Borrowings from Officer

12 Months Ended

Dec. 31, 2011

Borrowings from Officer

Borrowings from Officer

7. Borrowings from Officer

On January 30, 2008, and extended on October 24, 2008, March 19, 2009, February 4, 2010 and February 3, 2011, the Company entered into an unsecured revolving promissory note to borrow up to $700,000 from G. Ward Paxton, the Company’s Chairman, President and Chief Executive Officer.  Under the terms of the note, the Company may borrow, repay and reborrow on the loan as needed up to an outstanding principal balance due of $700,000 at any given time.

On March 20, 2008 and extended on November 7, 2008, February 4, 2010 and February 3, 2011, we received a written commitment from our Chief Executive Officer to loan up to an additional $1,500,000 in the Company until March 2012, should such funding be required by the Company, on terms and conditions identical to those described above on the $700,000 note.

On February 9, 2012, the Company entered into an unsecured revolving promissory note to borrow up to $2,200,000 from G. Ward Paxton, the Company’s Chief Executive Officer.  Under the terms of the note, the Company may borrow, repay and reborrow on the loan as needed up to an outstanding principal balance due of $2,200,000 at any given time through March 2013.

Amounts borrowed from this officer accrue interest at a floating rate per annum equal to SVB’s prime rate plus 1% (5% at December 31, 2011).  All outstanding borrowings and accrued but unpaid interest is due on March 31, 2013.  As of December 31, 2011 the borrowings outstanding totaled $1,530,000 and accrued interest totaled $54,000.  The Company paid no interest during 2011 and paid $68,000 during 2010.