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Long-Term Debt | 12 Months Ended
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Sep. 30, 2017
Debt Disclosure [Abstract] |
Long-Term Debt | 8. Long-term Debt Long-term debt consisted of the following (in thousands):
|  |  |  | September 30, |
|  |  |  | 2017 |  |  | 2016 |
Notes payable at 10-11%, mature August 2022 and December 2024 |  | * |  | $ | 2,358 |  |  | $ | 2,662 |
Note payable at 7%, matures December 2019 |  | * |  |  | 95 |  |  |  | 133 |
Notes payable at 5.5%, matures January 2023 |  | * |  |  | 1,157 |  |  |  | 1,238 |
Notes payable at 5.5%, matures January 2023 and January 2022 |  | * |  |  | 4,510 |  |  |  | 4,864 |
Note payable refinanced at 6.25%, matures July 2018 |  | * |  |  | 1,120 |  |  |  | 1,227 |
Note payable at 6.3%, matures June 2030, collateralized by aircraft |  |  |  |  | - |  |  |  | 422 |
Note payable at 9.5%, matures August 2024 |  | ** |  |  | 6,941 |  |  |  | 10,642 |
Notes payable at 9.5%, mature September 2024 |  | * |  |  | 6,423 |  |  |  | 7,040 |
6% convertible debentures, mature March 2023 |  | ** |  |  | - |  |  |  | 406 |
Notes payable at 13%, matures October 2016 and 2017 |  | ** |  |  | - |  |  |  | 4,000 |
Notes payable at 5-7%, mature from 2018 to 2028 |  | * |  |  | 1,679 |  |  |  | 1,867 |
Note payable at 11%, matures June 2018 |  | * |  |  | - |  |  |  | 1,500 |
9% convertible debentures mature October 2016 |  |  |  |  | - |  |  |  | 452 |
7.45% note payable collateralized by aircraft, matures January 2019 |  |  |  |  | 2,740 |  |  |  | 3,013 |
Notes payable at 12%, mature December 2017 and September 2018 |  | ** |  |  | - |  |  |  | 4,000 |
Non-interest-bearing debt to State of Texas, matures May 2022, interest imputed at 9.6% |  |  |  |  | 5,613 |  |  |  | 6,201 |
Note payable at 6.5%, matures January 2020 |  | * |  |  | 4,484 |  |  |  | 4,621 |
Note payable at 6%, matures January 2019 |  | * |  |  | 504 |  |  |  | 857 |
Notes payable at 5.5%, matures May 2020 |  | * |  |  | 5,320 |  |  |  | 5,493 |
Note payable at 6%, matures May 2020 |  | * |  |  | 1,037 |  |  |  | 1,386 |
Note payable at 5.25%, matures December 2024 |  | * |  |  | 1,777 |  |  |  | 1,842 |
Note payable at 5.45%, matures July 2020 |  | * |  |  | 10,620 |  |  |  | 10,962 |
Note payable at the greater of 2% above prime or 5% (6.25% at September 30, 2017), matures October 2025 |  | * |  |  | 4,303 |  |  |  | 4,430 |
Note payable at 5%, matures January 2026 |  | * |  |  | 9,672 |  |  |  | 9,882 |
Note payable at 5.25%, matures March 2037 |  | * |  |  | 4,651 |  |  |  | 4,442 |
Note payable at 5%, matures July 2017 |  | * |  |  | - |  |  |  | 2,157 |
Note payable at 6.25%, matures February 2018 |  | * |  |  | 1,894 |  |  |  | 1,894 |
Note payable at 5.95%, matures August 2021 |  | * |  |  | 8,267 |  |  |  | 8,945 |
Note payable at 12%, matures October 2021 |  | ** |  |  | 9,671 |  |  |  | - |
Note payable at 4.99%, matures April 2037, collateralized by aircraft |  |  |  |  | 941 |  |  |  | - |
Notes payable at 12%, mature May 2020 |  | ** |  |  | 5,440 |  |  |  | - |
Note payable at 5%, matures November 2017 |  | ** |  |  | 5,000 |  |  |  |  |
Note payable at 8%, matures May 2029 |  | ** |  |  | 15,291 |  |  |  | - |
Note payable at 5%, matures May 2038 |  | * |  |  | 3,441 |  |  |  | - |
Total debt |  |  |  |  | 124,949 |  |  |  | 106,578 |
Less unamortized debt issuance costs |  |  |  |  | (597 | ) |  |  | (692 | )
Less current portion |  |  |  |  | (17,440 | ) |  |  | (9,950 | )
Total long-term debt |  |  |  | $ | 106,912 |  |  | $ | 95,936 |
* Collateralized by real estate ** Collateralized by stock in subsidiary Following is a summary of long-term debt at September 30 (in thousands):
|  | 2017 |  |  | 2016 |
Secured by real estate |  | $ | 73,312 |  |  | $ | 76,204 |
Secured by stock in subsidiary |  |  | 42,343 |  |  |  | 19,048 |
Secured by other assets |  |  | 3,681 |  |  |  | 3,435 |
Unsecured |  |  | 5,613 |  |  |  | 7,891 |
|  | $ | 124,949 |  |  | $ | 106,578 |
In April 2010, the Company acquired the real estate for the club in Austin, Texas formerly known as Rick’s Cabaret. In connection with the purchase, the Company executed a note to the seller amounting to $ 2.2 million. The note was collateralized by the real estate and was payable in monthly installments through April 2025 of $19,774, including principal and interest at the prime rate plus 4.5% with a minimum rate of 7%. The Company refinanced this debt in 2013 with a note of $1.5 million, payable in monthly installments of $15,090 through July 2018, including principal and interest at 6.25%. In June 2010, the Company borrowed $518,192 from a lender. The funds were used to purchase an aircraft. The debt bore interest at 6.30% with monthly principal and interest payments of $3,803 beginning in July 2010, maturing June 2030. This note was refinanced with a bank in April 2017 with