Quarterly report pursuant to Section 13 or 15(d)

NOTE G - LONG TERM DEBT

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NOTE G - LONG TERM DEBT
3 Months Ended
Mar. 31, 2012
Long-term Debt [Text Block]

NOTE G – LONG TERM DEBT


Business Loan


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 shall pay equal monthly installments of $4,426 each; 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 credit facility in whole or in part at any time without penalty. The Loan Agreement is secured by substantially all of the Company’s assets and the proceeds from this loan were used for the working capital requirements of the Company. The Loan Agreement contains covenants which require, among other things, that the Company shall keep and maintain 75 existing full-time positions and create and fill 35 additional full-time positions in Milwaukee, Wisconsin by December 31, 2012. For each new full time position not kept, created or maintained, the Company will be required to pay a penalty consisting of an incremental increase in the interest rate not to exceed 4%. As of April 30, 2012, the Company has 77 full-time employees in Wisconsin, of which 17 are newly created full-time positions. The outstanding borrowings under the agreement as of March 31, 2012 and December 31, 2011 were $240,417 and $252,454, respectively.


Promissory Note #1


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 (“Note #1”) due to Purchaser in the aggregate principal amount of $700,000. The outstanding principal balance bears interest at the annual rate of 6% and is due on March 31, 2014.   Note #1 may be prepaid in whole or in part, without penalty at any time, however scheduled payments are due on June 30, 2012 and June 30, 2013.  Payments will be applied first to accrued but unpaid interest and then to principal.  Note #1 contains certain earn-out provisions that encompass both the Company’s and Purchaser’s revenue volumes.  Provided these provisions are met, the Company could potentially retire Note #1 prior to its expiration date.  As of March 31, 2012, the non cash reduction of principal calculated under these provisions and classified as notes payable-current is $15,408.  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. The outstanding principal balance of this note as of March 31, 2012 and December 31, 2011 was $700,000.


Promissory Note #2


From the sale of its Series 5 PLC product line assets, the Company used the proceeds received to retire substantially all of its obligations under its $1.6 million senior convertible debenture due May 29, 2011 and to cancel the related warrants covering 11.7 million shares of the Company’s common stock.  In exchange for the early retirement of debt and cancellation of warrants, the Company provided the third party with an unsecured one-year promissory note (“Note #2”) for $50,000. The outstanding principal balance bore interest at the annual rate of 5.25% and was due on March 4, 2012. This note was paid in full prior to March 31, 2012.


Aggregate maturities of long-term debt as of March 31, 2012 are as follows:


For the years ending December 31,   Amount
  2012 (Remainder of)     $ 51,878  
  2013       49,485  
  2014       735,076  
  2015       51,503  
  2016       52,475  
          940,417  
  Less: Current portion       (64,156  
  Total Long term portion     $ 876,261