Notes Payable to Stockholders - Related Party

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Notes Payable to Stockholders - Related Party

11.

Notes Payable to Stockholders – Related Party

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 $6.1 million. 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 (3.678% and 3.616% per annum at March 31, 2018 and 2017, respectively), 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 $7.0 million. Beginning in March 2006, annually, through February 2012, the maturity date for the agreement was extended annually from December 31, 2007, to December 31, 2018. On May 9, 2018 he extended the maturity rate to December 31, 2019.

During the three months ended March 31, 2018 we borrowed an additional $200,000 from him and repaid $0. As of March 31, 2018 and December 31, 2017 we owed him $8,163,349 and $7,963,349 which represented approximately 77% and 78% of our total liabilities, respectively. On May 9, 2018 he extended the maturity date to December 31, 2019.  While he has continued to fund our working capital needs at reduced levels and extend the due date of the obligation for an additional year, he is under no contractual obligation to do so. During 2017 he advised us he does not expect to continue to provide working capital advances to us at historic amounts. If we are unable to meet our obligation to our Chairman and Chief Executive Officer prior to maturity, he has advised us that he may forgive all, or substantially all, of this obligation.

In November 2017, the Company received an additional loan in the amount of $25,000 from this same former member of the Board of Directors. The loan bears interest at a rate of 5% per annum and is due December 31, 2018.

From April 1, 2018 through May 15, 2018, the Company received additional loans in the amount of $250,000 from a related party to the Company’s Chairman and CEO, as advances for working capital needs.  The Loan is unsecured and payable on demand.

During the three months ended March 31, 2018 and 2017, the Company incurred interest expense of $74,365 and $65,083, respectively, on its loan from the Chairman of the Board, which is included in interest expense in the accompanying statements of operations as well as interest expense of $308 and $442 for the three months ended March 31, 2018 and 2017 related to the loan from one if its former Board members. These amounts, in addition to interest expense of $30 and $20 for the three months ended March 31, 2018 and 2017, respectively, related to capital lease obligations, financing and loans from a stockholder.

Notes payable and capital leases consisted of the following at March 31, 2018 and December 31, 2017:

	March 31, 2018			December 31, 2017
Notes payable to stockholders	$	8,188,349		$	7,988,349
Capital lease obligation		2,505			3,443
		8,190,854			7,991,792
Less: current maturities		(27,505	)		(7,991,792	)
Long-term maturities	$	8,163,349		$	—

Maturities of Long-Term Obligations for Five Years and Beyond

The minimum annual principal payments of notes payable and capital lease obligations at March 31, 2018 were:

2018	$	27,505
2019		8,163,349
Total	$	8,190,854