UNITED STATES
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): August 28, 2019

Appliance Recycling Centers of America, Inc.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (702) 997-5968

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b 2 of this chapter).

Emerging growth company o

If any emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

On August 28, 2019, ARCA Recycling, Inc. (the “Borrower”), a wholly-owned subsidiary of Appliance Recycling Centers of America, Inc. (the “Parent”), entered into and delivered to Isaac Capital Group, LLC (the “Lender”), a secured revolving line of credit promissory note, whereby the Lender agreed to provide the Borrower with a $2,500,000 revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility matures on August 28, 2020. The Revolving Credit Facility bears interest at 8.75% per annum and provides for the payment of interest monthly in arrears. The Borrower will pay a loan fee of 2.0% on each borrowing made under the Revolving Credit Facility. On August 28, 2019, the Borrower received an advance of $1,000,000 under the Revolving Credit Facility. In connection with entering into the Revolving Credit Facility, the Borrower also entered into a security agreement in favor of the Lender, pursuant to which the Borrower granted a security interest in all of its assets to the Lender. The obligations of the Borrower under the Revolving Credit Facility are guaranteed by the Parent. The foregoing transaction did not include the issuance of any shares of Parent’s common stock, warrants, or other derivative securities.

The Lender is a record and beneficial owner of less than 20.0% of the outstanding capital stock of the Parent. Jon Isaac is the manager and sole member of the Lender, and the son of Tony Isaac, the Chief Executive Officer of the Parent and the Borrower.

The foregoing descriptions of the Revolving Credit Facility and guaranty by the Parent do not purport to be complete and are qualified in their entirety by reference to the complete text of the secured revolving line of credit promissory note, a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference. A copy of the press release announcing the foregoing financing transaction is attached to this Current Report on Form 8-K as Exhibit 99.1.

The information set forth in Item 1.01 above is incorporated by reference into this Item 2.03.

(d) Exhibits

SIGNATURES

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.

Exhibit 10.1

SECURED REVOLVING LINE OF CREDIT PROMISSORY NOTE

August 28, 2019

For value received, ARCA Recycling, Inc., a California corporation (“Borrower”), hereby promises to pay to the order of Isaac Capital Group (“Lender”), at such address as the Lender may designate, the principal sum of $2,500,000, or the aggregate unpaid principal amount of all advances made by the Lender to the Borrower hereunder, whichever is less, in lawful money of the United States of America. During the period from the date hereof until the Maturity Date (as defined below), within two business days of a written request (including by e-mail) from Borrower, Lender shall make advances (“Advances”) hereunder and the Borrower may borrow, repay and reborrow; provided, however, that the aggregate amount of all advances at any one time outstanding shall not exceed the face amount of this Note; and provided, further, that the Lender’s obligation to make advances and the Borrower’s right to borrow, repay and reborrow are subject to the terms, conditions and limitations contained in this Note. If any Advances are made during the period from the date hereof until the anniversary of the date hereof (as such date may be extended, in writing from time to time, in the Lender’s sole and absolute discretion, the “Maturity Date”), the outstanding principal balance of all advances hereunder plus accrued but unpaid interest thereon, and all other indebtedness under this Note, if not sooner paid, shall be due and payable on the Maturity Date.

The outstanding principal of all Advances hereunder will bear interest at 8.75% per annum. Interest on the outstanding principal of all Advances shall be payable at the rate set forth above and shall be payable in arrears on the last day of each month commencing September 30, 2019 and on the Maturity Date. Interest shall be computed on the basis of a 360-day year and actual days elapsed. Upon default or after judgment has been rendered on this Note, the unpaid principal of all Advances shall, at the option of the Lender, bear interest at a rate which is 3.0% points per annum greater than that which would otherwise be applicable.

Promptly (but no later than two business days) following the provision of an Advance, Borrower shall pay to Lender a fee equal to 2.0% of the principal amount of each Advance.

All payments hereunder shall be applied first to the payment of interest on the unpaid principal of all Advances outstanding under this Note, and then to the balance on account of the principal of all Advances due under this Note.

If at any time, the rate of interest, together with all amounts which constitute interest and which are reserved, charged or taken by Lender as compensation for fees, services, or expenses incidental to the making, negotiating, or collection of any Advance evidenced hereby, shall be deemed by any competent court of law, governmental agency, or tribunal to exceed the maximum of rate of interest permitted to be charged by Lender to Borrower, then, during such time as such rate of interest would be deemed excessive, that portion of each sum paid attributable to that portion of such interest rate that exceeds the maximum rate of interest so permitted shall be deemed a voluntary prepayment of principal.

The Borrower may prepay this Note, in whole or in part, at any time, without penalty or premium.

The Borrower agrees to pay all taxes levied or assessed upon the outstanding principal against any holder of this Note and to pay all reasonable costs, including attorneys’ fees, costs relating to the appraisal and/or valuation of assets and all other costs and expenses incurred in the collection, protection, defense, preservation, or enforcement of this Note or any endorsement of this Note or in any litigation arising out of the transactions of which this Note or any endorsement of this Note is a part.

