Note 9 - Lines of Credit

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Debt Disclosure [Text Block]

NOTE

9

- LINES OF CREDIT

On

July 1, 2016,

Han Feng, HF Group’s main operating entity, entered into a line of credit agreement with East West Bank. The line of credit agreement provided for a revolving credit of

$14,500,000.

The line of credit was secured by virtually all assets of Han Feng, the premises and an adjoining undeveloped parcel of land owned by R&N Holding, and premises owned by R&N Lexington. The principal and all accrued unpaid interest were originally due in

May 2018

and then extended to

May 27, 2019,

in order to provide an uninterrupted credit facility while the renewal of the line of credit is being reviewed by the bank. Interest was based on the prime rate less

0.15%,

but in

no

event less than

3.25%

per annum, and was payable monthly. On

April 18, 2019,

this

$5,156,018

obligation was repaid in full with proceeds from the Credit Agreement with East West Bank entered into on

April 18, 2019,

as described below.

On

November 14, 2012,

NSF, another operating entity, entered into a line of credit agreement with Bank of America. The line of credit agreement provided for a revolving credit of

$4,000,000.

The line of credit was secured by

three

real properties owned by NSF, and guaranteed by the

two

shareholders of the Company, as well as BB, a subsidiary of the Company. The maximum borrowings were determined by certain percentages of eligible accounts receivable and inventories. The principal and all accrued unpaid interest were originally due in

January 2018

and subsequently extended to

February 2020.

Interest was based on the LIBOR rate plus

2.75%.

On

April 18, 2019,

this

$954,984

obligation was paid off in full with proceeds from the Credit Agreement with East West Bank entered into on

April 18, 2019,

as described below.

On

April 18, 2019,

the Company, Han Feng, NSF and Kirnland entered into a Credit Agreement (the “Credit Agreement”) with East West Bank. The Credit Agreement provided for a

$25

million secured line of credit facility available to be used in

one

or more revolving loans to the Company’s domestic subsidiaries that were parties to the Credit Agreement for working capital and general corporate purposes. Han Feng, NSF and Kirnland (the “Borrower Subsidiaries”) were the borrowers and the Company and each of its other material subsidiaries were guarantors of all the obligations under the Credit Agreement. The original maturity of the line of credit was

August 18, 2021.

Contemporaneously with the execution of the Credit Agreement, existing senior debt of the Borrower Subsidiaries in the amount of

$6,111,692

was paid from revolving loans drawn on the line of credit. Under the Credit Agreement, the Borrower subsidiaries were to pay interest on the principal amounts drawn on the line of credit at a rate per annum equal to (a)

0.375%

below the Prime Rate in effect from time to time, or (b)

2.20%

above the LIBOR Rate in effect from time to time, depending on the rate elected at the time a borrowing request is made, but in

no

event would the interest rate of any revolving loan at any time be less than

4.214%

per annum (

4.625%

at

September 30, 2019).

The outstanding balance on the line of credit at

September 30, 2019

was

$11,864,481.

The Credit Agreement contained certain financial covenants which, among other things, required Han Feng to maintain certain financial ratios. On

November 4, 2019,

the line of credit was paid off from borrowings under the Amended and Restated Credit Agreement entered into in connection with the closing of the merger with B&R Global as described below. The outstanding balance paid off, including accrued interest, was

$13,864,481.

On

November 4, 2019,

the Company entered into an Amended and Restated Credit Agreement with JP Morgan Chase Bank, N.A. (“JP Morgan”). The Amended and Restated Credit Agreement provides for a

$100

million asset-secured revolving credit facility maturing on

November 4, 2022,

with an option to renew at the bank’s discretion. The line of credit is collateralized by all assets of the Company and is also guaranteed by B&R Group Realty Holding, LLC (“B&R Group Realty”) and its subsidiaries (“B&R Realty Subsidiaries”), which are related parties of the Company. The Amended and Restated Credit Agreement contains financial covenants requiring the Company on a consolidated basis to maintain a Fixed Charge Coverage Ratio of

1.10

to

1.00,

determined as of the end of each fiscal quarter for the

four

fiscal quarter periods then ended. As of

December 31, 2019,

the Company was in compliance with the covenants under the credit agreement. The outstanding principal balance on the line of credit as of

December 31, 2019

was

$41.6

million.