Quarterly report pursuant to Section 13 or 15(d)

Note Payable

v3.19.3
Note Payable
9 Months Ended
Sep. 30, 2019
Notes Payable [Abstract]  
Note Payable

7. NOTE PAYABLE

On June 24, 2016, certain wholly-owned subsidiaries (“Secured Subsidiaries”) of the Company entered into a loan agreement and certain other related agreements (collectively, the “Loan Agreement”) between the Secured Subsidiaries and Insurance Strategy Funding IV, LLC (the “Lender”). Under the Loan Agreement, the Secured Subsidiaries are borrowing from the Lender in the principal amount of $20 million pursuant to a promissory note (the “Promissory Note”). The Promissory Note bears an interest rate equal to 4.192% per annum (effective interest rate 4.40%) and is due to mature on July 1, 2036. Pursuant to a security agreement (the “Security Agreement”), the obligations under the Loan Agreement are secured by certain real estate assets owned by the Secured Subsidiaries.

The Company entered into a non-recourse guaranty on June 24, 2016 (the “Guaranty,” and together with the Loan Agreement, the Promissory Note and the Security Agreement, the “Loan Documents”) to guarantee the payment to Lender of certain obligations of the Secured Subsidiaries under the Loan Agreement.

The Loan Documents require the Secured Subsidiaries and the Company to comply with certain covenants, including, among others, a minimum net worth test and other customary covenants. The Lender may accelerate amounts outstanding under the Loan Documents upon the occurrence of an event of default (as defined in the Loan Agreement) including, but not limited to, the failure to pay amounts due or commencement of bankruptcy proceedings.

The Company incurred loan procurement costs of $646,246 and such costs have been recorded net of the note payable on the consolidated balance sheet and are amortized as an adjustment to interest expense over the term of the loan. The Company recorded amortization expense of $10,342 and $10,588 for the three months ended September 30, 2019 and 2018, respectively, and $31,213 and $31,806 for the nine months ended September 30, 2019 and 2018, respectively.

The carrying value of the Company’s note payable is summarized as follows:

 

Note Payable

 

September 30, 2019

 

 

December 31, 2018

 

Principal balance outstanding

 

$

19,458,149

 

 

$

19,809,511

 

Less: Loan procurement costs, net

 

 

(509,048

)

 

 

(540,261

)

Total note payable, net

 

$

18,949,101

 

 

$

19,269,250

 

 

As of September 30, 2019, the note payable was secured by certain of its stores with an aggregate net book value of approximately $34.3 million. The following table represents the future principal payment requirements on the note payable as of September 30, 2019:

 

2019

 

$

159,736

 

2020

 

 

492,797

 

2021

 

 

513,857

 

2022

 

 

535,816

 

2023

 

 

558,714

 

2024 and thereafter

 

 

17,197,229

 

Total principal payments

 

$

19,458,149

 

 

 

Revolving Line of Credit

 

On December 20, 2018, certain wholly owned subsidiaries (the “Subsidiaries”) of the Company entered into a revolving credit loan agreement (the “Agreement”) between the Subsidiaries and TCF National Bank (the “Lender”). Under the Agreement, the Subsidiaries are borrowing from the Lender in the principal amount of up to $10 million pursuant to a promissory note (the “Note”). The Note bears an interest rate equal to 3.00% over the One Month U.S. Dollar London Inter-Bank Offered Rate (effective rate 6.46%) and is due to mature on December 20, 2021. The obligations under the Agreement are secured by certain real estate assets owned by the Subsidiaries.

 

The Company entered into a guaranty of payment on December 20, 2018 (the “Guaranty,” and together with the Agreement, the Note and related instruments, the “Revolver”) to guarantee the payment to Lender of certain obligations of the Subsidiaries under the Agreement.

 

The Revolver requires the Subsidiaries and the Company to comply with certain covenants, including, among others, customary financial covenants. The Lender may accelerate amounts outstanding under the Loan Documents upon the occurrence of an Event of Default (as defined in the Agreement) including, but not limited to, the failure to pay amounts due to the Lender or commencement of bankruptcy proceedings.

The Company incurred issuance costs of $477,981 and such costs are amortized as an adjustment to interest expense over the term of the loan. The Company recorded amortization expense of $39,832 and $0 for the three months ended September 30, 2019 and 2018, respectively, and $119,495 and $0 for the nine months ended September 30, 2019 and 2018, respectively. The outstanding loan balance under the Revolver was $380,000 as of September 30, 2019.