Quarterly report pursuant to Section 13 or 15(d)

Notes Payable

v3.24.2
Notes Payable
 6 Months Ended
May 31, 2024
Debt Disclosure [Abstract]  
Notes Payable

Note 5 – Notes Payable

On July 18, 2022, the Company entered into a Credit Agreement (“Agreement Susser”) with Susser Bank, a Texas state bank, as administrative agent (“Susser”) on behalf of itself and the other lenders (collectively, the “Lenders”) for (i) an unsecured revolving line of credit in an aggregate principal amount of up to $10,000,000 (the “RCF”); and (ii) a term loan facility in an original principal amount of $8,960,000 (the “Term Loan Susser” and together with the RCF collectively, the “Loans”). In connection with the RCF the Company entered into a Revolving Credit Line, in favor of Susser, in the stated principal amount of $10,000,000 (the “RCF Note”), and in connection with the Term Loan the Company entered into a Term Note, in favor of Susser, in the stated principal amount of $8,960,000 (the “Term Note” and together with RCF Note, collectively, the “Notes”). The Loans bear interest at the Company’s option at: (a) the Base Rate, which is the highest of (i) the rate of interest published by The Wall Street Journal, from time to time, as the “U.S. Prime Rate”, (ii) the federal funds rate plus 0.5% and (iii) the Monthly SOFR rate plus 1.0% (subject in each case to a floor of 5.5%), plus 4.25% or (b) the Monthly SOFR plus 3.25% (subject to a floor of 4.5%). The RCF matures on July 18, 2025 and the Term Note matures on July 18, 2032. As of the three months ended May 31, 2024 and May 31, 2023, the Company paid interest of $252,543 and $204,206, respectively, which is reflected in interest expense on the accompanying consolidated statements of income. As of the six months ended May 31, 2024 and May 31, 2023, the Company paid interest of $455,802 and $406,681, respectively, which is reflected in interest expense on the accompanying consolidated statements of income. The interest rates for the RCF and Term Note as of May 31, 2024 were 8.57% and 8.57%, respectively.

The average outstanding balance during the six months ended May 31, 2024 for the revolving line of credit was $2,624,641. The average outstanding balance during the twelve months ended November 30, 2023 for the revolving line of credit was $1,848,344. The revolving line of credit balance as of May 31, 2024 and November 30, 2022 was $4,222,728 and $1,222,728, respectively, and is reflected on the accompanying balance sheet.

The Company incurred debt issuance costs related to the term loan in the amount of $196,501 which is recorded as a direct reduction of the carrying amount of the note payable and amortized over the life of the loan. As of the three months ended May 31, 2024 and May 31, 2023, $5,322 and $5,418, respectively, of the debt issuance costs were amortized and are reflected in interest expense on the accompanying consolidated statements of income. As of the six months ended May 31, 2024 and May 31, 2023, $10,670 and $10,862, respectively, of the debt issuance costs were amortized and are reflected in interest expense on the accompanying consolidated statements of income.

On March 27, 2023, the Company entered into an interest rate swap agreement with Susser to manage exposure to interest rate risk related to its variable rate debt obligation under the Term Note. The swap agreement had a notional amount equal to the Term Loan. The agreement is to pay the Company monthly SOFR plus 3.25% on the notional amount and the Company is to pay a fixed rate of interest equal to 6.96%. The effective date of the amended term loan was March 27, 2023 with a maturity date of July 29, 2032. On April 15, 2024, the Company terminated the interest rate swap agreement and recorded proceeds of $228,000.

The Company is required to pay a commitment fee equal to 0.5% times the daily average unused portion of the RCF.

The Agreement requires the Company to maintain a Leverage Ratio, determined as of the last day of each quarter for the four-fiscal quarter period ending on the date of determination, of no more than 3.50 to 1.00. The Agreement also requires the Company to maintain a Debt Service Coverage Ratio of no less than 1.25 to 1.00 determined as of the last day of each quarter for the four-fiscal quarter period ending on the date of determination.

As of May 31, 2024 and November 30, 2023, the note payable obligation was as follows:

 

 

 

May 31, 2024

 

 

November 30, 2023

 

Note payable - Susser

 

$

8,686,712

 

 

$

8,765,082

 

Unamortized debt issuance costs - Susser

 

 

(158,735

)

 

 

(169,404

)

Net note payable

 

$

8,527,977

 

 

$

8,595,678

 

Current portion of note payable

 

$

171,605

 

 

$

165,641

 

Long-term note payable, net of debt issuance costs

 

 

8,356,372

 

 

 

8,430,037

 

Total

 

$

8,527,977

 

 

$

8,595,678

 

 

Interest expense on the note payable for the three and six months ended May 31, 2024 and 2023 was as follows:

 

 

 

For the three months ended

 

 

For the six months ended

 

 

 

May 31, 2024

 

 

May 31, 2024

 

Interest expense on notes payable - Susser

 

$

47,166

 

 

$

47,166

 

Debt issuance costs - Susser

 

 

—

 

 

 

—

 

Total interest expense

 

$

47,166

 

 

$

47,166

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

For the six months ended

 

 

 

May 31, 2023

 

 

May 31, 2023

 

Interest expense on notes payable - Susser

 

$

204,206

 

 

$

406,681

 

Debt issuance costs - Susser

 

 

5,418

 

 

 

10,862

 

Total interest expense

 

$

209,624

 

 

$

417,543

 

 

During the three and six months ended May 31, 2024, the Company capitalized interest expense of $210,700 and $409,307, respectively, related to the construction of the Company's new facility in North Carolina.