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Notes Payable | 12 Months Ended
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Dec. 31, 2013
Debt Disclosure [Abstract] |
Debt Disclosure [Text Block] | 7. Notes Payable On March 24, 2004, the Company issued a note payable to a bank for $201,024, bearing a current interest rate of 6.25% per annum (the “Bank Loan”). Monthly principal and interest payments are $3,826 each with the final payment due on April 30, 2014. The note is secured by the personal guarantees of the Company’s founders, as well as a director. The guarantee by the director is secured by the pledge of the directors’ certificate of deposit in the amount of $200,000. In addition, the note is secured by a senior secured interest on all business assets of the Company. The obligation is subject to certain covenants, which require that the Company maintain continuity of operations and which include limitations regarding the Company’s indebtedness. In addition, the bank is a party to an intercreditor agreement involving Authority Loan No. 1 and Authority Loan No. 2 (together, the “Authority Loans”), as discussed and defined below, which provides for cross notifications between the lenders. As of December 31, 2013, the principal amount outstanding under this bank loan was $13,872. On July 17, 2009, the Company issued a note payable to the Ohio State Development Authority in the amount of $1,012,500, bearing interest at a rate of 6.00% per annum (“Authority Loan No. 1”). Pursuant to the terms of the loan, the Company was required to pay only interest through September 30, 2010 and then monthly principal and interest payments of $23,779 each through September 1, 2015. The note is secured by a senior secured interest on all business assets financed with loan proceeds, as well as a second secured interest in all business assets. Upon maturity, by acceleration or otherwise, the Company shall pay a loan participation fee of $101,250, which is accounted for as a loan premium, accreted monthly, utilizing the interest method, over the term of the loan. Effective December 31, 2012 Intellinetics and the Ohio State Development Authority entered into a Notice and Acknowledgement of Modification to Payment Schedule relating to Authority Loan No. 1 deferring principal and interest payments for a six month period from December 1, 2012 to May 1, 2013, with the next principal and interest payment due on June 1, 2013. Effective March 12, 2013, Intellinetics and the Ohio State Development Authority entered into another Notice and Acknowledgement of Modification to Payment Schedule relating to Authority Loan No.1, deferring principal and interest payment until December 31, 2013, with the next principal and interest payment due on January 1, 2014. As of December 31, 2013, the principal amount outstanding under Authority Loan No. 1 was $741,788. On June 3, 2011, the Company issued a note payable to the Ohio State Development Authority in the amount of $750,000, bearing interest at a rate of 1% per annum for the first 12 months, then interest at rate of 7% per annum for the second 12 months (“Authority Loan No. 2”). The Company was not obligated to remit payments of principal until September 1, 2013. The monthly principal and interest payments, beginning on the third anniversary of the loan origination, are $14,850 and are payable on a monthly basis through July 13, 2017. The note is secured by a senior secured interest on all business assets financed with loan proceeds, as well as a second secured interest in all business assets. Upon maturity, by acceleration or otherwise, the Company shall pay a loan participation fee of $75,000, which is accounted for as a loan premium, accreted monthly utilizing the interest method, over the term of the loan. The interest rate of 1% during the first 12 months of this loan was considered to be below market for that period. The Company further determined that over the life of the loan, the effective interest rate was 5.6% per annum. Accordingly, during the first 12 months of the loan, the Company recorded interest expense at the 5.6% rate per annum. The difference between the interest expense accrual at 5.6% and the stated rate of 1% over the first 12 months is credited to deferred interest. The deferred interest amount that is accumulated over the first 12 months of the loan term will be amortized as a reduction to interest expense over the remaining term of the loan. At December 31, 2013 and 2012, deferred interest of $83,942 and $41,440, respectively, was reflected within long-term liabilities on the accompanying consolidated balance sheets. Effective December 31, 2012, Intellinetics