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Senior Secured Notes Payable
3 Months Ended
Mar. 31, 2017
Debt Disclosure [Abstract]  
SENIOR SECURED NOTES PAYABLE

NOTE 10 – SENIOR SECURED NOTES PAYABLE

 

On February 1, 2017, the Company entered into a loan and security agreement (the “Loan Agreement”) with various lenders, including an entity controlled by its then chief executive officer, Jonathan Kahn, and a director, Morris Garfinkle, and issued a note in connection therewith (the “Note”). The principal amount of the loan is $996,000. The Loan accrues interest at a rate per annum equal to the prime rate plus 18.9%. Interest is payable monthly and the principal is payable on the maturity date of the loan, which is 2.5 years from the issuance date. The loan is secured by all of the assets of the Company. The Loan Agreement contains certain covenants regarding financial reporting, limits on the Company’s incurrence of indebtedness, permitted investments, encumbrances, restricted payments, and mergers and acquisitions.

 

The Loan Agreement includes customary events of default, including non-payment by the Company of the monthly interest payments and the payment of penalties upon such late payments. The Company used a portion of the proceeds of the loan to exercise its purchase option under its Equipment Lease Agreement with Fordham Capital Partners, LLC (“Fordham”) that it entered into on July 17, 2015 (the “Equipment Lease Agreement”). The Company intends to utilize the proceeds from the loan for working capital purposes.

 

As a condition to the Loan Agreement, two directors of the Company that held senior secured debt of the Company entered into a subordination agreement with the Company and the administrative agent for the lenders (the “Subordination Agreement”).