Annual report pursuant to Section 13 and 15(d)

Long Term Debt

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Long Term Debt
12 Months Ended
Dec. 31, 2017
Debt Disclosure [Abstract]  
Long Term Debt

Note 7 - Long Term Debt

 

Long term debt consists of the following (in thousands):

 

    At December 31,  
    2017     2016  
             
Term Loan Agreements   $ 6,657     $ 9,485  
Promissory Notes     6,250       6,250  
Equipment Financing Agreements     1,094       1,421  
Business Loan and Security Agreement     62        
      14,063       17,156  
Less: Current portion of Long Term Debt     (3,241 )     (3,154 )
Less: Discounts on warrants, net     (654 )     (835 )
Less: Debt Issuance Costs     (53 )     (68 )
Long Term Debt, net of Current Portion   $ 10,115     $ 13,099  
                 
Future minimum loan payments:                
2018   $ 3,241          
2019     3,197          
2020     1,268          
2021     6,357          
2022              
Total   $ 14,063          

 

Bank United Term Loans

 

On December 17, 2014, the Company entered into a term loan agreement with BankUnited in the amount of $7.5 million (the “First Term Loan Agreement”), of which the proceeds were used to repay existing debt and fund additional Company growth and working capital needs.

 

The First Term Loan Agreement, which matures on December 1, 2019, bears interest at an annual rate of 5.0%. Beginning on January 1, 2015, the Company is required to make sixty consecutive monthly installment payments of $124,583 plus accrued interest towards the First Term Loan Agreement.

 

On June 2, 2015, the Company entered into a second term loan agreement with BankUnited, wherein BankUnited agreed to make multiple advances to the Company in the aggregate principal amount of up to $6.0 million (the "Second Term Loan Agreement").

 

The Second Term Loan Agreement, which matures on September 1, 2020, bears interest at an annual rate of 5.0%. Beginning on April 1, 2016, the Company is required to make fifty-four consecutive monthly installments, with each installment to be in the principal amount of the lesser of $111,111 or the quotient of (x) the outstanding principal amount of all advances on March 31, 2016, divided by (y) fifty-four (54); provided, however, that the final principal installment shall be in an amount equal to the aggregate principal amount of all advances outstanding on September 1, 2020, or such earlier date on which all outstanding advances shall become due and payable, whether by acceleration or otherwise.

 

The First Term Loan Agreement and the Second Term Loan Agreement are secured by substantially of the Company’s assets. The First Term Loan Agreement and the Second Term Loan Agreement contain certain affirmative and negative covenants that limit or restrict, among other things, liens and encumbrances, indebtedness, mergers, asset sales, investments, assumptions and guaranties of indebtedness of other persons, change in nature of operations, changes in fiscal year and other matters customarily restricted in such agreements. The financial covenants contained in these agreements require the borrowers to maintain a certain adjusted tangible net worth and a debt service coverage ratio. As of December 31, 2017, the Company is in compliance with all of its financial covenants under the First Term Loan Agreement and the Second Term Loan Agreement.

 

At December 31, 2017, the outstanding balance under the First Term Loan Agreement and the Second Term Loan Agreement is $3.0 million and $3.7 million, respectively.

 

Promissory Notes

 

2235570 Ontario Limited

 

On June 27, 2016 the Company entered into a $1.0 million loan agreement with 2235570 Ontario Limited (“Ontario Noteholder”) through an unsecured promissory note (the “Ontario Note”). The Ontario Note bears interest at a rate of 10.0% per annum, payable in quarterly installments beginning September 30, 2016. The entire balance of the Ontario Note is due on its maturity date of June 27, 2021. In connection with the issuance of the Ontario Note, the Company issued warrants to the Ontario Noteholder with a fair value of $0.1 million (See Note 14), which was recorded by the Company as a reduction to the principal balance of the Ontario Note and is being amortized to interest expense over the term of the Ontario Note. At December 31, 2017, the amount outstanding under the Ontario Note is $1.0 million. At December 31, 2017, there is $87,500 of unamortized discount related to the Ontario Warrant.