and the Ohio State Development Authority entered into a Notice and Acknowledgement of Modification to Payment Schedule relating to Authority Loan No. 2 deferring the interest payment for a six month period from December 1, 2012 to May 1, 2013, with the next interest payment due on June 1, 2013. Effective March 12, 2013, Intellinetics and the Ohio State Development Authority entered into another Notice and Acknowledgement of Modification to Payment Schedule, deferring principal and interest payment until December 31, 2013, with the next principal and interest payment due on January 1, 2014. As of December 31, 2013, the principal amount outstanding under Authority Loan No. 2 was $750,000. The Authority Loans were granted to the Company in connection with the State of Ohio’s economic development programs. The proceeds from these loans were used by the Company to support its efforts in developing software solutions for its customers. These Authority Loans are subject to certain covenants and reporting requirements. The material covenants include:
| · | Providing quarterly financial information and management certifications;
| · | Maintaining our principal office in the state of Ohio;
| · | Maintaining insurance for risk of loss, public liability, and worker’s compensation;
| · | Delivering notice in the event of default, any pending or threatened action that would materially impair the company;
| · | Permitting the inspection of books, records, and premises;
| · | Not selling or disposing of substantially all of our assets or equity or merging or consolidating with another entity without consent; and
Not pledging or encumbering our assets. Additionally, Intellinetics is required to, within three years of the respective loan origination dates of each of the Authority Loans, have created and/or retained an aggregate of 25 full time jobs in the State of Ohio. Should Intellinetics not have attained these employment levels by the respective dates, then the interest rates on the Authority Loans shall increase to 10% per annum. The Authority Loans are subject of an intercreditor agreement involving the Bank Loan, which provides for cross notifications between the lenders in an event of a default. We have had past instances of non-compliance with certain of the loan covenants. We are currently in compliance with the loan covenants. There can be no assurance that we will not become non-compliant with one or more of these covenants in the future. On June 6, 2012, the Company issued a note to an individual for $50,000, bearing interest at 10.00% per annum, with a maturity date of June 1, 2013. On May 31, 2013, the Company paid in full, all principal of the $50,000 note and all interest in the amount of $1,168. The Company does not have any on-going relationship with the individual. On August 7, 2012, the Company issued a $400,000 Promissory Note to a lender. The principal sum due to the lender was prorated based on the consideration actually funded by the lender, plus an approximate 10% Original Issue Discount (“OID”) that was prorated based on the consideration actually funded by the lender as well as any other interest or fees, such that the Company was only required to repay the amount funded. The initial proceeds received on August 8, 2012 were $100,000, and the Company did not received any further proceeds from the lender. As of December 31, 2012, the principal balance, net of discounts, totaled $107,518. Accrued interest included in accounts payable and accrued expenses totaled $23,056. On January 30, 2013, the Company paid off, in full, all principal plus fees in the total amount of $154,292. The termination of the option to exercise a beneficial conversion feature resulted in a derivative gain of $15,470 on January 30, 2013. The Company does not have any on-going relationship with the lender. On February 15, 2013, the Company converted aggregate amount of debt (principal and interest) in the amount of $489,211 issued by the Company and Intellinetics to an advisor (as identified in the table below with principal amounts of $131,500, $300,000, and $38,000), into 1,686,935 restricted shares of the Company at a price of $0.29 per share (based on the closing price of Globalwise shares on February 14, 2013, the immediately preceding business day). The advisor converted the aggregate debt of $489,211 into 1,686,935 restricted shares of Globalwise, (subject to the applicable holding period restrictions under Rule 144) in reliance upon exemptions from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D, as promulgated by the SEC. On November 12, 2013, the Company issued two convertible promissory notes in an aggregate amount of $160,000 