Quarterly report pursuant to Section 13 or 15(d)

LONG-TERM DEBT AND NOTES PAYABLE

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LONG-TERM DEBT AND NOTES PAYABLE
 6 Months Ended
Jun. 30, 2014
Debt Disclosure [Abstract]  
Debt Disclosure [Text Block]
6.
LONG-TERM DEBT AND NOTES PAYABLE
 
Long-term debt and notes payable are summarized as follows.
 
 
 
 
June 30,
 
December 31,
 
 
 
 
 
2014
 
2013
 
 
 
 
 
 
 
 
 
 
 
Note payable to a bank due in monthly installments of $4,406 including interest at Wall Street Journal Prime + 1% (minimum of 5.5%); remaining balance due October 10, 2018; collateralized by substantially all of the 
Company's assets and guaranteed by an officer of the Company
 
(a)
 
$
197,416
 
$
218,119
 
 
 
 
 
 
 
 
 
 
 
Line of credit to a bank, expires April 10, 2014, interest rate of Wall Street Journal Prime (3.25% as of March 31, 2014) plus 1%, floor rate of 5%
 
(b)
 
 
500,000
 
 
472,000
 
 
 
 
 
 
 
 
 
 
 
Note payable to a bank due interest only at a 5% rate; balloon principal payment due August 10, 2014; collateralized by substantially all of the Company's assets and guaranteed by an officer of the Company
 
(c)
 
 
500,088
 
 
-
 
 
 
 
 
 
 
 
 
 
 
Note payable to a bank, matured August 5, 2014, interest rate of Wall St. Journal Prime (3.25% as of March 31, 2014) plus 1%
 
(d)
 
 
10,249
 
 
38,614
 
 
 
 
 
 
 
 
 
 
 
Loan agreement with an outside company on December 23, 2013, interest at 1% per month, accrued interest and principal due February 23, 2014, unsecured
 
(e)
 
 
125,000
 
 
150,000
 
 
 
 
 
 
 
 
 
 
 
Loan agreement with an outside company on June 20, 2014, interest at 8% annual rate, accrued interest and principal due July 11, 2014, unsecured
 
(f)
 
 
100,000
 
 
-
 
 
 
 
 
 
 
 
 
 
 
Bank overdraft facility; unsecured; maximum facility $260,000; interest rate 11% at June 30, 2014, subject to annual renewal in December 2014
 
(g)
 
 
132,930
 
 
79,372
 
 
 
 
 
 
 
 
 
 
 
Term facility with monthly payments of $5,000, including interest at 10.3% at March 31, 2014; due June 14, 2016
 
(h)
 
 
112,291
 
 
133,448
 
 
 
 
 
 
 
 
 
 
 
Term facility dated April 2014, interest at 2.6 % over South African prime rate (prime currently 9.25%); due April 2024; secured by a bond on all assets at our
Port Elizabeth, South Africa location and partially guaranteed by our CEO and South African COO
 
(i)
 
 
330,220
 
 
-
 
 
 
 
 
 
 
 
 
 
 
Term facility dated December 1, 2013; monthly payments of $3,172 including interest at 12.5%; due December 1, 2018; secured by a bond on all moveable assets at our Pretoria, South Africa location and partially
guaranteed by our CEO
 
(j)
 
 
132,259
 
 
142,807
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,140,453
 
 
1,234,360
 
Current portion of long-term debt
 
 
 
 
1,959,579
 
 
835,454
 
Long-term debt, less current portion
 
 
 
$
180,874
 
$
398,906
 
 
(a) On April 11, 2013, the Company and Paragon Commercial Bank (“Paragon”) entered into a credit agreement (the “Credit Agreement”). (b) The Credit Agreement provides for an additional $500,000 revolving credit facility with a one-year term from the closing date. The Credit Agreement is available to be drawn at the Company’s discretion to finance investments in new business ventures and for the Company’s general corporate working capital requirements in the ordinary course of business. The note payable originally matured on August 10, 2013 and on November 4, 2013 the note was extended to October 10, 2018 with monthly principal and interest payments of $4,406, whereas the new credit facility (b) expired on August 10, 2014. Borrowings under the Credit Agreement bear monthly interest at the greater of: (i) floor rate of 5.00% or (ii) the Wall Street Journal’s prime plus rate (3.25% as of June 30, 2014) plus 1.00%. All unpaid principal and interest are due one (1) year after the closing date. Any borrowings are secured by a lien on all of the Company’s assets. The obligations under the Credit Agreement are guaranteed by Mike Pruitt, the Company’s Chief Executive Officer. 
 
(c) In addition, in February 2014 the Company secured a note with Paragon for $500,088 due on August 10, 2014. The note bears interest at a 5% annual rate, payments of interest only are due monthly until the due date.
 
This increases the Company’s aggregate obligation to Paragon to approximately $1.2 million at June 30, 2014. The Company is currently negotiating with the lender to extend the above debts (b and c) with an expiration date of August 10, 2014. The lender has not issued a formal notice of default to the Company.
 
(d) ARB entered into a term note with TD Bank in 2008 for $300,000, which has a balance of $10,249 at June 30, 2014 and has a maturity date of August 4, 2014. The interest rate is 1.75% above the Wall Street Journal prime rate (3.25%), and the monthly principal and interest payment is $4,836, subject to adjustment by TD Bank, except for the last payment which shall be the unpaid balance at maturity. The term note is personally guaranteed by two former shareholders of ARB, and TD Bank has a first lien on all ARB’s assets.
 
(e) On December 23, 2013, the Company entered into a loan agreement with an outside company for $150,000, due on February 23, 2014. Interest is compounded monthly at a rate of 1%. As of February 23, 2014, the Company was not in compliance with the terms of this note due to non-payment of principal and interest. On March 21, 2014, the Company paid the note holder $25,000 of principal and $4,751 of accrued interest. However, the note holder has not issued a formal notice of default to the Company.
 
(f) On June 20, 2014, the Company entered into a loan agreement with an outside company for $100,000, due on July 11, 2014. Interest is at an 8% annual rate. The Company is currently negotiating with the lender to extend the above debt. The lender has not issued a formal notice of default to the Company.
 
(i) In April 2014, our South African subsidiary entered into a mortgage note with a South African bank for the purchase of the building in Port Elizabeth for our Hooters location. The 10-year note is for $330,220 with an annual interest rate of 2.6% above the South African prime rate (prime currently 9.25%). Monthly principal and interest payments of approximately $4,600 commence in August, 2014. The mortgage note is personally guaranteed by our CEO and South African COO and secured by the assets of the Port Elizabeth building.