the borrowing of $952,690 at 4.99% for 20 years, together with a purchase of a new aircraft. Monthly payments for the new note is at $6,286, including interest, beginning in May 2017. This note has been paid off in 2017. In connection with the acquisition of Silver City in January 2012, the Company executed notes to the seller in the amount of $ 1.5 million. The notes are payable over eleven years at $12,256 per month including interest and have an adjustable interest rate of 5.5%. The rate adjusts to prime plus 2.5% in the 61st month, not to exceed 9%. In the same transaction, the Company also acquired the related real estate and executed notes to the seller for $6.5 million. The notes are also payable over eleven years at $53,110 per month including interest and have the same adjustable interest rate of 5.5%. As consideration for the purchase of nine operating adult cabarets and two other licensed location under development at that time (collectively, the “Foster Clubs”), a subsidiary paid to the sellers at closing $3.5 million cash and $22.0 million pursuant to a secured promissory note (the “Club Note”). The Club Note bears interest at the rate of 9.5% per annum, is payable in 144 equal monthly installments of $ 256,602 per month and is secured by the assets purchased from the Companies. In connection with the acquisition of the Foster Clubs, as explained above, the Company’s wholly owned subsidiary, Jaguars Holdings, Inc. (“JHI”), entered into a Commercial Contract (the “Real Estate Agreement”), which agreement provided for JHI to purchase the real estate where the Foster Clubs are located. The transactions contemplated by the Real Estate Agreement closed on October 16, 2012. The purchase price of the real estate was $10.1 million (discounted to $9.6 million as explained below) and was paid with $350,000 in cash, $9.1 million in mortgage notes, and an agreement to make a one-time payment of $650,000 in twelve years that bears no interest. The note bears interest at the rate of 9.5%, is payable in 143 equal monthly installments and is secured by the real estate properties. The Company has recorded a debt discount of $431,252 related to the one-time payment of $650,000. The Club Note from the Jaguars acquisition also provides that in the event any regulatory or administrative authority seeks to enforce or attempts to collect any tax or obligation or liability that may be due pursuant to the Texas Patron Tax (sometimes referred to as the “Pole Tax”) or related legislation, then the then outstanding principal amount of the Club Note, as of the date the tax is enforced, will immediately be reduced by an amount calculated by multiplying 1,200,000 by the dollar amount of the per-person tax implemented (the “Reduction Amount”). The Reduction Amount cannot exceed $6.0 million. By way of example, if exactly two years after closing, a $2.00 per person tax is implemented and enforced, the Reduction Amount would be $2.4 million and the then principal amount of the Club Note would be reduced $2.4 million. The Texas Patron Tax is currently enacted to be $5 per person which equates to a $6.0 million Reduction Amount. The State of Texas has demanded payment and this provision was invoked in July 2014 and the Company recorded a gain of $6 million, less related debt discount. During the year ended September 30, 2013, the Company acquired four parcels of real estate at a cost aggregating $3,230,000 and incurred debt aggregating $2.6 million in connection therewith. The notes bear interest at rates ranging from 5 - 7% and are payable $25,660 monthly, including principal and interest. The notes mature from 2018 to 2028. On October 15, 2013, the Company sold to certain investors (i) 9% Convertible Debentures with an aggregate principal amount of $4,525,000 (the “Debentures”), under the terms and conditions set forth in the Debentures, and (ii) warrants to purchase a total of 72,400 shares of the Company’s common stock (the “Warrants”), under the terms and conditions set forth in the Warrants. Each of the Debentures had a term of three years, was convertible into shares of our common stock at a conversion price of $12.50 per share (subject to adjustment), and had an annual interest rate of 9%, with one initial payment of interest only due April 15, 2014. Thereafter, the principal amount was payable in 10 equal quarterly principal payments, which amounts to a total of $452,500, plus accrued and unpaid interest. Six months after the issue date of the Debentures, we had the right to redeem the Debentures if the Company’s common stock has a closing price of $16.25 (subject to adjustment) for 20 consecutive trading days. The Warrants had an exercise price of $12.50 per share (subject to adjustment) and expired on October 15, 2016. The Company sold the Debentures and Warrants to the investors in a private transaction and received consideration of $4,525,000. The notes were paid off in October 2016. The fair value of the warrants was estimated to be $105,318 using a Black-Scholes option-pricing model using the following weighted average assumptions:
