Long-Term Debt

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Long-Term Debt

NOTE 7. LONG-TERM DEBT

Long-term debt is comprised of the following:

	March 31, 2018			December 31, 2017
Real estate loans	$	4,454,030		$	4,518,424
Hard Rock Note, net of discount		6,939,420			7,422,912
Machinery loans		466,932			513,317
Transportation loans		338,827			353,400
		12,199,209			12,808,053
Current portion of long-term debt		(7,552,460	)		(6,101,678	)
Long-term debt, less current portion	$	4,646,749		$	6,706,375

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.

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 $17,061 and $20,452 for the three months ended March 31, 2018 and 2017, 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. As amended and restated, the Hard Rock Note accrues interest at 5.75% per annum and matures on January 15, 2020. The following remaining payments are required under the current terms of the Hard Rock Note: in 2018, $500,000 in principal plus accrued interest on each of May 15 and July 15, 2018 and in 2019, $1,000,000 in principal plus accrued interest on each of January 15, March 15, May 15 and July 15, 2019. The remaining $2,000,000 balance of principal plus accrued interest on the Hard Rock Note are due on January 15, 2020. In December 2017, we made a $500,000 payment for the principal due in January 2018. In January 2018, we made a $500,000 payment for the principal due in March 2018. On May 7, 2018, we made a $500,000 payment for the principal due on May 15, 2018. Additionally in 2018, we have made the accrued interest payments related to the note on January 15, 2018, March 16, 2018, and May 7, 2018 of $70,890, $65,062, and $57,342, respectively.