Long-Term Debt

3 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

Long-Term Debt

NOTE 6. LONG-TERM DEBT

Long-term debt is comprised of the following:

	March 31, 2017			December 31, 2016
Real estate loans	$	4,706,562		$	7,264,036
Hard Rock Note, net of discount		7,865,601			7,846,497
Machinery loans		643,380			684,921
Transportation loans		382,478			398,929
		13,598,021			16,194,383
Current portion of long-term debt		(1,418,480	)		(2,905,682	)
Long-term debt, less current portion	$	12,179,541		$	13,288,701

Real Estate Loans

Our manufacturing facility is 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.

On February 9, 2017, the Company sold real estate to Superior Auto Body (“SAB”), a related party, for the net proceeds of $2.5 million. The cash received from the sale was used to pay down the $2.5 million loan balance on the property. As part of the sale, the Company released 547,000 shares of the Meiers common stock from the collateral for the Tronco note (see Note 5 – Related Party Note Receivable).

Hard Rock Note

In 2014, the Company purchased all of the interests of Hard Rock Solutions, LLC (“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. 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 $19,000 for the quarter ended March 31, 2017.

On August 10, 2016, certain of our subsidiaries entered into an amended and restated note with the seller in our acquisition of Hard Rock. 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 2017, we have made the accrued interest payments related to the note on January 15, 2017 and March 15, 2017 of $129,808 and $74,356, respectively.