Volatility |  |  | 28 | %
Expected life |  |  | 1.5 years |
Expected dividend yield |  |  | - |
Risk free rate |  |  | 0.33 | %
The cost of the warrants has been recognized as a discount on the related debt and will be amortized to interest expense over the life of the debt. The warrants expired in October 2016. In December 2013, the Company borrowed $3.6 million from a lender. The funds were used to purchase an aircraft. The debt bears interest at 7.45% with monthly principal and interest payments of $40,653 beginning March 2012. The note matures in January 2019. In December 2014, the Company refinanced certain real estate debt amounting to $2.1 million with new bank debt of $2.0 million. The new debt is payable $13,270 per month, including interest at 5.25% and matures in ten years. In December 2014, the Company borrowed $1.0 million from an individual. The note is collateralized by certain real estate, is payable $13,215 per month, including interest at 10% and matures in ten years. On January 13, 2015 a Company subsidiary purchased Down in Texas Saloon gentlemen’s club in an Austin, Texas suburb. As part of the transaction, another subsidiary also purchased the club’s real estate. Total consideration of $6.8 million consisted of $3.5 million for the club business and $3.3 million for its 3.5 acres of real estate. Payment was in the form of $1 million in cash and $1.4 million in seller financing at 6% annual interest, with the balance provided by commercial bank financing in the form of a note at a variable interest rate equal to the prime rate plus 2%, but in no event less than 6.5%. Payments on these notes aggregate $68,829 per month. See Note 14. On May 4, 2015 a Company subsidiary purchased The Seville gentlemen’s club in Minneapolis Minnesota. As part of the transaction, another subsidiary also purchased the club’s real estate. Total consideration of $8.5 million consisted of $4.5 million for the assets of the club business and $4.0 million for the real estate. Payment was made through bank financing of $5.7 million at 5.5% interest, seller financing of $1.8 million at 6% and cash of $1.1 million. See Note 14. There are certain financial covenants with which the Company must be in compliance related to this financing. The Company is in compliance with such covenants as of September 30, 2017. Payments on these notes aggregate to $65,355 per month. On July 30, 2015, a subsidiary of the Company acquired the building in which the Company’s Miami Gardens, Florida nightclub operates. The cost was $15,300,000 and was purchased with an $11,325,000 note, payable in monthly installments of approximately $78,000, including interest at 5.45% and matures in five years and the balance with cash. The building has several other third-party tenants in addition to the Company’s nightclub. There are certain financial covenants with which the Company must be in compliance related to this financing. The Company is in compliance with such covenants as of September 30, 2017. In 2015, the Company reached a settlement with the State of Texas over payment of the state’s Patron Tax on adult club customers. To resolve the issue of taxes owed, the Company agreed to pay $10.0 million in equal monthly installments of $119,000, without interest, over 84 months, beginning in June 2015, for all but two nonsettled locations. Going forward, the Company agreed to remit the Patron Tax on a monthly basis, based on the current rate of $5 per customer. For accounting purposes, the Company has discounted the $10.0 million at an imputed interest rate of 9.6%, establishing a net present value for the settlement of $7.2 million. This is included as long-term debt in the consolidated balance sheets. In October 2015, the Company refinanced certain real estate debt amounting to $2.3 million with new bank debt of $4.6 million. After closing costs, the Company received $2.0 million in cash from the transaction. The new debt is payable $30,244 per month, including interest at the prime rate plus 2% (5.5% at September 30, 2016) and matures in ten years. There are certain financial covenants with which the Company must be in compliance related to this financing. The Company is in compliance with such covenants as of September 30, 2017. In October 2015, the Company entered into a $4.7 million construction loan with a commercial bank for a new corporate headquarters building. The note, which was fully funded upon the finish of construction of the building in October 2016, is payable over 20 years at $31,988 per month including interest and has an adjustable interest rate of 5.25%. The rate adjusts to prime plus 1% in the 61st month, with a floor of 5.25%. In