Notes Payable to Stockholders and Capital Leases

12 Months Ended

Dec. 31, 2016

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 (2.946% and 2.5865% per annum at December 31, 2016 and 2015, 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.

During the year ended December 31, 2016 we borrowed an additional $1,363,732 from him and repaid $100,000, and at December 31, 2016 we owed him $7,088,349 which represented approximately 76% of our total liabilities. Subsequent to December 31, 2016, he has advanced an additional $200,000 in working capital funding. On November 11, 2016 $6.1 million of principal and interest was converted into 20,333,333 shares of our common stock at a conversion price of $0.30 per share. This conversion was above the market price of our common stock.  The balance of this loan, which is unsecured, matures on December 31, 2017.  While he has continued to fund our working capital needs and extend the due date of the obligation, he is under no contractual obligation to do so.  He has recently advised us he does not expect to continue to provide working capital advances to us at historic amounts or extend the due date of the obligation. If we are unable to meet our obligation to our Chairman and Chief Executive Officer prior to maturity, he has advised us that he may forgive all, or substantially all, of this obligation.

Additionally, the Company had unsecured loans outstanding from a member of the board of directors who is also a significant stockholder, totaling $100,000 at December 31, 2016.  The notes bear interest at a rate of 5% per annum and are due January 7, 2017.  Please see Note 18 to the Company's audited financial statements appearing elsewhere in this report.

During the years ended December 31, 2016 and 2015, the Company incurred interest expense of $345,734 and $249,134, respectively, on its loans from this stockholder, which is included in interest expense in the accompanying statements of operations. Also included in interest expense at December 31, 2016 and 2015 were $980 and $1,997 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, 2016 and December 31, 2015:

	2016		2015
Notes payable to stockholders	$	7,188,349	$	11,924,617
Capital lease obligation		7,198		10,953
		7,195,547		11,935,570
Less: current maturities		(3,443)		(3,755	)
	$	7,192,140	$	11,931,815

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, 2016 were:

2017		7,192,104
2018		3,443
	$	7,195,547