Long-Term Debt

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Long-Term Debt

NOTE 7. LONG-TERM DEBT

Long-term debt is comprised of the following:

	December 31, 2016			December 31, 2015
Real estate loans	$	7,264,036		$	7,585,063
Hard Rock Note, net of discount		7,846,497			9,738,521
Related party loans		-			826,583
Machinery loans		684,921			853,970
Transportation loans		398,929			658,430
		16,194,383			19,662,567
Current portion of long-term debt		(2,905,682	)		(3,078,264	)
	$	13,288,701		$	16,584,303

Real Estate Loans

Our manufacturing facility was financed by a commercial bank loan requiring monthly payments of approximately $39,000, including principal and interest at 5.25%. A lump sum principal payment of approximately $4.2 million is due at the maturity date of this loan on August 15, 2018.

In 2012, we became co-borrowers on a $1.7 million loan and a $1.2 million loan for Superior Auto Body. The interest on this debt accrued at 5.50% and 2.42%, respectively, and the notes required monthly payments of $10,565 and $7,517, respectively, and a lump sum payment at maturity for the remaining principal balance. Both notes were paid off in February 2017 in conjunction with the sale of the Superior Auto Body land and building (see Note 10 – Related Party Transactions).

Hard Rock Note

In 2014, the Company purchased all of the interests of Hard Rock. Consideration consisted of $12.5 million paid in cash at closing and a $12.5 million seller’ s note (the “Hard Rock Note”). The Hard Rock Note and subsequent amendments are secured by all of the patents, patents pending, other patent rights, and trademarks transferred to Hard Rock by Hard Rock in the closing of the Hard Rock acquisition. At issuance, the fair value of the Hard Rock Note was determined to be $11,144,000, which is less than the face value due to a below-market interest rate. The resulting discount of $1,356,000 will be amortized to interest expense using the effective interest method, totaling approximately $108,000 and $567,000 during 2016 and 2015, respectively.

On August 10, 2016, certain of our subsidiaries entered into an amended and restated note with the seller in our acquisition of Hard Rock Solutions, LLC. As amended and restated, the Hard Rock Note accrues interest at 5.75% per annum and matures and is fully payable on January 15, 2020. Under the current terms of the Hard Rock Note, we are required to make the following payments: accrued interest only on each of January 15, March 15, May 15 and July 15, 2017; $500,000 in principal plus accrued interest on each of January 15, March 15, May 15 and July 15, 2018, and $1,000,000 in principal plus accrued interest on each of January 15, March 15, May 15 and July 15, 2019. The remaining balance of principal of $2,000,000 and accrued interest on the Hard Rock Note are due on January 15, 2020.

During the year ending December 31, 2016, we paid interest of $769,582 and a principal payment of $2,000,000, of which $1,000,000 was paid with 700,000 restricted shares of common stock on August 10, 2016 (having an agreed per share value of $1.43). The Company paid interest of $406,250 and a principal payment of $2,500,000 during the year ending December 31, 2015. Subsequent to year end, we made the accrued interest payments related to the note on January 15, 2017 and March 15, 2017 of $129,808 and $74,356, respectively.

Related Party Loans

In 2014, the Company issued notes payable to related parties in the amount of $2 million. The notes bear interest at 7.5% and mature on January 2, 2017. In January 2017, the Company made a $50,000 payment. Based on an informal agreement, the Company will continue to reduce the balance on the note in 2017 against the interest due to the Company on the Tronco note receivable (see Note 6 – Note Receivable) instead of repaying the note.

Bridge Financing

On August 8, 2016, we entered into a private transaction with a private investor pursuant to which we issued a promissory note in the aggregate principal amounts of $1,000,000 and a warrant to purchase up to an aggregate of 250,000 shares of our common stock, subject to certain adjustments to the number of shares and the exercise price described in the warrants. These warrants were valued at $112,024, based on using the Black Scholes model and were recorded as a liability and treated as derivatives. The variable inputs used in the Black Scholes calculation were; expected volatility of 95%, discount rate of 0.72% and the term of the warrants of 5 years. Once the indebtedness was paid off on October 5, 2016, and the final number of shares were known, the liability was removed and the warrants were included in equity.

Machinery Loans

During February 2013, we obtained a commercial loan collateralized by specific machinery with a face value of $592,000, requiring monthly payments of approximately $8,600, including principal and interest at 6% beginning March 1, 2013 and continuing through maturity on February 1, 2020. This loan contains a minimum debt service ratio and fixed charge covenants. The Company was in compliance with these covenants as of December 31, 2016.

In 2013, we obtained a $627,000 loan for machinery The Small Business Administration has guaranteed 75% of the loan balance and the terms are as follows: 7-year maturity, 6.00% interest rate, 84 monthly payments of $9,160. The machinery is held as collateral.

Transportation Loans

Vehicles

Our loans for Company vehicles and other transportation are with various financing parties we have engaged with in connection with the acquisition of the vehicles. As of December 31, 2016, the loans bear interest ranging from 0%-8.39% with maturity dates ranging from July 2017 through October 2021, and are collateralized by the vehicles. Our cumulative monthly payment under these loans as of December 31, 2016 was approximately $3,050, including principal and interest.

Airplane Loan

Our loan for the Company airplane bears interest at 7.35%, requires monthly payments of principal and interest of approximately $3,500, matures in May of 2026 and is collateralized by the airplane.

Future annual maturities of all long-term debt are as follows(1) :

Year
2017	$	2,577,488
2018		6,709,503
2019		4,323,767
2020		2,234,131
2021		134,503
Thereafter		861,572
Total long-term debt	$	16,840,964

(1) Excludes discounts for debt issuance costts.