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NOTE F - LONG TERM DEBT
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Jun. 30, 2011
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| Debt Disclosure [Text Block] |
NOTE F -
LONG TERM DEBT
Senior
Convertible Debenture
A
summary of convertible debentures payable at June 30, 2011
and December 31, 2010 is as follows:
On
March 4, 2011, the Company sold its Series 5 Power Line
Carrier product line and related business assets to Dynamic
Ratings, Inc. (“Dynamic Ratings”). The
purchase price was $1,000,000 in cash. In
connection with the sale, Dynamic Ratings lent the Company an
additional $700,000 in the form of a 6% promissory note dated
March 4, 2011. The Company used the proceeds 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 lender with an unsecured one-year
promissory note for $50,000 (Promissory Note#2).
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 two
(2.00) percent. 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 credit facility 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 outstanding borrowing under
the agreement at June 30, 2011 was $276,346.
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 a 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 six (6) percent 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 shall 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. 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
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
lender with an unsecured one-year promissory note
(“Note #2”) for $50,000. The outstanding principal balance
bears interest at the annual rate of five and one-quarter
(5.25) percent and is due on March 4, 2012. The monthly
payment of principal and interest is
$4,385. However Note #2 is due immediately if the
Company (a) receives three million ($3,000,000) dollars in
aggregate in new debt or equity financing, (b) attains one
million ($1,000,000) dollars in EBITDA for any reporting
quarter or (3) becomes insolvent. The Note may be
prepaid in whole or in part, without penalty at any
time. Payments shall be applied first to accrued
but unpaid interest and then to
principal.
Aggregate
maturities of long-term debt as of June 30, 2011 are as
follows:
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