Notes Payable to Stockholders - Related Party

3 Months Ended

Mar. 31, 2019

Debt Disclosure [Abstract]

Notes Payable to Stockholders - Related Party

10.

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 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 (4.01% and 3.678% per annum at March 31, 2019 and 2018, 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.

On March 25, 2019 we entered into a note exchange agreement with our Executive Chairman pursuant to which he exchanged $7,989,622 of principal and $395,510 of accrued interest which would have been due on December 31, 2019 under an unsecured loan for a secured promissory note in the principal amount of $8,385,132. The secured note which matures on December 31, 2021, and bears interest at 4% per annum, payable monthly, is secured by a first position security interest in our assets.

From January 1, 2019 through March 31, 2019, the Company received additional loans in the amount of $275,000 from the Company’s Executive Chairman, as advances for working capital needs. The loans bear interest at the BBA Libor Daily Floating Rate plus 1.4 points. As of March 31, 2019 the total balance due was $600,000.

In January 7, 2019, the Company received an additional loan in the amount of $25,000 from a stockholder and former member of the Board of Directors. The loan bears interest at a rate of 5% per annum and is due January 7, 2020.

During the three months ended March 31, 2019 and 2018, the Company incurred interest expense of $84,939 and $74,673, respectively, on its loan from the Executive Chairman of the Board, which is included in interest expense in the accompanying condensed statements of operations, as well as interest expense of $288 and $308 for the three months ended March 31, 2019 and 2018, respectively, related to the loan from a former Board member. These amounts, in addition to interest expense of $4,059 and $30 for the three months ended March 31, 2019 and 2018, respectively, are related to financing and late fees.

Notes payable and operating lease liabilities consisted of the following at March 31, 2019 and December 31, 2018:

	March 31, 2019			December 31, 2018
Notes payable to stockholders	$	9,010,132		$	8,314,622
Operating lease liabilities		918,086			—
		9,928,218			8,314,622
Less: current maturities		(799,435	)		(325,000	)
Long-term maturities	$	9,128,783		$	7,989,622