THE LENDER AND THE BORROWER IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY PROCEEDING HEREAFTER INSTITUTED BY OR AGAINST THE LENDER OR THE BORROWER IN RESPECT OF THIS NOTE OR ARISING OUT OF ANY DOCUMENT, INSTRUMENT OR AGREEMENT EVIDENCING, GOVERNING OR SECURING THIS NOTE, INCLUDING THE AFORESAID AGREEMENT.

Borrower hereby waives diligence, demand, presentment for payment, notice of nonpayment, protest and notice of protest, and notice of any renewals or extensions of this Note, and all rights under any statute of limitations, and agrees that the time for payment of this Note may be changed and extended at the Lender’s sole discretion, without impairing the Borrower’s liability hereon, and further consents to the release of all or any part of the security for the payment hereof at the discretion of the Lender. Any delay on the part of the Lender in exercising any right hereunder shall not operate as a waiver of any such right, and any waiver granted for one occasion shall not operate as a waiver in the event of any subsequent default.

The making of an Advance at any time shall not be deemed a waiver of, or consent, agreement or commitment by the Lender to the making of any future Advance to the Borrower.

If any provision of this Note shall, to any extent, be held invalid or unenforceable, then only such provision shall be deemed ineffective and the remainder of this Note shall not be affected.

This Note shall bind the successors and assigns of the Borrower and shall inure to the benefit of the Lender, its successors and assigns.

This Note is secured in accordance with the terms of the Security Agreement of even date herewith between the Lender and the Borrower.

This Note shall be governed by and construed in accordance with the laws of the State of Nevada.

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AGREEMENT AND GUARANTY

For valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in consideration of ARCA Recycling, Inc., a California corporation (“Borrower”), a wholly-owned subsidiary of Appliance Recycling Centers of America, Inc., a Nevada corporation (“Guarantor”), having agreed to the terms of financing described in that certain Secured Revolving Line of Credit Promissory Note dated as of the date hereof (the “Note”), Guarantor does hereby unconditionally guarantee to Isaac Capital Group, LLC (the “Lender”) full and prompt payment and performance of all obligations of Borrower to Lender under the Note. Guarantor also agrees to pay in addition thereto all costs, expenses, and reasonable attorney’s fees at any time paid or incurred by Lender in endeavoring to enforce this Guaranty.

 Upon any default by Borrower with respect to any of the obligations herein guaranteed, the liability of the Guarantor hereunder shall be deemed to have become immediately due and payable, without demand, presentment, protest or notice of any kind, all of which are hereby waived, and without any suit or action against the Guarantor and without further steps to be taken or further conditions to be performed by the Guarantor. Failure of Lender to make any demand or otherwise to proceed against the Guarantor in respect to any default by the Borrower or the Guarantor, or any delay by the Lender in doing so, shall not constitute a waiver of the Lender’s right to proceed in respect to any or all other defaults by the Borrower or the Guarantor.

This Agreement and Guaranty shall be governed by and construed in accordance with the laws of the State of Nevada (without reference to the conflicts of law provisions thereof). The invalidity or unenforceability of any provision hereof shall not limit the validity or enforceability of any other provision hereof. This Agreement and Guaranty may not be amended except by an instrument in writing signed by the party to be charged.

Executed effective as of this 28^th day of August 2019.

APPLIANCE RECYCLING CENTERS OF AMERICA, INC.

Exhibit 99.1

ARCA Announces Significant Increase in Orders in its Recycling Division

Company expecting one of its best years ever in recycling

Las Vegas, NV (August 29, 2019) —Appliance Recycling Centers of America, Inc. (NASDAQ: ARCI) announced today that it is experiencing significant increases in business in its recycling exchange program. The higher volume of orders comes from facilities in multiple regions in which the company operates its recycling centers. The company is expecting one of its best fiscal years in recycling. The increase in orders is expected to boost sales at its recycling division and the company on a consolidated basis.

Tony Isaac, ARCA CEO, said, “We are delighted at this welcome pick-up in orders at many of our facilities across the United States. It demonstrates, once again, that utility companies trust ARCA to provide reliable, efficient, turnkey recycling services.”

As a result of this increase in business, on August 28, 2019, the company entered into a $2,500,000 line of credit with a related party. As of the date of this press release, $1,000,000 has been drawn and received by the company’s recycling division. The line of credit is a debt-only facility and does not include the issuance of any shares of the company’s common stock, warrants, or other derivative securities. The company expects to file a Current Report on Form 8-K with further details regarding this arrangement.

About ARCA

ARCA and subsidiaries are in the business of recycling major household appliances in North America by providing turnkey appliance recycling and replacement services for utilities and other sponsors of energy efficiency programs. In addition, through GeoTraq, ARCA is engaged in the development, design and ultimately, ARCA expects, the sale of Mobile IoT modules.

Forward Looking Statements

This press release contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995, including statements with respect to the company’s financial results of its recycling business for the current fiscal year, the increase in sales, and the company’s ability to consummate new financing arrangements with third-party lenders. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made, including the risks associated with the general economic conditions, competition in the retain and recycling industries and regulatory risks. Other factors that could cause operating and financial results to differ are described in ARCA's periodic reports filed with the Securities and Exchange Commission (the “SEC”). Other risks may be detailed from time to time in reports to be filed with the SEC.