January 2016, a subsidiary of the Company acquired the building in which the Company’s Rick’s Cabaret New York nightclub operates. The cost was $10.5 million, including closing costs and was purchased with a $10.0 million note, payable in monthly installments of approximately $59,000, including interest at 5.0% and matures in ten years. There are certain financial covenants with which the Company must be in compliance related to this financing. The Company is in compliance with such covenants as of September 30, 2017. In July 2016, the Company acquired certain land for future development of a Bombshells in Harris County, Texas for $3.3 million, financed with a bank note for $2.2 million, payable interest only at 5.0% monthly until its maturity in 12 months. This note has been paid off in 2017. In August 2016, the Company acquired certain land for future development of a Bombshells in Harris County, Texas for $2.5 million, financed with a bank note for $1.9 million, payable interest only at 5.0% monthly until its maturity in 18 months. In August 2016, the Company refinanced two notes payable with an aggregate carrying value of $6.1 million with a $9.0 million bank note at an interest rate of 5.95%. The note matures in 10 years with monthly installments of $100,062 and a balloon payment at maturity for the remaining balance. There are certain financial covenants with which the Company must be in compliance related to this financing, which the Company would not have been in compliance with as of September 30, 2017, except for the subsequent effect of the New Loan (see Note 20). On October 5, 2016, the Company refinanced $8.0 million of long-term debt by borrowing $9.9 million. The new unsecured debt is payable $118,817 per month, including interest at 12%, and matures in five years with a balloon payment for the remaining balance at maturity. The refinanced debt was comprised of interest-only notes that were scheduled to mature with full principal payments in fiscal 2018. On January 4, 2017, the Company paid off $392,000 of convertible 6% notes, which would have matured on March 4, 2023. On March 13, 2017, the Company entered into a promissory note with a bank, which provides for a $1.0 million revolving line of credit maturing on March 13, 2018. The interest rate under this revolving line of credit is at 6.5% per annum payable every 13th of each month starting April 13, 2017 for all outstanding borrowings. In an event of a default, as defined in the agreement, the interest rate shall be increased to 17% per annum. As of September 30, 2017, the Company had available borrowing capacity of $1.0 million under the revolving line of credit. On May 1, 2017, the Company raised $5.4 million through the issuance of 12% unsecured promissory notes to certain investors, which notes mature on May 1, 2020. The notes pay interest-only in equal monthly installments, with a lump sum principal payment at maturity. On May 4, 2017, the Company entered into a construction loan agreement with a bank for the construction of the Company’s Bombshells Pearland location. The maximum availability of the 5% promissory note is $4.8 million with advances based on the progress of construction. On June 4, 2017, an initial advance of $2.2 million was used to pay off a previous interest-only note for the same construction project. The new loan is payable interest-only until after one year from the date of the initial advance when the construction loan, including all advances as its principal, converts to an amortizing 20-year note with scheduled monthly payments to be determined on the date of conversion. The Company paid loan costs amounting to $24,000, which will be amortized for the term of the note. On May 8, 2017, in relation to the Scarlett’s acquisition (see Note 14), the Company executed two promissory notes with the sellers: (i) a 5% short-term note for $5.0 million payable in lump sum after six months from closing date and (ii) a 12-year amortizing 8% note for $15.6 million. The 12-year note is payable $168,343 per month, including interest. Future maturities of long-term debt consist of the following, net of debt discount (in thousands):
|  | Regular |  |  | Balloon |  |  | Total |
|  | Amortization |  |  | Payments |  |  | Payments |
2018 |  | $ | 9,512 |  |  | $ | 7,928 |  |  | $ | 17,440 |
2019 |  |  | 9,653 |  |  |  | 2,370 |  |  |  | 12,023 |
2020 |  |  | 8,270 |  |  |  | 24,816 |  |  |  | 33,086 |
2021 |  |  | 6,116 |  |  |  | 5,285 |  |  |  | 11,401 |
2022 |  |  | 4,923 |  |  |  | 8,317 |  |  |  | 13,240 |
Thereafter |  |  | 23,314 |  |  |  | 14,445 |  |  |  | 37,759 |
|  | $ | 61,788 |  |  | $ | 63,161 |  |  | $ | 124,949 |

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- Definition The entire disclosure for long-term debt. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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