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): January 5, 2023 (December 29, 2022)
| SMART FOR LIFE, INC. |
| (Exact name of registrant as specified in its charter) |
| Delaware | 001-41290 | 81-5360128 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
| 990 S Rogers Circle, Suite 3, Boca Raton, FL | 33487 | |
| (Address of principal executive offices) | (Zip Code) |
| (786) 749-1221 |
| (Registrant’s telephone number, including area code) |
| N/A |
| (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 | ||
| Common Stock, par value $0.0001 per share | SMFL | The Nasdaq Stock Market LLC |
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 Material Definitive Agreement. |
As previously disclosed, on July 1, 2021, Smart for Life, Inc. and certain of its subsidiaries (collectively, the “Company”) entered into a loan agreement, which was amended on June 29, 2022 (as amended, the “Loan Agreement”), with Diamond Creek Capital, LLC (the “Lender”) for a term loan in the principal amount of up to $3,000,000 (the “Loan”). The Loan bears interest at a rate of 15.0% per annum, provided that upon an event of default, such rate shall increase by 5%. The Loan was due and payable on the earlier of July 1, 2022 or upon completion of the Company’s initial public offering in February 2022. The Company repaid a portion of the Loan from the proceeds of such initial public offering. In connection with such repayment, the Lender agreed that the remaining balance was due and payable on January 1, 2023. The Loan is secured by all of the Company’s assets and the Loan Agreement contains customary events of default and financial and other covenants for a loan of this type.
On December 29, 2022, the Company and the Lender entered into a Second Amendment to Loan Agreement (the “Amendment”) to amend the terms of the Loan Agreement. Pursuant to the Amendment, the maturity date was extended to July 1, 2023 and certain financial covenants set forth in the Loan Agreement were amended, as more particularly described in the Amendment. The Lender also waived certain financial covenants set forth in the Loan Agreement. As consideration for entering into the Amendment, the Company agreed to pay the Lender an extension, waiver and amendment fee of $30,000 concurrent with entering into the Amendment.
The foregoing summary of the terms and conditions of the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment attached as Exhibit 10.1 hereto, which are incorporated herein by reference.
| 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 under Item 1.01 is incorporated by reference into this Item 2.03.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
|
Exhibit No. |
Description of Exhibit | |
| 10.1 | Second Amendment to Loan Agreement, dated December 29, 2022, between Smart for Life, Inc. and Diamond Creek Capital, LLC | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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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: January 5, 2023 |
SMART FOR LIFE, INC. | |
| /s/ Darren C. Minton | ||
| Name: | Darren C. Minton | |
| Title: | Chief Executive Officer | |
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Exhibit 10.1
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO THE LOAN AGREEMENT (this “Second Amendment”), dated and effective as of December 29, 2022, amends the Loan Agreement dated as of July 1, 2021 and amended on June 29, 2022 by and between Smart For Life, Inc., a Delaware corporation (“SFL” or the “Company”), and Diamond Creek Capital, LLC, a Delaware limited liability company (“Lender”) (as amended, the “Loan Agreement”). Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement (as defined below).
WHEREAS, the Lender, and the Company (formerly, Bonne Santé Group, Inc.), Doctors Scientific Organica, LLC, a Florida limited liability company (“DSO”), Bonne Santé Natural Manufacturing, Inc., a Florida corporation (“BSNM”), Nexus Offers, Inc., a Florida corporation (“Nexus”), GSP Nutrition, Inc., a Florida corporation (“GSP”) and Ceautamed Worldwide, LLC, a Florida limited liability company (“Ceautamed’) and together with the Company, DSO, BSNM, Nexus, and GSP, the “Borrower”), are parties to (i) the Loan Agreement dated July 1, 2021 and amended on June 29, 2022, and (ii) Security Agreement dated July 1, 2021 (the “Security Agreement” and together with the promissory note and any other agreements relating thereto, the “Loan Agreements”).
I. RECITALS
II. WHEREAS, Borrower and Lender desire to amend certain terms of the Loan Agreement;
III. WHEREAS, the Borrower currently has an outstanding principal balance of $1,125,000 in Loans under the Loan Agreement identified above as of December 31, 2022; accrued and unpaid interest on such Loans of $14,531.25 through and including December 31, 2022; and an outstanding Monitoring Fee in the amount of $1,000.00 as of December 31, 2022.
IV. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:
1. Definitions. Section 1.01 of the Loan Agreement is hereby amended to delete and replace the following definition:
“Maturity Date” means the earlier of (a) July 1, 2023, and (b) such earlier date on which the Loan is due and payable (whether at stated maturity, by acceleration or otherwise) in accordance with the terms of this Agreement.”
2. Waiver and Amendments. Lender shall agree to waive the financial covenants specified in Section 2.04 (d) EBITDA Deficit and Section 5.02 (n) Funded Debt/EBITDA Ratio of the Loan Agreement for all of the Borrower’s 2022 fiscal year. Furthermore, Borrower and Lender agree to amend the subject covenants in tandem with the execution of the Second Amendment. Section 2.04 (d) EBITDA Deficit of the Loan Agreement shall be amended as follows: While any principal under this Agreement is outstanding, the aggregate Funded Debt shall not exceed three (3) times the annualized three (3) month EBITDA of Borrower, as measured on a quarterly basis 30 days after each calendar quarter (commencing on March 31, 2023), based on the annualized 3 month period ending on the last day of such calendar quarter. In the event any such measurement reveals an aggregate outstanding Funded Debt in excess of the limit set forth above (“EBITDA Deficit”), the Borrower shall make a prepayment against the outstanding principal amount under this Agreement equal to the EBITDA Deficit, within 30 days of the EBITDA Deficit measurement. For the avoidance of doubt, EBITDA shall be calculated on an annualized run rate basis during the duration of the Second Amendment.
Section 5.02 (n) Funded Debt/EBITDA Ratio of the Loan Agreement shall be amended as follows: Borrower shall not permit the aggregate Funded Debt during the annualized three (3) month period to exceed three (3) times the annualized trailing three (3) month EBITDA of Borrower, as measured on a quarterly basis on and after March 31, 2023. For the avoidance of doubt, EBITDA shall be calculated on an annualized run rate basis during the duration of the Second Amendment.
3. Extension, Waiver and Amendment Fee. Lender shall receive an aggregate Extension, Waiver and Amendment Fee in the amount of $30,000.00 for agreeing to extend the Loans, waive the subject financial covenants for Borrower’s entire 2022 fiscal year, and agree to the aforementioned amendments. Lender and Borrower agree that the Waiver Fee will be paid concurrent with the execution of the Second Amendment.
4. Reaffirmation. The Loan Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Borrower ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement. Borrower confirms that after giving effect to this Amendment, an Event of Default has not occurred and is not continuing.
5. Loan Agreement. Except as expressly amended and modified by this Second Amendment (and any prior amendments), the Loan Agreement shall remain in full force and effect.
6. Counterparts. This Second Amendment may be executed in any number of counterparts, any of which may be executed and transmitted by facsimile or electronic mail transmission, and each of which will be deemed to be an original of this Amendment, and all of which, when taken together, shall be deemed to constitute one and the same agreement.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be executed and delivered as of the date first above written.
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