Note 8 - Notes Payable

3 Months Ended

Mar. 31, 2013

Debt Disclosure [Text Block]

NOTE 8:                LINES OF CREDIT AND NOTES PAYABLE

On March 18, 2013, the Company entered into a $2,000,000 revolving line of credit with The Northern Trust Company guaranteed by Cornelis F. Wit, Chief Executive Officer and Director.  The line of credit matures on March 17, 2014 and carries a variable interest rate based on the prime rate.

At March 31, 2013, the Company owed $5,667,865 in notes payable all of which are unsecured.  The table below provides details as to the terms and conditions of the notes payable.

			Ending
			principal		Non related party				Related party
Origination	Maturity	Interest	March 31,				Long				Long
date	date	rate	2013		Current		term		Current		term
12/31/2010	1/1/2015	10%	$	308,561	$	-0-	$	308,561	$	-0-	$	-0-
12/31/2010	1/1/2015	10%		123,425		-0-		123,425		-0-		-0-
2/1/2011	1/1/2015	12%		137,500		-0-		137,500		-0-		-0-
3/31/2011	4/1/2014	12%		2,866,879		-0-		-0-		-0-		2,866,879
12/31/2011	1/1/2015	12%		1,600,000		-0-		-0-		-0-		1,600,000
12/31/2011	1/1/2016	12%		20,000		-0-		-0-		-0-		20,000
4/1/2012	1/1/2014	12%		17,500		17,500		-0-		-0-		-0-
10/1/2012	1/1/2015	12%		45,000		-0-		45,000		-0-		-0-
12/17/2012	12/16/2014	12%		20,000		-0-		20,000		-0-		-0-
1/1/2013	1/1/2016	12%		529,000		-0-		-0-		-0-		529,000
Discount on note payable						-0-		-0-		-0-		(904,416	)
Total			$	5,667,865	$	17,500	$	634,486	$	-0-	$	4,111,463

At December 31, 2012, the Company owed $5,138,866 in notes payable all of which were unsecured.  The table below provides details as to the terms and conditions of the notes payable.

			Ending
			principal		Non related party				Related party
Origination	Maturity	Interest	December 31,				Long				Long
date	date	rate	2012		Current		term		Current		term
12/31/2010	1/1/2015	10%	$	308,562	$	-0-	$	308,562	$	-0-	$	-0-
12/31/2010	1/1/2015	10%		123,425		-0-		123,425		-0-		-0-
2/1/2011	1/1/2015	12%		137,500		-0-		137,500		-0-		-0-
3/31/2011	4/1/2014	12%		2,866,879		-0-		-0-		-0-		2,866,879
12/31/2011	1/1/2015	12%		1,600,000		-0-		-0-		-0-		1,600,000
12/31/2011	1/1/2016	12%		20,000		-0-		-0-		-0-		20,000
4/1/2012	1/1/2014	12%		17,500		-0-		17,500		-0-		-0-
10/1/2012	1/1/2015	12%		45,000		-0-		45,000		-0-		-0-
12/17/2012	12/16/2014	12%		20,000		-0-		20,000		-0-		-0-
Discount on note payable						-0-		-0-		-0-		(656,524	)
Total			$	5,138,866	$	-0-	$	651,987	$	-0-	$	3,830,355

On January 1, 2013, the Company issued a promissory note in the principal amount of $529,000 and warrants to purchase 2,116,000 shares of common stock of the Company at an exercise price of $0.25 per share with an expiration date of January 31, 2016 to our Chief Executive Officer and Director, Cornelis F. Wit.  The note carries an interest rate of 12% per annum and is due on January 1, 2016.

This issuance caused us to calculate and record a derivative liability for the warrant liability.  The warrants were valued using the Black Scholes option pricing model.  A value of $400,142 was calculated and allocated to the warrants and recorded as a liability to the issuance of the note payable.  As a result of the liability we recorded a discount to the note payable.  The carrying amount of the note at the time of issuance was therefore $128,858.  The warrant liability (discount) will be amortized over the 36 month duration of the note payable.  The Company will continue to perform a fair value calculation periodically on the warrant liability and accordingly the warrant liability is increased or decreased based on the fair value calculation.  The resulting increase or decrease is reflected in operations as an unrealized gain or loss on changes in derivative liabilities.

On January 1, 2013 the Company issued promissory notes in the amount of $431,986 in exchange for existing promissory notes in the same amount.  The promissory notes carry an interest rate of 10% and have a maturity date of January 1, 2015.

On January 1, 2013 the Company issued a promissory note in the amount of $45,000 in exchange for an existing promissory note in the same amount.  The promissory note carries an interest rate of 12% and has a maturity date of January 1, 2015.

On February 1, 2013 the Company issued a promissory note in the amount of $20,000 to our Chairman and Chief Technology Officer Randall G. Smith in exchange for an existing promissory note in the same amount.  The promissory note carries an interest rate of 12% and has a maturity date of January 1, 2016.

On March 5, 2013 the Company issued a promissory note in the amount of $137,500 in exchange for a promissory note in the same amount.  The promissory note carries an interest rate of 12% and has a maturity date of January 1, 2015.