Appliance Recycling announced that the Hennepin County District Court, State of Minnesota, has granted final approval of a settlement of the stockholder derivative lawsuit captioned Gray, et al. v. Cameron, et al. The plaintiffs in this lawsuit sought to assert claims derivatively on behalf of ARCA against certain of the company's current and former officers and directors. The settlement resolves all claims asserted in the lawsuit. ARCA and the other defendants denied plaintiffs' allegations, and have not admitted any liability or wrongdoing as part of the settlement. The court made no findings or determinations with respect to the merit of plaintiffs' claims, and no payment is being made by ARCA or the other defendants. As a condition of the settlement, ARCA has agreed to provide certain training to employees in the company's accounting department for a period of one year. The court also granted an application by plaintiffs' counsel for attorneys' fees, to be paid by the company's insurance carrier. No other payment or other consideration was paid by ARCA nor its officers or directors in connection with the settlement.
On September 20, Appliance Recycling Centers of America received a written notice of default, dated September 20, from MidCap Funding X Trust, asserting that events of default had occurred with respect to that certain Credit and Security Agreement dated May 10, 2017, by and among the Agent and certain other Lenders, and the company and certain of its subsidiaries. The Agent alleges in the Notice of Default that, as a result of the company's recent acquisition of GeoTraq, and the issuance of promissory notes to the stockholders of GeoTraq in connection with such acquisition, the Borrowers have failed to comply with certain terms of the Loan Agreement, and that such failure constitutes one or more Events of Default under the Loan Agreement...The Agent has not declared the amounts outstanding under the Loan Agreement to be immediately due and payable but has imposed the default rate of interest 10.73%, which is 5% in excess of the rates otherwise payable under the Loan Agreement), effective as of August 18, 2017 and continuing until the Agent notifies the Borrowers that the specified Events of Default have been waived and no other Events of Default exist. As of the filing of this Current Report on Form 8-K, the outstanding balance of borrowings under the Loan Agreement was approximately $3,021,375. The company strongly disagrees with the Lenders that any Event of Default has occurred and is reserving all of its options with respect to the Loan Agreement. The company and the Agent have begun discussions for forbearance of the default, however there can be no assurance the company and the Agent will be able to agree on terms of the forbear
Appliance Recycling announced that it has acquired GeoTraq, a manufacturer of what is widely regarded as the world's smallest cellular tracking module designed specifically for the Internet of Things market.
Appliance Recycling Centers of America announced that on September 6, 2017 it received notification from the Listing Qualifications Department of The Nasdaq Stock Market that the company has regained compliance with Listing Rule 5550(a)(2).
Appliance Recycling announces that management anticipates increased profitability following recent corporate-wide efforts to reduce costs and streamline operations. The company recently launched an initiative to increase productivity and streamline operations, which management believes will result in increased profitability. As part of this initiative, management conducted an extensive audit of current costs to determine areas where cuts could be enacted, which led to an 18 percent reduction in overhead costs, which the company recently reported for the quarter ending July 1, 2017. In addition, several areas were identified where systems could be streamlined. The result was a significant cost savings that management believes will garner continued profitability going forward. This initiative is expected to continue in the coming quarters.
Appliance Recycling Centers of America announces that it intends to diversify and reposition its current business model. Having nearly completed a turnaround of its existing operations and successfully sold its joint venture interest in AAP, management commenced discussions with its Board of Directors to reposition the company's current business model. As part of this effort, the company will seek to acquire targets in high margin, high growth industries such as the technology sector. Management believes this repositioning will lead to an increase in shareholder value and will attract institutional shareholders to the company's stock.
Appliance Recycling has completed the sale of its 50% joint venture interest in ARCA Advanced Processing. In a transaction valued at approximately $5M, the company received $800K in cash and was released from more than $4M in direct and contingent liabilities and guarantees. In addition, the transaction is expected to improve the company's net income moving forward.