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Notes Payable to Related Party
9 Months Ended
Sep. 30, 2016
Debt Disclosure [Abstract]  
Notes Payable to Related Party

5. Notes Payable to Related Party

 

Notes payable to a related party consist of notes payable to Catamaran dated January 22, 2014, April 24, 2014, February 5, 2015, June 30, 2015, March 14, 2016, and March 30, 2016 for a total value of $2,605,500 including accrued interest of $205,500 as of September 30, 2016. Catamaran Holdings, Ltd. (“Holding”), the sole shareholder of Catamaran, has directors in common with Inversiones, one of the major shareholders of MBC. The indirect beneficial owner of Inversiones is UBHL. Dr. Vijay Mallya, the Chairman of the Board of Directors of the Company is also the Chairman of the Board of Directors of UBHL.

 

The Catamaran notes are payable within six months following the date of the notes, and if the Company is not able to satisfy its obligations on these notes within the six month period following the date of the notes, the notes shall be automatically extended for additional six month terms until they are paid. Each time Catamaran provided a loan, the Company received a letter from Lender permitting the Company to obtain such loans subject to certain conditions, including that no portion of such loans would be payable until either (a) certain obligations of the Company to Lender pursuant to the Credit and Security Agreement were satisfied in full, or (b) such payment was a Permitted Payment. A “Permitted Payment” with respect to the notes dated January 22, 2014, April 24, 2014, and February 5, 2015 means a payment made from an equity investment by the Company’s majority shareholder in excess of $500,000. A “Permitted Payment” with respect to the note dated June 30, 2015 means a payment made from an equity investment by the Company’s majority shareholder. On March 14, 2016, Catamaran provided a fifth loan in the principal amount of $325,000 on terms substantially similar to the previous notes, except that the definition of “Permitted Payment” was revised to mean, for purposes of this fifth note, a payment made from a bridge loan by the Company’s majority shareholder in excess of $600,000. On March 30, 2016, Catamaran provided a sixth loan in the principal amount of $75,000 on terms substantially similar to the fifth note. If Catamaran ceases to provide ongoing financial support to the Company, and the Company is unable to obtain alternate financing, it would have a material adverse effect on the Company’s financial condition and the Company’s ability to continue to operate.

 

Interest shall accrue from the date of the applicable Catamaran note on the unpaid principal at a rate equal to the lesser of (i) one and one-half percent (1.5%) per annum above the prime rate offered from time to time by the Bank of America Corporation in San Francisco, California, or (ii) ten percent (10%) per annum, until the principal is fully paid.

 

The Catamaran notes may be prepaid without penalty at the option of the Company; however, no payments on the Catamaran notes may be made unless such payment is a “Permitted Payment” or certain existing obligations of the Company to Lender pursuant to the Credit and Security Agreement have been satisfied in full. The Catamaran notes may not be amended without the prior written consent of Lender.