On January 31, 1996, the Company's wholly owned subsidiary,
Meret,increased its then $5,000 line of credit from Coast Business Credit
("Coast"), an asset based lender, to a maximum of $8,000; the line of
credit is collateralized by accounts receivable, inventory and property and
equipment. Osicom has guaranteed this line, for which Meret is the
borrower, to the extent of $1,000. This line of credit provides for interest at
2.5% over the bank's prime rate but not less than 8% (11.0% at July 31,
1997). In addition, the Company issued to Coast three year warrants to
purchase shares of its common stock at the respective market prices at
funding: 10,000 shares of its common stock at $3.34 per share expiring
June 11, 1998 and 40,000 shares of its common stock at $5.31 per share
expiring January 31, 1999. Advances are limited to 80% of eligible
accounts receivable and 25% of eligible raw materials and finished goods
not to exceed the lesser of $1,000 or 75% of then outstanding accounts
receivable loan. The agreement remains in effect until February 1, 1999
and automatically renews for successive additional terms of one year on a
continuous basis unless terminated by written notice of either party or by
default. Additionally, the agreements provide for term loans more fully
described in Note F. Meret paid Coast a $30 origination fee and the
quarterly facility fee was increased to $4. The interest rate on the Meret line
of credit remained unchanged at 11.0% for the six months ended July 31,
1997. The highest and average amounts outstanding were $3,070 and
$2,187, respectively, during the six months ended July 31, 1997.
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Yes this is a horrible loan for us! what can we do? we need the money. I think Par is running out of free loans for our company.
Now we could try to issue more shares on the open market. But Par doesn't want to dilute his shares too much. He must be real greedy after all he is a major shareholder. So we get this 8 million dollar line of credit at 11% interest. We also give the loan company 50,000 shares. Yuck!
AFTER ALL WHEN OUR STOCK IS $20 DOLLARS NEXT YEAR THAT IS ONE MILLION DOLLARS!!!!
But after all who is going to loan us the money? It is clear to me that Coast believes our stock will be worth something in a couple years or they would have never agreed.
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