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
 9 Months Ended
Sep. 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.
 
 
 
 
 
September 30,
 
December 31,
 
 
 
 
 
2014
 
2013
 
 
 
 
 
 
 
 
 
Note payable to a bank due in monthly installments of $4,406 including interest at Wall Street Journal Prime plus 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)
 
$
187,393
 
$
218,119
 
 
 
 
 
 
 
 
 
 
 
Line of credit to a bank, expires May 10, 2015, interest rate of Wall Street Journal Prime (3.25% as of September 30, 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 June 10, 2019; collateralized by substantially all of the Company's assets and guaranteed by an officer of the Company
 
(c)
 
 
500,000
 
 
-
 
 
 
 
 
 
 
 
 
 
 
Note payable to a bank, matured and paid in full August 5, 2014, interest rate of Wall St. Journal Prime plus 1%
 
(d)
 
 
-
 
 
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)
 
 
100,000
 
 
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 facilities $260,000; interest rate 11% at September 30, 2014, subject to annual renewal in December 2014
 
(g)
 
 
167,502
 
 
79,372
 
 
 
 
 
 
 
 
 
 
 
Term facility with monthly payments of $5,000, including interest at 10.3% at September 30, 2014; due June 14, 2016
 
(h)
 
 
99,906
 
 
133,448
 
 
 
 
 
 
 
 
 
 
 
Term facility dated April 2014, interest at 2.6 % over South African prime rate (prime currently 9.25%); due July 31, 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)
 
 
327,218
 
 
-
 
 
 
 
 
 
 
 
 
 
 
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)
 
 
126,701
 
 
142,807
 
 
 
 
 
 
 
 
 
 
 
Loan agreement with an outside company on July 1, 2014, interest at 12% annual rate, principal payments due per below, secured by certain secured assets and gaming revenue of the Australian entities
 
(k)
 
 
5,000,000
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7,108,720
 
 
1,234,360
 
Current portion of long-term debt
 
 
 
 
2,092,005
 
 
835,454
 
Long-term debt, less current portion
 
 
 
$
5,016,715
 
$
398,906
 

 
(a) and (b) 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) expires on May 10, 2015. 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 September 30, 2014) plus 1.00%. All unpaid principal and interest is 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 $500,000 due on June 10, 2019. The note bears interest at a 5% annual rate, payments of interest only are due monthly until the due date. This increased the Company’s aggregate obligation to Paragon to approximately $1.2 million at September 30, 2014.
 
(d) ARB entered into a term note with TD Bank in 2008 for $300,000, which has a balance of $10,249 at September 30, 2014 and had 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. The note has been paid in full.
 
(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 and August 20, 2014, the Company paid the note holder $25,000 each of principal and accrued interest. 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 this debt. The note holder 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 commenced 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.
 
(k) On July 1, 2014, pursuant to Purchase Agreements executed on June 30, 2014, the Company completed the acquisition of a sixty percent (60%) ownership interest in Hoot Parramatta Pty Ltd, Hoot Australia Pty Ltd, Hoot Penrith Pty Ltd, and TMIX Management Australia Pty Ltd (collectively, the “Australian Entities”), which own, operate, and manage Hooters restaurant locations and gaming operations in Australia. The ownership interest in the Australian Entities was purchased from the respective entities in exchange for the Company agreeing to assume a five million dollar ($5,000,000) debt bearing interest at 12% annually and issuing two hundred fifty thousand (250,000) warrants to purchase shares of our common stock. Originally principal repayments were as follows: $2,000,000 on December 31, 2014, $2,000,000 on June 30, 2015, and $1,000,000 on December 31, 2015. On October 15, 2014, principal repayments were restructured whereby $650,000 is due by September 30, 2015, $3,350,000 is due by July 31, 2016, and the remaining $1,000,000 is due by January 31, 2017. The Company will issue $175,000 of the Company’s common stock (87,500 shares at $2.00 per share) and 87,500 common stock warrants at $3.50 per share exercise price in consideration for the debt restructuring before the end of November 2014.
 
During October 2014, our South African subsidiary secured additional local bank financing in the form of term and overdraft facilities of approximately $182,000 and $45,000, respectively. The five-year term facility has an annual interest rate of 3.5% above the South African prime rate (currently 9.25%). Monthly principal and interest payments of approximately $4,250 commence in December 2014.