Line of Credit

12 Months Ended

Dec. 31, 2011

Line of Credit [Abstract]

Line of Credit

6. Line of Credit

In 2008, the Company negotiated a $100,000 revolving line of credit with a bank to provide a source of working capital. The line of credit is secured by all the assets of the Company and bears interest at the bank’s prime rate plus 0.5%. At December 31, 2011, the interest rate applicable to the Company’s line of credit was 3.75%. During the year ended December 31, 2009, the Company borrowed the entire $100,000 available under the line of credit. Until the third quarter of 2010, the Company had been required to pay interest only on borrowings under the line of credit. During the third quarter of 2010, the Company was notified by the bank that the line of credit was not being renewed and was offered repayment terms, which the Company accepted, to repay the outstanding loan balance in forty-eight equal monthly installments of $2,083, plus interest at the bank’s prime rate plus 0.5%, 3.75% at December 31, 2011, beginning in October 2010. At December 31, 2011, the line of credit balance was $68,750. Future installment payments under this repayment arrangement are: $25,000 – 2012; $25,000 – 2013 and $18,750 –2014. The incurrence of certain unsecured loans in 2010 and 2011 constitutes a violation of certain covenants under the Company’s line of credit which gives the lender certain rights, including the right to require the Company to repay immediately the entire outstanding loan balance, which was $68,750 at December 31, 2011, rather than on a monthly basis over the following thirty-three months. Should the bank require immediate prepayment, the Company’s financial condition could be materially adversely affected. Management of the Company intends to cure this violation.