Notes Payable and Long-Term Debt

3 Months Ended

Dec. 29, 2020

Debt Disclosure [Abstract]

Notes Payable and Long-Term Debt

Note 6. Notes Payable and Long-Term Debt

Cadence Credit Facility

The Company maintains a credit agreement with Cadence Bank (“Cadence”) pursuant to which, as amended, Cadence agreed to loan the Company up to $17,000,000 with a maturity date of December 31, 2021 (the “Cadence Credit Facility”). On February 21, 2019 the Cadence Credit Facility was amended, in connection with the repurchase of minority interests related to three Bad Daddy’s restaurants, to retroactively attribute EBITDA previously attributed to non-controlling interests to the Company for purposes of certain financial covenants. On December 9, 2019 the Cadence Credit Facility was amended in connection with the separation of the Company’s former CEO, to amend the definition of “Consolidated EBITDA” for the purposes of financial covenants, to require certain installment payments, and to permit the company to make certain “Restricted Payments” (as defined in the Cadence Credit Facility). Subsequent to December 29, 2020, on January 8, 2021, the Cadence Credit Facility was amended to eliminate certain installment payments; reduce the commitment immediately to $11.0 million with reductions to $10.0 million and $8.0 million on March 31, 2021, and July 1, 2021, respectively; revise certain financial covenants; provide a mechanism for a transition from LIBOR to an alternate benchmark rate; and extend the maturity date to January 31, 2023. As amended by the various amendments, the Cadence Credit Facility accrues commitment fees on the daily unused balance of the facility at a rate of 0.25%. As of December 29, 2020, all borrowings under the Cadence Credit Facility, as amended, bear interest at a variable rate based upon the Company’s election of (i) 2.5% plus the base rate, which is the highest of the (a) Federal Funds Rate plus 0.5%, (b) the Cadence bank publicly-announced prime rate, and (c) LIBOR plus 1.0%, or (ii) LIBOR, with a 0.250% floor, plus 3.5%. Interest is due at the end of each calendar quarter if the Company selects to pay interest based on the base rate and at the end of each LIBOR period if it selects to pay interest based on LIBOR. As of December 29, 2020, the weighted average interest rate applicable to borrowings under the Cadence Credit Facility was 3.75%.

Principal payments on the Cadence Credit Facility were required beginning on March 31, 2020 in $250,000 installments on the last business day each of March, June, September, and December in each calendar year. The total loan commitment was permanently reduced by the corresponding amount of each such repayment on such date. New borrowings were permitted up to the amount of the loan commitment. The note was set to mature on December 31, 2021. Subsequent to December 29, 2020 per the January 8, 2021 amendment, the quarterly principal payment requirement and associated commitment reduction was eliminated, and the maturity date was extended to January 31, 2023.

As of December 29, 2020, the Cadence Credit Facility, as amended, contains certain affirmative and negative covenants and events of default that the Company considers customary for an agreement of this type, including covenants setting a maximum leverage ratio of 5.35:1, a minimum pre-distribution fixed charge coverage ratio of 1.25:1, a minimum post-distribution fixed charge coverage ratio of 1.10:1 and minimum liquidity of $2.0 million. As of December 29, 2020, the Company was in compliance with all covenants under the Cadence Credit Facility. Subsequent to December 29, 2020 per the January 8, 2021 amendment, certain financial covenants were amended.

As a result of entering into the Cadence Credit Facility and the various amendments, the Company paid loan origination costs including professional fees of approximately $292,000 and is amortizing these costs over the term of the credit agreement.

The obligations under the Cadence Credit Facility are collateralized by a first-priority lien on substantially all of the Company’s assets.

As of December 29, 2020, the outstanding balance on borrowings against the facility was $4,000,000. Availability of the Cadence Credit Facility for borrowings is reduced by the outstanding face value of any letters of credit issued under the facility. As of December 29, 2020, the outstanding face value of such letters of credit was $157,500.

Paycheck Protection Program Loans

On May 7, 2020, Good Times and three of its wholly-owned subsidiaries, BDI, Drive Thru, and BD Colo (each a “Borrower”), entered into unsecured loans in the aggregate principal amount of $11,645,000 (the “Loans”) with Cadence Bank, N.A. (the “Lender”) pursuant to the PPP.

The Loans are evidenced by individual promissory notes of each of the Borrowers dated April 29, 2020 executed by each Borrower on May 7, 2020 (together, the “Notes”) in favor of the Lender which Notes bear interest at the rate of 1.00% per annum. All or a portion of the Loans may be forgiven by the SBA upon application by the Borrowers accompanied by documentation of expenditures in accordance with SBA requirements under the PPP, which includes employees being kept on the payroll for twenty-four weeks after the date of the Loans and the proceeds of such Loans being used for payroll, rent, mortgage interest or utilities. Congress subsequently passed the PPP Flexibility Act which modified certain provisions of the PPP program, including expanding the original eight-week covered period to a period of twenty-four weeks (the “Covered Period”). The SBA and the Treasury continue to develop and issue new and updated guidance regarding the PPP loan application process, including guidance regarding required borrower certifications and requirements for forgiveness of loans made under the PPP. The Company continues to track the guidance as it is released and assess and re-assess various aspects of its application as necessary based on the guidance. The Company believes it qualifies for the PPP and is compliant in all aspects with its use of PPP funds, and expects to apply for forgiveness during 2021. However, in the absence of definitive guidance or regulations the Company cannot give any assurance that the Loans will be forgivable in whole or in part.

In the event that any portion of the Loans are not forgiven in accordance with the PPP, the Company will be required to pay the Lender monthly payments of principal and interest in an aggregate amount of $489,000 to repay the PPP Loans in full on or before April 29, 2022. The SBA has deferred loan payments to either (1) the date the SBA remits our forgiveness to the lender, or (2) 10 months after the end of the Covered Period, which would be in August 2021. However, as of the date of this report we have not yet received a decision from the SBA regarding forgiveness of our PPP loans or communication regarding the official end date of our deferral period. The Loans may be prepaid by the Company at any time prior to maturity with no prepayment penalties. The Notes contain certifications and agreements related to the PPP, as well as customary default and other provisions. We reflect the full principal amount of the PPP loans as debt, accounting for such loans under ASC 470, with current maturities of approximately $6.7 million pursuant to the current payment amortization schedule. We intend to account for the forgiveness of such loans at the time such forgiveness is granted.

Components of Long-Term Debt

The components of long-term debt as reflected on our consolidated balance sheet are as follows:

Current Maturities
Cadence Credit Facility	$	1,000
PPP Loans		6,693
Total Current Maturities		7,693
Maturities due after One Year
Cadence Credit Facility	$	3,000
PPP Loans		4,952
Total Maturities after One Year	$	7,952