Note 10 - Subsequent Events

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Subsequent Events [Text Block]

10.

     Subsequent Events

On

February 7, 2019,

the Company, Buyer and related parties entered into a Consent, Reaffirmation, and Joinder (the “Consent”) in connection with a new senior credit facility that Buyer expected to enter into with Alterna Capital Solutions, LLC (“Alterna”).  Pursuant to the Consent, Buyer paid

$180,000

of principal and accrued interest under the A&R Note as provided in the Consent and Buyer delivered a Seconded Amended and Restated Subordinated Secured Promissory Note (the “Second A&R Note”) in favor of the Company. The Second A&R Note has a principal amount of

$3,201,536

and remains payable

no

later than

March 2, 2023.

The terms of the Second A&R Note are substantially the same as those of the A&R Note. The Second A&R Note also remains guaranteed by Stanley Intermediate Holdings LLC, formerly Churchill Downs Intermediate Holdings LLC. Pursuant to the Consent, Buyer’s British Virginia island parent company has also guaranteed the Second A&R Note.

In addition, Buyer’s British Virgin Island parent company repurchased

2,500

shares of its stock held by the Company for

$120,000

pursuant to a stock purchase agreement dated

February 7, 2019. 

The Company

no

longer maintains an equity interest in Buyer’s British Virgin Island parent company.

On

February 25, 2019,

Buyer closed and funded its new senior credit facility with Alterna. Pursuant to the Consent, the Company entered into an Intercreditor and Debt Subordination Agreement, dated

February 25, 2019 (

the “Subordination Agreement”), with Alterna. The Subordination Agreement with Alterna is generally on the same terms as the subordination agreement the Company previously entered into with North Mill Capital, LLC in connection with the original subordinated secured promissory note dated

March 2, 2018

from Buyer in favor of the Company, except that principal payments on the Second A&R Note, before satisfaction of the of indebtedness to Alterna and termination of the Subordination Agreement, are conditioned upon (l)

no

event of default under the new senior credit facility existing or resulting from the payment,  (

2

) availability under the new senior credit facility to make the payment, (

3

) all tax and debt obligations of SFC being current and within their terms,  and (

4

) there being

no

delinquency in payables or other obligations of SFC to specified critical vendors. 

Subsequent to

December 31, 2018

through the report date, the Company has received principal payments from S&L of approximately

$704,000

 resulting in a current balance of approximately

$3,696,000

 under the S&L Note.

As the CDSOA distributed monies collected by Customs to eligible domestic producers that supported a successful antidumping petition (“Supporting Producers”), a portion of the proceeds were retained and held in an escrow account in order to fund future expenses (such as professional fees) related to the petition.  As of

December 31, 2018,

there was approximately

$7.5

million held in escrow in addition to cash deposits held of

$224,000.

  During the

first

quarter of

2019,

the Supporting Producers group decided, based on the current facts and circumstances of the petition, to disburse the portion of those funds related to the

2013,

2014,

and

first

half of

2015

distributions, which was approximately

$3.5

million.  The Company’s share of the escrow release is approximately

$1.2

million, which we received on

March 15, 2019. 

The group of Supporting Producers expect that the remaining funds held in escrow will be used for future expenses related to the petition.  The Company does

not

expect any future disbursements related to these escrow funds.

On

March 19, 2019,

HG Holdings, Inc. (the “Company”) entered into subscription agreements with HC Government Realty Trust, Inc., a Maryland corporation (“HC Realty”), pursuant to which it purchased (i)

200,000

shares of HC Realty’s

10.00%

Series B Cumulative Convertible Preferred Stock (the “Series B Stock”) for an aggregate purchase price of

$2,000,000

and (ii)

300,000

shares of HC Realty’s common stock for an aggregate purchase price of

$3,000,000.

  Certain investors affiliated with Hale Partnership Capital Management, LLC (the “Hale Partnership”) purchased an additional

850,000

shares of Series B Stock for an aggregate purchase price of

$8,500,000.

 

On

March 19, 2019,

the Company and certain entities affiliated with the Hale Partnership (the “Lenders”) also entered into a loan agreement with HC Government Realty Holdings, L.P., HC Realty’s operating partnership (the “Operating Partnership”), pursuant to which the Lenders provided the Operating Partnership with a

$10,500,000

senior secured term loan, of which

$2,000,000

was provided by the Company.

In connection with the transactions discussed above, Steven A. Hale II (“Hale”), the Company’s Chairman and Chief Executive Officer, was appointed to serve as HC Realty’s Chairman and Chief Executive Officer, effective immediately, and Hale, Brad G. Garner, the Company’s Principal Financial and Accounting Officer, and Matthew A. Hultquist,

one

of the Company’s directors, were each appointed to serve as directors of HC Realty, effective immediately.

HC Realty currently owns and operates a portfolio of

16

single-tenant properties leased entirely to the United States of America for occupancy by federal agencies including the Federal Bureau of Investigation, the Drug Enforcement Administration, the Social Security Administration and the Department of Transportation.