|9 Months Ended|
Sep. 30, 2015
|Debt Disclosure [Abstract]|
|NOTE G - DEBT||
On September 11, 2009, the Company entered into a Loan Agreement in the aggregate principal amount of $300,000 with the Wisconsin Department of Commerce (the Department). The outstanding principal balance bears interest at the annual rate of 2%. Payment of interest and principal is to be made in the following manner: (a) payment of any and all interest that accrues from the date of disbursement commenced on January 1, 2010 and continued on the first day of each consecutive month thereafter through and including December 31, 2010; (b) commencing on January 1, 2011 and continuing on the first day of each consecutive month thereafter through and including November 1, 2016, the Company is required to pay equal monthly installments of $4,426; followed by a final installment on December 1, 2016 which shall include all remaining principal, accrued interest and other amounts owed by the Company to the Department under the Loan Agreement. The Company may prepay amounts outstanding under the Loan Agreement in whole or in part at any time without penalty. The Loan Agreement was secured by substantially all of the Companys assets. On September 24, 2014, the Department signed a subordination agreement of all the Companys security interests. The proceeds from this loan were used for the working capital requirements of the Company. The Loan Agreement contains covenants which required, among other things, that the Company keep and maintain 75 existing full-time positions and create and fill 35 additional full-time positions in Milwaukee, Wisconsin by December 31, 2012. On June 18, 2012, the Department agreed to permanently waive all penalties associated with the Companys noncompliance with this covenant. The outstanding borrowings under the agreement as of September 30, 2015 and December 31, 2014 were $65,448 and $103,979, respectively.
On March 4, 2011, the Company sold all its Series 5 PLC product line assets to Wisconsin-based Dynamic Ratings, Inc. (Purchaser) under an Asset Purchase Agreement (APA). Per the APA, the Company signed an unsecured Promissory Note (the Note) due to Purchaser in the aggregate principal amount of $700,000. The outstanding principal balance bears interest at the annual rate of 6% and was originally due on March 31, 2014. The Note may be prepaid in whole or in part, without penalty at any time. Payments not made when due, by maturity acceleration or otherwise, shall bear interest at the rate of 12% per annum from the date due until fully paid. Effective April 30, 2013, Purchaser approved an amendment to certain terms of the Note. Telkonet commenced a monthly payment of principal and interest of $20,000 to be applied against the outstanding balance starting May 1, 2013. The interest rate remains unchanged at 6% and the maturity date was extended to January 1, 2016. During the nine months ended September 30, 2015, the Company made additional payments of $20,000 in aggregate beyond the required monthly payments of principal and interest. The outstanding principal balance of the Note as of September 30, 2015 and December 31, 2014 was $99,561 and $289,973, respectively.
Revolving Credit Facility
On September 30, 2014, the Company and its wholly owned subsidiary, EthoStream, as co-borrowers (collectively, the Borrowers), entered into a Loan and Security Agreement (the Loan Agreement) with Heritage Bank of Commerce, a California state chartered bank (Heritage Bank), governing a new revolving credit facility in a principal amount not to exceed $2,000,000 (the Credit Facility). Availability of borrowings under the Credit Facility from time to time is subject to a borrowing base calculation based on the Companys eligible accounts receivable and eligible inventory each multiplied by an applicable advance rate, with an overall limitation tied to the Companys eligible accounts receivable. The Loan Agreement is available for working capital and other lawful general corporate purposes. The outstanding principal balance of the Credit Facility bears interest at the Prime Rate plus 3.00%, which was 6.25% at September 30, 2015 and December 31, 2014. The Credit Facility matures on September 30, 2016, unless earlier accelerated under the terms of the Loan Agreement. On October 9, 2014, as part of the Loan Agreement, Heritage Bank was granted a warrant to purchase 250,000 shares of Telkonet common stock. The warrant has an exercise price of $0.20 and expires October 9, 2021.
The Loan Agreement also contains financial covenants that place restrictions on, among other things, the incurrence of debt, granting of liens and sale of assets. The Loan Agreement also contains financial covenants that require the Borrowers to maintain a minimum EBITDA level, measured quarterly, and a minimum asset coverage ratio, measured monthly. A violation of any of these covenants could result in an event of default under the Loan Agreement. Upon the occurrence of such an event of default or certain other customary events of defaults, payment of any outstanding amounts under the Credit Facility may be accelerated and Heritage Banks commitment to extend credit under the Loan Agreement may be terminated. The Loan Agreement contains other representations and warranties, covenants, and other provisions customary to transactions of this nature. As of September 30, 2015, the Company was in compliance with all financial covenants. The outstanding balance on the Credit Facility was $961,771 and $628,204 at September 30, 2015 and December 31, 2014 leaving an available borrowing base of approximately $447,000 and $241,000 at September 30, 2015 and December 31, 2014, respectively.
Aggregate annual future maturities of the Companys debt as of September 30, 2015 are as follows:
The entire disclosure for long-term debt.
Reference 1: http://www.xbrl.org/2003/role/presentationRef