10. Note Payable

9 Months Ended

Sep. 30, 2014

Debt Disclosure [Abstract]

Note Payable

Notes payable consisted of the following:

	September 30,		December 31,
	2014		2013
Short-Term Notes	$	1,795,702	$	9,379
Short-Term Captial Leases		-		2,505
	$	1,795,702	$	11,884

Short-Term Notes.  On May 2, 2014, LRM entered into a loan and security agreement with Sovereign Bank, a Texas state bank, for a term loan facility in the aggregate amount of $2.0 million (the “Sovereign Note”).  The proceeds of the Sovereign Note are being used primarily to finance costs associated with refurbishment of the Nixon Facility’s naphtha stabilizer and depropanizer units.  The Sovereign Note is due in May 2015 and bears interest at 6.00%.  The Sovereign Note is: (i) subject to a financial maintenance covenant pertaining to debt service coverage ratio, (ii) secured by the assignment of certain leases of LRM, certain assets of LEH, our controlling shareholder and an affiliated entity, and (iii) guaranteed by Jonathan Carroll, Chairman of the Board, Chief Executive Officer, and President of Blue Dolphin and majority owner of LEH and an affiliated entity.  The principal balance outstanding on the Sovereign Note was $1,795,702 and $0 at September 30, 2014 and December 31, 2013, respectively.  Interest was accrued on the Sovereign Note in the amount of $8,979 and $0 at September 30, 2014 and December 31, 2013, respectively.

The balance on a short-term note issued in January 2010 in the amount of $100,000 as payment for financing services was $0 and $9,379 at September 30, 2014 and December 31, 2013, respectively.  The unsecured note was paid off during the first quarter of 2014.

Short-Term Capital Leases.  The balance on short-term notes under capital lease agreements was $0 and $2,505 at September 30, 2014 and December 31, 2013, respectively.  These capital leases were paid off during the first quarter of 2014.