7. Debt

12 Months Ended

Dec. 31, 2014

Debt Disclosure [Abstract]

7. Debt

Note 7 – Debt

Debt consists of the following:

			December 31,
Description	Note		2014		2013
Line of credit		A	$	47,000	$	47,000
Note payable to distribution partner		B		580,000		550,347
Investor debt		C		267,787		267,787
Related party debt		D		3,840,749		2,965,863
Other notes payable		E		57,692		60,836
Cash draw agreements		F		255,793		46,663
Convertible promissory notes		G		217,500		—
Total				5,266,521		3,938,496
Less:  current portion				2,373,307		3,938,496
Debt, long-term portion			$	2,893,214	$	—

A – Line of Credit – We utilized this bank line of credit for working capital purposes. The outstanding obligation is due on demand, has a stated initial interest rate of 10.5% that is subject to adjustment, and is guaranteed by our majority shareholder.

B – Note Payable to Distribution Partner – Note payable to a significant European distribution partner, entered into in October 2014, bearing interest at 5% payable quarterly, with principal payable monthly through September 2019. The 2014 note payable aggregated the 2007 promissory note, accrued interest and accounts payable. The December 31, 2013, balance represents the outstanding principal balance plus 5% annual interest due on a 2007 promissory note with 5% annual interest.

C – Investor Debt – Notes payable to lenders having an ownership interest in Holdings at December 31, 2014, and Energie at December 31, 2013. These loans are not collateralized. All have been renegotiated to have a maturity of December 31, 2014. The following summarizes the terms and balances of the investor debt:

December 31,
2014		2013		Interest Rate
$	87,787	$	87,787		24%
	50,000		50,000		24%
	50,000		50,000		24%
	25,000		25,000		8%
	25,000		25,000		8%
	20,000		20,000		2%
	10,000		10,000		24%
$	267,787	$	267,787

D – Related Party Debt – The following summarizes notes payable to related parties.

	December 31,
	2014		2013		Interest Rate
D1	$	3,152,231	$	2,413,752		6%
D2		497,130		448,611		12%
D3		34,888		—		12%
D4		156,500		103,500		24%
Total	$	3,840,749	$	2,965,863

D1 – Notes payable to Symbiote, Inc. (“Symbiote”), entered into in December 2014, with monthly principal and interest payable through November 2017. The 2014 notes aggregated the previous notes payable, accrued interest and accounts payable. The 2014 notes are not convertible. The previous note agreement gave Symbiote, at its option at any time after default, the right to convert any remaining balance of the notes to equity at a rate equal to the proportion of the remaining balance of the note divided by $4,000,000 enterprise value. Symbiote holds the largest ownership percentage in Holdings, is the lessor of our manufacturing facility, and the provider of our payroll services.

We evaluated the agreement for derivatives and determined that it does not qualify for derivative treatment for financial reporting purposes, because the agreement relates to our own equity, and the debt and the equity are not closely related. We also determined this does not qualify as a beneficial conversion feature. Accordingly, the 2013 balance was reported at the carrying amount.

D2 – Note payable to an executive vice president, entered into in December 2014, with monthly principal and interest payable through November 2017. The 2014 note aggregated the previous note payable, accrued interest and accounts payable.

D3 – Note payable to our chief executive officer (“CEO”), entered into in December 2014, with monthly principal and interest payable through November 2015.

D4 – Notes payable to the spouse of our CEO, due upon demand.

E – Other Notes Payable – Represents the outstanding principal balance on two separate notes bearing interest at approximately 12% annually. Although we are past due on our required payments, the loan holders have not made demand for repayment of the principal and interest due. In the event we receive proceeds as the beneficiary of a life insurance policy covering our majority shareholder, repayment of principal and interest is due on these notes prior to using the proceeds for any other purpose.

F – Cash draw agreements – Under these agreements, the lender advances us the principal balance and then automatically withdraws a stated amount each business day. Accordingly, there is no stated interest rate. The total remaining daily payments due under these arrangements was $332,184 as of December 31, 2014. The maturity dates of the agreements range from April to October 2015.

G – Convertible promissory notes – Represents the outstanding principal balance on two separate convertible promissory notes with interest of 8% annually, due June 2015. At the option of the holder, the notes may be settled in cash or converted into shares of our common stock at any time beginning 180 days from the date of the notes at a price equal to 61% of the average closing bid price of our common stock during the 10 trading days immediately preceding the date of conversion. In the event we fail to pay the notes when they become due, the balance due under the notes incurs interest at the rate of 22% per annum. The notes contain additional terms and conditions normally included in instruments of this kind, including a right of first refusal wherein we have granted the holders the right to match the terms of any future financing in which we engage on the same terms and contemplated in such future financing. We estimate that the fair value of the convertible debt approximates the face value, so no value has been assigned to the beneficial conversion feature.

The future maturities of debt are as follows:

Year ending December 31,
2015	$	2,373,307
2016		1,300,211
2017		1,373,003
2018		120,000
2019		100,000
	$	5,266,521