XML 40 R26.htm IDEA: XBRL DOCUMENT v2.4.0.8
5. Debt - Debt (Details) (USD $)
Sep. 30, 2014
Dec. 31, 2013
Debt Disclosure [Abstract]    
Line of credit $ 47,000 [1] $ 47,000 [1]
Accounts receivable factoring 29,379 [2] 52,530 [2]
Note payable to distribution partner 530,347 [3] 550,347 [3]
Related party debt 3,515,440 [4] 3,110,889 [4]
Other notes payable 361,949 [5] 221,166 [5]
Convertible promissory notes 93,000 [6]    [6]
Debt $ 4,577,115 $ 3,981,932
[1] A - Line of Credit - We utilized this bank line of credit for working capital purposes. The outstanding obligation is due on demand, has a stated initial interest rate of 10.5% that is subject to adjustment, and is guaranteed by our majority shareholder.
[2] B - Accounts Receivable Factoring - Pursuant to factoring and security agreement, we submit accounts receivable for sale to a factoring firm at an amount equal to their face value, less a 1.5% commission and an initial factoring fee based on the prime interest rate plus 3%. The factor advances a percent of the account balance to us, and the remaining amount will be withheld in a non-interest bearing reserve account. Accounts purchased by the factor are with full recourse with us within 120 days from the invoices date. The factoring transaction is treated as a loan, with the receivables used as collateral. We have granted the factoring firm a security interest in, and a blanket lien upon our assets.
[3] C - Note Payable to Distribution Partner - Represents the outstanding principal balance plus 5% annual interest due on a 2007 promissory note with 5% annual interest, between us and a significant European distribution partner. Although we are past due on required payments, the loan holder has not made any demand for repayment of the principal and interest due.
[4] D - Related Parties Debt - Amounts due to lenders having an ownership interest in Holdings. These loans are not collateralized. All have been renegotiated to have a maturity of December 31, 2014. The following summarizes the terms and balances of the related party notes:
[5] E - Other Notes Payable - Represents the outstanding principal balance plus interest due on three separate promissory notes with interest rates ranging from 8% to 24% annually. Although we are past due on our required payments, the loan holders have not made demand for repayment of the principal and interest due. In the event we receive proceeds as the beneficiary of a life insurance policy covering our majority shareholder, repayment of principal and interest is due on these notes prior to using the proceeds for any other purpose.
[6] F - Convertible promissory notes - Represents the outstanding principal balance on two separate convertible promissory notes with interest of 8% annually, due June 2015. At the option of the holder, the notes may be settled in cash or converted into shares of our common stock at any time beginning 180 days from the date of the notes at a price equal to 61% of the average closing bid price of our common stock during the 10 trading days immediately preceding the date of conversion. In the event we fail to pay the notes when they become due, the balance due under the notes incurs interest at the rate of 22% per annum. The notes contain additional terms and conditions normally included in instruments of this kind, including a right of first refusal wherein we have granted the holders the right to match the terms of any future financing in which we engage on the same terms and contemplated in such future financing. We estimate that the fair value of the convertible debt approximates the face value, so no value ha