aerogrow-8k011410.htm
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 14, 2010
AEROGROW
INTERNATIONAL, INC.
(Exact
name of registrant as specified in its charter)
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Nevada
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000-50888
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46-0510685
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(State
or Other Jurisdiction of Incorporation)
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(Commission
File Number)
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(I.R.S.
Employer Identification
No.)
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6075
Longbow Dr. Suite 200, Boulder, Colorado
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80301
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Registrant's
Telephone Number, Including Area Code: (303) 444-7755
Check the
appropriate box below if the Form 8-K is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following
provisions:
o Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
5.02. Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers
On
January 14, 2010, the Board of Directors of AeroGrow International, Inc.
("AeroGrow" or the “Company”) appointed Jack J. Walker as Chief Executive
Officer, in addition to his existing role as Chairman of the Company’s Board of
Directors. The Board of Directors also appointed J. Michael Wolfe as
Chief Operating Officer, and John K. Thompson as Senior Vice President of Sales
and Marketing on that date.
Mr.
Walker replaces Jervis B. Perkins who had been the Company’s President and Chief
Executive Officer since March 2008, and who is leaving the Company effective
January 15, 2010. Mr. Perkins’ departure reflects the strategic
decision by the Board of Directors to reduce the Company’s reliance on sales to
retailers, an area in which Mr. Perkins had specific expertise. Mr.
Perkins will remain a director of the Company.
Mr.
Walker, age 75, has been a director of the Company since the February 23, 2006
annual meeting of shareholders, and became Chairman as of July 23,
2008. He is the Managing Member of Walker Enterprises LLLP, a real
estate investment and development company, since 2000. He is on the
Board of Pathogen Systems, Inc and Modern Hotels Limited. He is an
English Solicitor and began his career in 1956 in London, England. In
1968 he founded English & Continental Property Company, and served as Joint
Managing Director of this commercial property development company, which
operated in Europe with over 200 staff, until its sale to the Post Office
Pension Fund in 1973. From 1973 he controlled several English listed
companies, including Charles Spreckly Industries, Town & Commercial
Properties and Associated Development Holdings, with worldwide interests and
over 3,500 employees. Mr. Walker served as a director of supermarket
group Megafoods Stores, Inc from 1987 to 1993, and was CFO for part of that
time. Mr. Walker created the Walker Foundation for Charitable
Activities in England, and serves as a director of various civic and charitable
organizations.
For his
service as Chief Executive Officer, Mr. Walker will not receive a salary, but
will be eligible to participate in the Company’s group medical
plan. In addition, on January 14, 2010, he was granted 100,000
fully-vested options to purchase common shares of the Company at $0.20 per
share, 110% of the closing market price per share on that date.
Mr.
Walker has a 67.71% beneficial ownership interest in the Company resulting from
his holdings of AeroGrow Series A convertible preferred shares, common shares,
and options and warrants to purchase additional Series A convertible preferred
and common shares.
Mr.
Walker is a co-borrower along with the Company on a loan from First National
Bank of Colorado (“FNB”) originally extended on May 19, 2008 (the “FNB
Loan”). During the Company’s fiscal year beginning April 1, 2009, the
outstanding loan balance under the FNB Loan has ranged between $700,000 and $1
million, and is currently $700,000. Mr. Walker has made principal
payments to FNB of $200,000 during the current fiscal year. These
principal payments were recorded by the Company (i) as offsets to a $150,000
receivable due from Mr. Walker, and (ii) as a note payable by the Company to Mr.
Walker in the principal amount of $50,000 and at an interest rate of 20%
p.a. No payments have been made against this note
payable.
Mr.
Walker is party to a loan agreement dated May 22, 2008, among the Company and
WLoans, LLC, a Colorado limited liability company (“WLLC”), as lender, that
provides for a credit facility in an amount up to $1,500,000 at an interest rate
of 12% p.a. (the “WLLC Loan”). Mr. Walker is also the managing member
holding a majority stake in WLLC. The WLLC Loan had an initial
maturity date of April 1, 2009. On May 19, 2009, Mr. Walker, WLLC,
and the Company entered into a loan extension agreement effective April 1, 2009,
extending the maturity date of the WLLC Loan until June 30, 2009. The
Company paid WLLC $5,000 in consideration for the loan
extension. From April 1, 2009 to June 30, 2009 there was $1,200,000
outstanding under the WLLC Loan. On June 30, 2009, the $1,200,000
principal outstanding was converted to 1,200 shares of the Company’s Series A
Convertible Preferred Stock, and the WLLC Loan was
terminated. Interest payments totaling $55,684 were made by the
Company to WLLC during the Company’s current fiscal year.
Mr.
Walker extended a $100,000 loan to the Company (the “Walker Bridge Loan”) on
August 28, 2009. The Walker Bridge Loan is unsecured, subordinated to
loans made to the Company by FCC, LLC, d/b/a First Capital (“FCC”), and bears
interest at 15% per annum. The Walker Bridge Loan had an initial
maturity date of November 16, 2009; however, no principal payments have been
made by the Company because FCC has not provided its required
consent. Interest due on the Walker Bridge Loan totaling $5,137 was
paid by the Company to Mr. Walker during the Company’s current fiscal
year. The Company also issued 100,000 warrants to purchase common
shares of the Company to Mr. Walker as compensation for extending the Walker
Bridge Loan. Each of the warrants has a five-year term and an
exercise price of $0.25 per common share.
Mr.
