Quarterly report pursuant to sections 13 or 15(d)

Notes payable

v2.4.0.8
Notes payable
3 Months Ended
Mar. 31, 2014
Notes payable [Abstract]  
Notes payable

Note 7 - Notes payable:

 

On October 1, 2009, THE ONE GROUP purchased the following membership units from a former member: 10.14% in JEC II, 6.55% in One Marks, 5.19% in Little West 12th and 4.63% in One LA. The Company paid $400,000, of which $300,000 was paid in cash and $100,000 in the form of a note and issued warrants to purchase up to 10,090 membership units of the Company at an exercise price of $22.94 per membership unit which were cancelled in connection with the Merger. Commencing in December 2009, quarterly payments of principal and interest in the amount of $5,656 are to accrue at an interest at a rate of 5% through September 2014. At March 31, 2014 and December 31, 2013, $10,000 and $15,000 remained outstanding under this note, respectively.

 

On October 31, 2011, the Company entered into a credit facility with a bank to borrow up to $3,000,000. The credit facility is to accrue interest at a rate equal to the greater of prime plus 1.75% and 5.0% (5% at March 31, 2014 and 2013, respectively) through April 30, 2014. In January 2013, the Company refinanced its credit facility with the bank to borrow up to $5,000,000. The credit facility is to accrue interest at a rate equal to the greater of prime plus 1.75% and 5.0% through April 30, 2015, the termination date. The agreement contains certain financial and nonfinancial covenants which the Company failed to meet for the quarters ended March 31, 2014 and December 31, 2013. The Company obtained a waiver from the bank for all covenant violations. The CEO of the Company had previously personally guaranteed this credit facility and in exchange the Company paid him an annual fee of 3% which for the three months ended March 31, 2013 was $26,718. The credit agreement is secured by substantially all of the assets of THE ONE GROUP, STK Atlanta, STK Vegas, One 29 Park Management and was guaranteed by the CEO of the Company. On October 15, 2013, the Company entered into an amendment to the credit facility whereby BankUnited agreed, upon effectiveness of the Merger, to the release and termination of the CEO's guarantee and pledge, certain subordination agreements of the CEO and related entities and the release of the assignment of the proceeds of the key-man life insurance policy on the life of the CEO. The amendment also imposed certain post-closing obligations on the Company, including executing a guarantee in favor of BankUnited unconditionally guaranteeing all of the obligations of the borrowers and the pledge of all of the membership interests of the Company. This post-closing obligation was met on October 25, 2013 when the Company entered into the Pledge Agreement and Guarantee Agreement with BankUnited. At March 31, 2014 and December 31, 2013, $4,353,968 and $4,316,865 remained outstanding under this credit facility, respectively.

 

On September 13, 2013, BankUnited provided the Company with a waiver of noncompliance with certain terms in the Credit Agreement, including the delayed filing of audited financial statements for the year ended December 31, 2012, the minimum tangible net worth covenant of not less than $15,000,000 with respect to the Company and its subsidiaries (and $9,000,000 with respect to the Company and several of its subsidiaries that were the borrowers under the Credit Agreement) as of the periods ended December 31, 2012, March 31, 2013 and June 30, 2013, and the increase to the key man life insurance policy from $3,000,000 to $5,000,000. In addition, on November 7, 2013, BankUnited provided us with a waiver of noncompliance with the minimum tangible net worth covenant of not less than $15,000,000 with respect to the Company and its subsidiaries (and $9,000,000 with respect to the Company and several of its subsidiaries that were the borrowers under the Credit Agreement) for the quarter ended September 30, 2013, and on March 25, 2014 provided us with a waiver of noncompliance with the minimum tangible net worth covenant of not less than $14,500,000 with respect to the Company and its subsidiaries as well as noncompliance with the advance ratio as of the year ended December 31, 2013 and March 31, 2014. Our tangible net worth as calculated pursuant to the Credit Agreement was $6,695,103, $5,189,908, $2,816,615, $8,226,636 and $7,180,935 as of the periods ended March 31, 2013, June 30, 2013, September 30, 2013, December 31, 2013 and March 31, 2014, respectively. We are currently in discussions with BankUnited to amend the Credit Agreement to adjust the tangible net worth and advance ratio calculations in order to be in compliance going forward.

 

Minimum future payments on the notes payable in each of the years subsequent to March 31, 2014 are $10,000 in 2014 and $4,353,968 in 2015.

 

Interest expense recognized related to these notes amounted to $49,436 and $32,928 for the three months ended March 31, 2014 and 2013, respectively.