sunflower utraceuticals n to Sunflower Nutraceuticals, Board of Directors from Teresita Alvarez, CEO re Working Capital Financing Options

I wanted to update you on my efforts to secure an increased line of credit for working capital. Despite my repeated efforts and the calls that both of you have made to our bank’s senior officers, Miami Dade Merchant’s
Bank (MDM) continues to be inflexible. It refuses to increase our $3.2 million line of credit and says that it will not change its mind. It is also proposing tighter covenants. I have highlighted for MDM our improved EBIT and free cash flow over the last eighteen months and our concomitant success in reducing the use of our line of credit by almost $500,000. MDM argues—perversely—that this shows we do not require additional funding, especially given our recent lack of revenue growth. I have pointed out its flawed, catch-22 logic. It claims that we don’t need additional working capital because we’re not growing, while I counter that we can’t grow without additional working capital.
Quite frankly, I think MDM now regards us as an unattractive account and is trying to fire us as a customer.
It appears that it is pruning its account base after being acquired by Imperial Bank. Although our long-time account executive, Chris Mitchell, swears otherwise, he has cautioned me that the bank is adopting a very tough line with small business accounts that breach covenants. For all of MDM’s rhetoric about supporting local businesses, they have shown little regard for our relationship.
In recent months, I have met with several other banks to gauge their interest in Sunflower as a new account.
Unfortunately, those conversations have not been successful: It seems that most commercial banks in South
Florida are retrenching. Also, in the unlikely case of another bank agreeing to replace MDM, we will probably