Walker is a guarantor under a Loan and Security Agreement between the Company
and FCC, dated June 23, 2008 (the “FCC Loan Agreement”), for an $8,000,000
revolving credit facility (the “Revolving Credit Facility”). FCC and
the Company executed a forbearance agreement related to the FCC Loan Agreement
(the “Forbearance Agreement”) effective as of January 31,
2009. Simultaneously with the execution of the Forbearance Agreement,
Mr. Walker provided a $1 million guarantee against certain liabilities under the
FCC Loan Agreement. As compensation for providing the guarantee, the
Company issued to Mr. Walker 50,000 warrants to purchase common stock of the
Company at a purchase price of $1.00 per share. As of July 1, 2009,
FCC, AeroGrow, and Mr. Walker, as guarantor, executed an amendment to the FCC
Loan Agreement (the “Third FCC Amendment”). The Company paid Mr.
Walker a $25,000 fee as compensation for providing the $1 million guarantee
against certain liabilities associated with the Third FCC
Amendment. The maximum amount outstanding under the Revolving Credit
Facility during the fiscal year was $5,742,266, and $2,408,009 was outstanding
as of January 13, 2010.
Mr.
Walker is also a guarantor to a $180,000 loan made by Grad-Wurn LLC to the
Company on November 1, 2009 (the “Grad-Wurn Loan”). The Grad-Wurn
Loan is unsecured, subordinated to loans made to the Company by FCC, and bears
interest at 20% per annum. No payments have been made on the
Grad-Wurn Loan since its origination.
Mr.
Wolfe, age 51, has been AeroGrow’s Vice President of Operations since joining
the Company in April 2006, and also General Manager of AeroGrow’s Direct
Response division since August 2008. Prior to joining AeroGrow, Mr.
Wolfe was an independent consultant from 2004 to 2006. He served as
President of Concepts Direct, Inc. from 1992 to 2004, where he oversaw the
development, launch and operations of seven catalogs including the highly
successful Colorful Images, Snoopy, Etc. and Linda Anderson brands.
Mr. Wolfe
has an 11.74% beneficial ownership interest in the Company resulting from his
holdings of AeroGrow Series A convertible preferred shares, and options and
warrants to purchase Series A convertible preferred shares and common
shares.
On
September 1, 2009, Mr. Wolfe extended a $25,000 loan to the Company (the “First
Wolfe Bridge Loan”). The First Wolfe Bridge Loan is unsecured,
subordinated to loans made to the Company by FCC, and bears interest at 15% per
annum. The First Wolfe Bridge Loan had an initial maturity date of
November 16, 2009; however, no principal payments have been made by the Company
because FCC has not provided its required consent. Interest due on
the First Wolfe Bridge Loan totaling $1,243 was paid by the Company to Mr. Wolfe
during the Company’s current fiscal year. The Company also issued
25,000 warrants to purchase common shares of the Company to Mr. Wolfe as
compensation for extending the First Wolfe Bridge Loan. Each of the
warrants has a five-year term and an exercise price of $0.25 per common
share.
On
November 5, 2009, Mr. Wolfe extended a $50,000 loan to the Company (the “Second
Wolfe Bridge Loan”). The Second Wolfe Bridge Loan is unsecured,
subordinated to loans made to the Company by FCC, and bears interest at 20% per
annum. The Second Wolfe Bridge Loan has an initial maturity date of
February 1, 2010. The Company issued 50,000 warrants to purchase
common shares of the Company to Mr. Wolfe as compensation for extending the
Second Wolfe Bridge Loan. Each of the warrants has a five-year term
and an exercise price of $0.25 per common share. No payments have
been made on the Second Wolfe Bridge Loan since its origination.
Mr.
Thompson, age 48, joined AeroGrow in 2002 and has served in a variety of senior
management positions at the Company, including his most recent position as Vice
President of Marketing, which he assumed in October 2009. Mr.
Thompson also served as the Company’s International Division General Manager and
Vice President of Investor Relations, and was instrumental in the research
activities leading up to the development and launch of the Company’s AeroGarden
product line. Prior to joining AeroGrow, Mr. Thompson was Director of
Marketing for Productivity Point International, a direct marketing and direct
sales company, and Sales and Marketing Manager for CareerTrack, a direct
marketing company that sold personal and professional growth products to the
consumer and commercial markets.
On
January 14, 2010, AeroGrow eliminated the Vice President of Sales position,
reflecting the Company’s strategic decision to reduce its reliance on sales to
retailers. As a result, Jeffrey M. Brainard, who was AeroGrow’s Vice
President of Sales since March 2006, and a Named Executive Officer, is leaving
the Company, effective January 15, 2010.
A copy of
the press release relating to Mr. Walker’s appointment as Chief Executive
Officer, Mr. Wolfe’s appointment as Chief Operating Officer, Mr. Thompson’s
appointment as Senior Vice President of Sales and Marketing, and the departures
of Mr. Perkins and Mr. Brainard is filed as Exhibit 99.1 to this Current Report
on Form 8-K and is incorporated herein by reference.
Item
9.01 Financial Statements and Exhibits.
(d)
Exhibits.
Portions
of this report may constitute “forward-looking statements” as defined by federal
law. Although the Company believes any such statements are based on reasonable
assumptions, there is no assurance that actual outcomes will not be materially
different. Any such statements are made in reliance on the “safe harbor”
protections provided under the Private Securities Litigation Reform Act of 1995.
Additional information about issues that could lead to material changes in the
Company’s performance is contained in the Company’s filings with the Securities
and Exchange Commission.
SIGNATURE
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.
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AeroGrow
International, Inc. |
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Dated:
January 15, 2010
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By:
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/s/
H. MacGregor Clarke |
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H.
MacGregor Clarke |
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Chief
Financial Officer and Treasurer |
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EXHIBIT INDEX
| Exhibit
No. |
Description |
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| 99.1 |
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