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Mortgages payable

12 Months Ended

Oct. 31, 2012

Debt Disclosure [Abstract]

Mortgages payable

Note 15- Mortgages payable

In January 2010, K&K acquired land and a building for $1,525,000. The purchase was financed through mortgage notes payable as follows:

·

Mortgage payable with TFCU in the amount of $800,000, with interest at a rate per annum of 6.625%. Minimum monthly payments due of principal and interest of $5,490 commencing March 1, 2010 through February 2020. The agreement included a financial covenant which required K&K to maintain a minimum debt service coverage ratio. The note was guaranteed by Cables Unlimited and collateralized by K&K’s real property. In November 2011, TFCU released Cables Unlimited as a guarantor on the mortgage. In addition, the mortgage was paid in full through a refinancing in January 2012. The outstanding balance of $777,155 was classified as current in the consolidated balance sheet at October 31, 2011.

·

In September 2010, K&K entered into a mortgage payable with the Small Business Administration (“SBA”) in the amount of $643,000, with interest at a rate per annum of 4.605%. Minimum monthly payments of principal and interest of $4,236 commencing October 1, 2010 through September 2030. The note was guaranteed by Cables Unlimited and the former owner of Cables Unlimited and was collateralized by K&K’s real property. The note included two provisions that required the prior written consent of the SBA for significant changes in ownership structure and/or the sale of property or assets not in the ordinary course of business. The former shareholder of Cables Unlimited did not obtain prior written consent prior to selling 100% of his interest. As a result, the loan was in default and was paid in full on November 7, 2011. The outstanding balance of $617,075 was classified as current in the consolidated balance sheet at October 31, 2011.

The following summarizes the information relative to the outstanding VIE debt at October 31, 2011:

Note payable - TFCU		$	777,155
Note payable - SBA			617,075
Total		$	1,394,230

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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