 

Anson Investments Master Fund LP

 

On August 11, 2016 the Company entered into a $3.0 million loan agreement with Anson Investments Master Fund LP (“Anson”) through an unsecured promissory note (the “Anson August Note”). The Anson August Note bears interest at a rate of 10% per annum, payable in quarterly installments beginning September 30, 2016. The entire balance of the Anson August Note is due on its maturity date of August 11, 2021. In connection with the issuance of the Anson August note, the Company issued warrants to Anson with a fair value of $0.4 million (See Note 14), which was recorded as a reduction to the principal balance of the Anson August Note and is being amortized to interest expense over the term of the Anson August Note. At December 31, 2017, the amount outstanding under the Anson August Note is $3.0 million. At December 31, 2017, there is $0.3 million of unamortized discount related to the Anson August Warrant.

 

On October 24, 2016, the Company entered into a $2.25 million loan agreement with Anson through an unsecured promissory note (the “Anson October Note”). The Anson October Note bears interest at a rate of 10% per annum, payable in quarterly installments beginning December 31, 2016. The entire balance of the Anson October Note is due on its maturity date of October 24, 2021. In connection with the issuance of the Anson October Note, the Company issued warrants to Anson with a fair value of $0.4 million (See Note 14), which was recorded as a reduction to the principal balance of the Anson October Note and is being amortized to interest expense over the term of the Anson October Note. At December 31, 2017, the amount outstanding under the Anson October Note is $2.25 million. At December 31, 2017, there is $0.3 million of unamortized discount related to the Anson October Warrant.

 

Equipment Financing Agreements

 

On June 5, 2015, the Company entered into a $1.0 million financing agreement with Sterling National Bank (“Sterling”) to purchase equipment for our STKs in Orlando and Chicago (the “First Sterling Agreement”). The First Sterling Agreement bears interest at a rate of 5% per annum, payable in equal monthly installments of $19,686 plus accrued interest beginning on July 1, 2015. The First Sterling Agreement is secured by the equipment purchased with the proceeds of the First Sterling Agreement. At December 31, 2017, the amount outstanding under the First Sterling Agreement is approximately $0.6 million.

 

On August 16, 2016, the Company entered into a $0.7 million financing agreement with Sterling to purchase equipment for STKs in San Diego, Denver and Orlando (the "Second Sterling Agreement"). The Second Sterling Agreement bears interest at a rate of 5% per annum, payable in equal monthly installments of $13,769 plus accrued interest beginning on September 1, 2016. The Second Sterling Agreement is secured by the equipment purchased with the proceeds of the Second Sterling Agreement. At December 31, 2017, the amount outstanding under the Second Sterling Agreement is approximately $0.5 million.


 

Business Loan and Security Agreement

 

On February 17, 2017, the Company entered into a financing agreement with American Express Bank, FSB (“American Express”) in the amount of $1.0 million (the “AMEX Agreement”). In consideration of the loan amount, the Company granted American Express a security interest in certain accounts receivable, as defined in the AMEX Agreement. Pursuant to the terms of the AMEX Agreement, the Company has agreed to pay a loan fee equal to 3.5% of the original principal balance of the loan amount and a repayment rate of 6% of daily American Express credit card receipts pursuant to a repayment schedule as defined in the AMEX Agreement. The loan is subordinate to the agreements with BankUnited. The entire balance of the loan amount is due and payable 365 days after the initial loan distribution. At December 31, 2017, the amount outstanding under the AMEX Agreement is approximately $62,000.

 

Interest expense for all the Company’s debt arrangements, excluding the amortization of debt issuance costs and other discounts and fees, amounted to $1.0 million and $0.8 million for the years ended December 31, 2017 and 2016, respectively. The Company capitalized interest of $0.2 million and $0.5 million for the years ended December 31, 2017 and 2016, respectively.

 

As of December 31, 2017, the Company had $1.4 million in letters of credit outstanding for certain restaurants. These letters of credit, which are cash collateralized, are recorded as a component of security deposits on the consolidated balance sheet for December 31, 2017.