Annual report pursuant to Section 13 and 15(d)

DEBT

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DEBT
12 Months Ended
Dec. 31, 2016
Debt Disclosure [Abstract]  
DEBT

NOTE 10 - DEBT

 

In June 2011, we issued an unsecured promissory note to a third party in the amount of $40,000 (the “June 2011 Note”) bearing interest at a rate of 10% per annum and a three year warrant to purchase 13,000 shares of our common stock at an exercise price of $1.00 per share. In addition, a second note payable, to the same third party, in the amount of $25,000 plus $3,000 of accrued interest was also converted into the June 2011 Note, resulting in a new principal balance of $68,000. Principal payments were due beginning November 2011 and the June 2011 Note and accrued interest was paid in full during August 2016 through an offset to trade accounts receivable from the note holder.

 

The Company entered into a loan agreement evidenced by a convertible secured promissory note with Advanced Technology Materials, Inc. (“ATMI”) on February 14, 2012. The amount of the convertible secured promissory note was $225,000. The loan agreement allowed for an additional $225,000 to be borrowed upon meeting certain defined milestones and stipulates the Company provide the lenders, among other things, a security agreement which also identifies the collateral, a development agreement, and use the loan proceeds for projects and transactions contemplated in the term sheet and development agreement. The registration rights agreement has not been executed by the parties to the loan. The note bears interest at 5 percent per annum. The entire loan and/or unpaid balance of the loan and accrued interest could be converted into the Company’s common stock at $0.50 per share at any time at the option of the holder. In December 2014, the promissory note and accrued interest was purchased by two shareholders of the Company from ATMI. In January 2015 the convertible promissory note and accrued interest totaling $257,400 was converted into approximately 514,800 shares on common stock in accordance with the terms on the original convertible note.

 

Debt as of December 31, 2016 and 2015 was comprised of the following:

 

    2016     2015  
June 2011 Note  - paid in full during 2016   $     $ 68,000  
                 

Convertible notes payable, interest at 8% per annum, unpaid principal and interest maturing 3 years from note date between August 2018 and October 2019, convertible into common stock at the option of the lenders at a rate of $0.70 per share; one convertible note for $250,000 has a personal guarantee of an officer of the Company

    1,605,000       1,250,000  
                 
Debt discount (see Note 13)     (14,900 )     (16,600 )
                 

Secured short term note payable dated October 24, 2016 with principal and interest due 60 days from issuance. The note requires a one-time fee in the amount of $10,000 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $1,000 shall be due and owing accruing on the first day of the week. A fee of 100,000 shares of restricted common stock shall be issued as a penalty for each month or prorated for any two-week portion of any month the note is outstanding for months 3 through 6, and a fee of 200,000 shares of restricted common stock shall be issued to lender for each month or prorated for each two-week portion of any month the note is outstanding beginning in month 7 until paid in full. The note is secured by specific customer accounts receivables and a personal guarantee of an officer of the Company. This note was paid in full in April 2017. The penalty period for shares to be issued has been reached, however, no shares have yet been issues.

    200,000        
                 

Secured short term note payable dated December 1, 2016 with principal and interest due 60 days from issuance. The note requires a one-time fee in the amount of $10,000 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $1,000 shall be due and owing accruing on the first day of the week. A fee of 100,000 shares of restricted common stock shall be issued as a penalty for each month or prorated for any two-week portion of any month the note is outstanding for months 3 through 6, and a fee of 200,000 shares of restricted common stock shall be issued to lender for each month or prorated for each two-week portion of any month the note is outstanding beginning in month 7 until paid in full. The note is secured by specific customer accounts receivables and a personal guarantee of an officer of the Company. The penalty period for shares to be issued has been reached, however, no shares have yet been issues.

    200,000        
                 
Note payable dated October 13, 2015, interest at 8% per annum, payable in 24 monthly installments of principal and interest $4,523, due October 1, 2017.   Secured by certain assets of SEM and guaranteed by SEER and MV     43,600       92,300  
                 
Note payable dated October 13, 2015, interest at 8% per annum, payable in 60 monthly installments of principal and interest $4,562, due October 1, 2020.   Secured by real estate and other assets of SEM and guaranteed by SEER and MV     180,000       218,900  
                 
Capital lease obligations, secured by certain assets, maturing through March 2019
    109,600       208,900  
     Total notes payable and capital lease obligations     2,323,300       1,821,500  
     Less:  current portion     (571,800 )     (660,100 )
     Notes payable and capital lease obligations, long-term, including debt discount   $ 1,751,500     $ 1,161,400  

 

Debt maturities as of December 31, 2016 are as follows:

 

Year:      
2017   $ 485,500  
2018     1,634,900  
2019     49,100  
2020     43,800  
    $ 2,213,300  

 

The Company issued two notes in the amount of $200,000 each in May and August of 2016 which were paid in full in 2016.

 

Future minimum lease payments under capital leases, which include bargain purchase options, are as follows at December 31, 2016:

 

2017   $ 86,300  
2018     22,900  
2019     9,200  
Total minimum lease payments     118,400  
Amount representing interest     (8,400 )
Present value of lease payments     110,000  
Less current portion     (86,300 )
Non-current portion   $ 23,700  

 

In connection with the issuance of convertible debt in 2016 and 2015 noted above, the Company issued 71,000 and 250,000 warrants as an inducement to enter into the transactions, respectively. The 2015 warrants exercisable for three years at $1.25 per share were valued at $18,300 using the Black Scholes valuation method at the date of issuance. The 2016 warrants exercisable for 3 years at $0.85 per share were valued at $4,900 using the Black Scholes valuation method at the date of issuance. During 2016, the 2015 convertible debt agreements were modified to more closely reflect the convertible debt transactions made in 2016, including adjusting the conversion price from $1.10 per share to $0.70 per share and the warrant exercise price from $1.25 to $0.85. The value of the convertible debt amendments will be recognized prospectively by the Company.