Annual report pursuant to Section 13 and 15(d)

Note Payable

v3.6.0.2
Note Payable
12 Months Ended
Nov. 30, 2016
Debt Disclosure [Abstract]  
Note Payable

Note 6– Note Payable

On June 30, 2015, the Company entered into a note payable in the amount of $1,300,000 in connection with the APA (Note 2). The note was payable in 48 monthly installments of $29,938 including principal and interest at the rate of 5% per annum, commencing on July 31, 2015, and ending on June 30, 2019. Pursuant to the APA, the note was secured by all assets, inventory, molds and tools sold and transferred to the Company, tangible personal property held for sale or lease, accounts, contract rights, and other rights to payment and general intangibles.

On April 22, 2016 the Company paid $778,287 which constituted payment in full of the Company’s payment obligations to CMDG pursuant to the terms of the original APA and Promissory Note, as well as pursuant to the terms of the Loan/Promissory Note Sale Agreement and Mutual Release executed by the Company and CMDG on April 22, 2016. Prior to making the payment in full, the Company made payments totaling $269,443 pursuant to the terms of the original APA and Promissory Note. The remaining principal balance of the note payable is $0 and $1,176,367 and is reflected on the accompanying balance sheets as of November 30, 2016 and November 30, 2015, respectively. The difference between the remaining principal balance and the final payment made on April 22, 2016 was $300,593 which was recorded as gain on extinguishment of debt for the twelve months ended November 30, 2016 on the accompanying consolidated statements of comprehensive (loss) income.

As of the twelve months ended November 30, 2016, the Company recognized $22,265 of interest expense related to the note payable.

On May 20, 2016, the Company entered into a Credit Agreement (“Agreement”) with Texas Capital Bank, National Association (“TCB”) for a term loan of $8.0 million in senior credit facilities. The proceeds of the term loan were used by the Company to fund repurchases of the Company’s common stock. Subject to the terms of the Agreement, on May 20, 2016, TCB advanced the Company $100.00. On July 1, 2016, TCB advanced the remaining principal amount of $7,999,900 per a promissory note dated May 20, 2016 between the Company and TCB, at a rate of 3.75% per annum plus LIBOR, payable monthly with a maturity date of July 2021. On August 26, 2016, the Company entered into a First Amendment to Credit Agreement with TCB. Pursuant to terms of the First Amendment to Credit Agreement, on August 26, 2016, TCB made an additional advance to the Company in principal amount of $2,133,433 per an Amended and Restated Promissory Note dated August 26, 2016 between the Company and TCB. The additional proceeds of the term loan were used by the Company to fund a portion of the Settlement Agreement and Release of All Claims with Charles D. Nyberg and Mary J. Nyberg, individually and as Trustees of the CDMJ Nyberg Family Trust as described in Note 17. As of November 30, 2016, principal paid to date is $633,000. As of November 30, 2016, the Company paid interest of $164,799, which is reflected in interest expense on the accompanying consolidated statements of comprehensive (loss) income.

On May 20, 2016, the Company also entered into a Subordination Agreement with TCB and CrowdOut Capital LLC (“CrowdOut”) for a subordinated loan of the principal amount of $650,000, which amount CrowdOut advanced to the Company on May 20, 2016. The proceeds of the subordinated loan will be used by the Company to fund continued repurchases of the Company’s common stock. Per a promissory note dated May 20, 2016 between the Company and CrowdOut, interest at 12% per annum on the principal sum of $650,000 is payable monthly with a maturity date of July 2021, at which time, the principal amount of $650,000 is payable. As of November 30, 2016, the Company paid interest of $42,250 which is reflected in interest expense on the accompanying consolidated statements of comprehensive (loss) income.

Collateral of the term and subordinated loans includes all money, securities and property of the Company.

The Company incurred debt issuance costs related to the term and subordinated loans in the amount of $378,785 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 November 30, 2016, $48,435 of the debt issuance costs have been amortized and are reflected in interest expense on the accompanying consolidated statements of comprehensive (loss) income.

As of November 30, 2016, the note payable obligation was as follows:

 

     November 30,
2016
 

Note payable

   $ 10,150,100  

Unamortized debt issuance costs

     (330,350
  

 

 

 

Net note payable

   $ 9,819,750  
  

 

 

 

Current portion of note payable

   $ 2,000,000  

Long-term note payable, net of debt issuance costs

     7,819,750  
  

 

 

 

Total

   $ 9,819,750  
  

 

 

 

 

Future principal payments under the note payable obligation are as follows:

 

Years ending November 30:

   Amount  

2017

   $ 2,000,000  

2018

     2,000,000  

2019

     2,000,000  

2020

     2,000,000  

2021

     2,150,100  
  

 

 

 

Total

   $ 10,150,100  
  

 

 

 

Interest expense on the note payable for the years ended November 30, 2016 was as follows:

 

     November 30,
2016
 

Interest expense on notes payable

   $ 229,314  

Debt issuance costs

     48,435  
  

 

 

 

Total interest expense

   $ 277,749