Notes Payable to Stockholders - Related Party

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Notes Payable to Stockholders - Related Party

11.

Notes Payable to Stockholders – Related Party

On March 28, 2002 the Company executed a binding agreement with one of its principal stockholders, who is also the former Chief Executive Officer, now Executive Chairman of the Board, to fund up to $6.1 million. Under the terms of the agreement, 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 (3.79% and 3.61% per annum at June 30, 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 the 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 six months ended June 30, 2018 we borrowed an additional $26,272 from our Executive Chairman, together with an $325,000 under a demand note not covered by this line of credit. This demand note bears interest at 4% per annum. As of June 30, 2018 and December 31, 2017 we owed him an aggregate of $8,314,622 and $7,988,349, respectively, which represented approximately 75% 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 Executive Chairman 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 a 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 both the Company’s Executive Chairman and its Chief Executive Officer, as advances for working capital needs. The amounts are non-interest bearing and are payable upon demand. On July 15, 2018, $250,000 was repaid.

During the three and six months ended June 30, 2018 and 2017, the Company incurred interest expense of $80,354 and $65,083, and $154,719 and $131,841, respectively, on its loan from the Executive Chairman of the Board, which is included in interest expense in the accompanying statements of operations as well as interest expense of $310 and $620 for the three and six months ended June 30, 2018 related to the loan from one if its former Board members. These amounts, in addition to interest expense of $4 and $481, and $32 and $575 for the three and six months ended June 30, 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 June 30, 2018 and December 31, 2017:

	June 30, 2018			December 31, 2017
Notes payable to stockholders	$	8,589,622		$	7,988,349
Capital lease obligation		1,567			3,443
		8,591,189			7,991,792
Less: current maturities		(601,567	)		(7,991,792	)
Long-term maturities	$	7,989,622		$	—

Maturities of Long Term Obligations for Five Years and Beyond

The minimum annual principal payments of notes payable and capital lease obligations at June 30, 2018 were:

2018	$	601,567
2019		7,989,622
	$	8,591,189