Notes Payable to Stockholders and Capital Leases

12 Months Ended

Dec. 31, 2015

Debt Disclosure [Abstract]

Notes Payable to Stockholders and Capital Leases

10. Notes Payable to Stockholders and Capital Leases

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 (2.5865% and 2.431% per annum at December 31, 2015 and 2014, 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, 2017. Refer to Note 16.

At December 30, 2015, the Company had drawn the full funding amount under the initial agreement of $6.1 million plus additional advances of $5,824,614. At December 31, 2014 the Company had drawn the full funding amount under the initial agreement of $6.1 million plus an additional $4,474,367. Additionally, the Company had an unsecured loan outstanding from a member of the board of directors who is also a significant stockholder, totaling $0 and $25,000 at December 31, 2015 and December 31, 2014, respectively. The note bears interest at a rate of 5% per annum and was due November 22, 2015. On November 21, 2015 the board of director member forgave the principal amount of $25,000 and accrued interest of $1,386. The Company recorded the forgiveness as a capital contribution.  See Note 14 and 16.

On February 13, 2013 the Company issued 882,353 shares of its common stock valued at $0.17 per share as payment for the note payable in the amount of $150,000 from a stockholder who is also a director. On April 8, 2013 the Company issued 50,656 shares of its common stock valued at $0.18 per share as payment for the interest, in the amount of $9,118, on the $150,000 note payable. On February 4, 2015 the Company received from the abovementioned stockholder who is also a director, a certificate in the amount of 882,353 shares of its common stock valued at $0.17 per share which had been issued in error as payment for the note payable in the amount of $150,000.  The certificate was reissued in the amount of 588,235 the company recorded a reduction of $294 for the par value of the common stock with on a corresponding offset to additional paid in capital as of December 31, 2014. See Notes 14 and 16.

During the years ended December 31, 2015 and 2014, the Company incurred interest expense of $249,134 and $215,696, respectively, on its loans from the stockholder who is also a director, which is included in interest expense in the accompanying statements of operations. Also included in interest expense at December 31, 2015 and 2014 were $1,997 and $3,118 of interest related to capital lease obligations, financing and loans from a stockholder.

Notes payable and capital leases consisted of the following at December 31, 2015 and December 31, 2014:

	2015			2014
Notes payable to stockholders	$	11,924,617		$	10,574,367
Capital lease obligation		10,953			3,280
		11,935,570			10,577,647
Less: current maturities		(3,755	)		(3,280	)
	$	11,931,815		$	10,574,367

Maturities of Long-Term Obligations for Five Years and Beyond

The minimum annual principal payments of notes payable and capital lease obligations at December 31, 2015 were:

2016	$	3,755
2017		11,928,372
2018		3,443
	$	11,935,570