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Notes Payable to Stockholders and Related Parties
9 Months Ended
Sep. 30, 2012
Notes Payable to Stockholders [Abstract]  
Notes Payable to Stockholders

6. Notes Payable to Stockholders and Related Parties


Beginning on March 28, 2002 the Company executed a binding agreement with one of its principal stockholders, who is also the Chairman of the Board and an executive officer, to fund up to $6,100,000. Under the terms of the agreements, the Company can draw amounts as needed to fund operations. Amounts drawn bear interest at the BBA LIBOR Daily Floating Rate plus 1.4 percentage points (1.641% per annum at September 30, 2012), payable monthly and were to become due and payable on December 31, 2005 or upon a change in control of the Company or consummation of any other financing over $7,000,000. Beginning in March 2006, annually, through February 2012, the maturity date for the agreement was extended annually from December 31, 2007 to December 31, 2013.

 

At September 30, 2012 the Company had drawn the full funding amount under the agreement of $6,100,000 plus an additional $1,799,017, which includes direct loans in the amount of $470,000. During the three months ended September 30, 2012, the stockholder loaned the Company an additional $325,000 directly, for a total amount due of $8,224,017.

 

Additionally, the Company has loans outstanding from one board member, who is also a significant stockholder and consultant, totaling $100,000 at September 30, 2012 and December 31, 2011. The outstanding debt obligation at September 30, 2012 matures January 1, 2013 and is included in Current Liabilities.

 

For the three-months ended September 30, 2012 and 2011, the Company recorded interest expense of $43,752 and $45,263, respectively, and for the nine-months ended September 30, 2012 and 2011, the Company recorded $122,617 and $126,453, respectively, related to the notes payable to stockholders, which is included in interest expense in the accompanying condensed consolidated statements of operations.