to two accredited investors who are associated with each other. The Company received proceeds in the amount of $160,000. The notes provide for maturity on July 31, 2014 and provide for 10 percent interest until maturity. The note holders have a right, at their sole discretion, to convert the notes into equity under certain circumstances at $0.10 per share. If the notes are not paid off by the Company, with the consent of the investors, by the maturity date or converted in to equity at the election of the investors prior to the maturity date, the note will accrue interest in the amount of 15% from the maturity date until the note is paid in full. Under the terms of the notes, the Company agreed to seek shareholder approval to increase the number of authorized shares by at least 10,000,000 shares on or before July 30, 2014. The Company used the proceeds for working capital and for general corporate purposes. On December 27, 2013, the Company issued two convertible promissory notes in an aggregate amount of $160,000 to two accredited investors who are associated with each other. The Company received proceeds in the amount of $160,000. The notes provide for maturity on July 31, 2014 and provide for 10% interest until maturity. The note holders have a right, at their sole discretion, to convert the notes into equity under certain circumstances at $0.08 per share. If the notes are not paid off by the Company, with the consent of the investors, by the maturity date or converted in to equity at the election of the investors prior to the maturity date, the note will accrue interest in the amount of 15% from the maturity date until the note is paid in full. Under the terms of the notes, the Company agreed to seek shareholder approval to increase the number of authorized shares by at least 10,000,000 shares on or before July 30, 2014. The Company used the proceeds for working capital and for general corporate purposes. The table below reflects all notes payable at December 31, 2013 and December 31, 2012, respectively, with the exception of related party notes disclosed in Note 8 - Notes Payable - Related Parties.
|  | December 31, |  | December 31, |
|  | 2013 |  | 2012 |
Bank Loan, due April 30, 2014 |  | $ | 13,872 |  | $ | 60,986 |
Authority Loan No. 1, due September 1, 2015 |  |  | 741,788 |  |  | 741,788 |
Authority Loan No. 2, due August 1, 2018 |  |  | 750,000 |  |  | 750,000 |
Notes payable to advisor, due March 16, 2013 |  |  | - |  |  | 131,500 |
Note payable to advisor, due July 1, 2013 |  |  | - |  |  | 300,000 |
Note payable due August 6, 2013 |  |  | - |  |  | 107,518 |
Note payable to advisor, due February 8, 2013 |  |  | - |  |  | 38,000 |
Note payable due June 1, 2013 |  |  | - |  |  | 50,000 |
Note payable due July 31, 2014 |  |  | 160,000 |  |  | - |
Note payable due July 31, 2014 |  |  | 160,000 |  |  | - |
Total notes payable |  | $ | 1,825,660 |  | $ | 2,179,792 |
Less current portion |  |  | (711,266) |  |  | (670,527) |
Long-term portion of notes payable |  | $ | 1,114,394 |  | $ | 1,509,265 |
Future minimum principal payments of these notes payable with the exception of the related party notes in Note 8 - Notes Payable - Related Parties, as described in this Note 7 are as follows:
For the Twelve-Month |  |  |  |
Period Ended December 31, |  | Amount |
2014 |  | $ | 711,266 |
2015 |  |  | 633,425 |
2016 |  |  | 149,271 |
2017 |  |  | 160,064 |
2018 |  |  | 171,634 |
Thereafter |  |  | - |
Total |  | $ | 1,825,660 |
As of December 31, 2013 and December 31, 2012, accrued interest for these notes payable with the exception of the related party notes in Note 8 - Notes Payable - Related Parties, was $155,199 and $133,894, respectively, and was reflected within accounts payable and accrued expenses on the consolidated balance sheets. As of December 31, 2013 and December 31, 2012, accrued loan participation fees were $134,576 and $104,277, respectively, and reflected within accounts payable and accrued expenses on the consolidated balance sheets. As of December 31, 2013 and December 31, 2012, deferred financing costs were $18,640 and $26,954, respectively, and were reflected within other assets on the consolidated balance sheets. With respect to all notes outstanding (other than the notes to related parties), for the twelve months ended December 31, 2013 and 2012, interest expense, including the amortization of deferred financing costs, accrued loan participation fees, original issue discounts, deferred interest and related fees and the embedded conversion feature was $168,824 and $255,192, respectively.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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