Notes Payable to Stockholders

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Notes Payable to Stockholders

12. Notes Payable to Stockholders

On March 28, 2002 the Company executed a binding agreement with one of its principal stockholders, who is also the former Chief Executive Officer, now 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 (4.06% and 3.88% per annum at December 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. (Refer to Note 17).

During the year ended December 31, 2019 and 2018, the Company received additional loans in the amount of $833,000 and $325,000, respectively 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 and is payable upon demand. As of December 31, 2019 the total balance due was $9,543,132.

On 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. On November 19, 2019, the Company received an additional loan in the amount of $25,000 from the same stockholder and former member of the Board of Directors. The loan bears interest at a rate of 5% per annum and is due on January 7, 2020 and November 18, 2020, respectively. On April 13, 2020, the maturity date for loan received on January 7, 2019 was extended to December 31, 2020.

During the years ended December 31, 2019 and 2018, the Company incurred interest expense of $367,829 and $324,087, respectively, on its loans from the executive chairman, which is included in interest expense in the accompanying statements of operations. Also included in interest expense at December 31, 2019 and 2018 were $39,405 and $3,365 of interest related to capital lease obligations, financing, late fees, short term loan and loans from a stockholder.

Notes payable and capital leases consisted of the following at December 31, 2019 and December 31, 2018:

	2019			2018
Notes payable to stockholders	$	9,593,132		$	8,314,622
Short-term loans		39,508			—
		9,632,640			8,314,622
Less: current maturities		(1,247,508	)		(325,000	)
Long-term maturities	$	8,385,132		$	7,989,622