. Borrowers will pay any court costs, in addition to all other sums provided by law.

10.

Governing Law. This Amendment, the interpretation and construction of this Amendment and any provision of this Amendment and of any issue relating to the transactions contemplated by this Amendment shall be governed by the laws of the State of CALIFORNIA, not including conflicts of law rules.

11.

Waiver of Jury Trial. To the fullest extent permitted by applicable law, the parties hereto each hereby waives the right to trial by jury in any action, suit, counterclaim, or proceeding arising out of or related to this Amendment.

[Consent and Sixth Amendment to

Loan and Security Agreement]

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FILENAME \* MERGEFORMAT [SLG] Consent and Sixth Amendment 4875-6455-8147 v.1

12.

Further Assurances. Borrowers agree to execute and deliver such other agreements, documents and instruments and take such other actions as Lender may reasonably request in connection with the transactions contemplated by this Amendment.

13.

ENTIRE AGREEMENT. THIS AMENDMENT, THE LOAN AGREEMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED AND DELIVERED IN CONNECTION WITH AND PURSUANT TO THIS AMENDMENT AND THE LOAN AGREEMENT REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[Signature Page Follows]

[Consent and Sixth Amendment to

Loan and Security Agreement]

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FILENAME \* MERGEFORMAT [SLG] Consent and Sixth Amendment 4875-6455-8147 v.1

IN WITNESS WHEREOF, Obligors and Lender have executed this Amendment by their respective duly authorized officers as of the date first above written.


	LENDER: UMB BANK, N.A. By: /s/ Phillip Goessler Name: Phillip Goessler Title: Senior Vice President
	BORROWERS: SCOTT’S LIQUID GOLD-INC. By: /s/ David Arndt Name: David Arndt Title: Chief Financial Officer
	SLG CHEMICALS, INC. By: /s/ David Arndt Name: David Arndt Title: Chief Financial Officer
	NEOTERIC COSMETICS, INC. By: /s/ David Arndt Name: David Arndt Title: Chief Financial Officer

[Consent and Sixth Amendment to

Loan and Security Agreement]

GUARANTORS:

SLG TOUCH-A-LITE, INC.
By:  /s/ David Arndt
Name:  David Arndt
Title:  Chief Financial Officer

[Consent and Sixth Amendment to

Loan and Security Agreement]

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