NOTE F - LONG TERM DEBT |
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Text Block] |
NOTE F
– LONG TERM DEBT
Senior
Convertible Debenture
A
summary of convertible debentures payable at September 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
sales 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.
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%
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 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 outstanding
borrowing under the agreement at September 30, 2011 was
$264,430.
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
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 5.25%
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, (c) 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. The outstanding principal balance as
of September 30, 2011 is $25,327.
Aggregate
maturities of long-term debt as of September 30, 2011 are as
follows:
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