Note 7 - Debt

9 Months Ended

Sep. 30, 2012

Debt Disclosure [Text Block]

NOTE 7.   DEBT

Credit Facilities

On December 22, 2011, the Company entered into a $4.5 million revolving line of credit (“credit facility”) with Rosenthal & Rosenthal.  The total loan amount available to the Company under the line of credit is equal to 85% of its net amount of eligible receivables, plus available inventory (the lesser of 50% of the lower of cost or market value of eligible inventory, or $250 thousand).  The credit facility is secured by a lien on the domestic assets of the Company.  The interest rate for borrowing on accounts receivable is 8.5%, on inventories 10.0% and on overdrafts 13.0%.  Additionally, there is an annual 1% facility fee on the entire amount of the credit facility, $4.5 million, payable at the beginning of the year.  The credit facility is a three year agreement, expiring on December 31, 2014, unless terminated sooner.  There are liquidated damages if the credit facility is terminated prior to December 31, 2014, which are based on the maximum credit facility amount then in effect.  The damages are:  3% if terminated prior to the first anniversary of the closing date, 2% if terminated prior to the second anniversary of the closing date, and 1% if terminated prior to the third anniversary of the closing date.  The Company is required to comply with certain financial covenants, measured quarterly, including, as defined in the agreement:  a tangible net worth amount and a working capital amount.  The Company was in compliance with the financial covenants at September 30, 2012.  Borrowings under the revolving line of credit were $1.3 million at September 30, 2012, and $701 thousand at December 31, 2011, and are recorded in the Company’s Condensed Consolidated Balance Sheets as a current liability under the caption “Credit line borrowings.”

The Company maintained a British pounds sterling-denominated bank overdraft facility with Lloyds Bank Plc through its United Kingdom subsidiary in the amount of £100,000, which had been renewed on an annual basis in May.  However, in May of 2012, this facility was not renewed.  The interest rate on the facility at December 31, 2011 was 3.60%, and there were no borrowing against it at that time.

Borrowings

The components of the Company’s debt at September 30, 2012 and December 31, 2011 were as follows (in thousands):

	September 30, 2012			December 31, 2011
Letter of Credit Agreement - Mark Plush	$	250		$	250
Cognovit Note - Keystone Ruby, LLC		289			325
Secured Subordinated Promissory Note - EF Energy Partners LLC		-			287
Convertible Promissory Note - TLC Investments LLC		500			500
Letter of Credit Agreement - John Davenport		-			250
Letter of Credit Agreement - Quercus Trust		-			300
Unsecured Promissory Note - Quercus Trust		70			70
Discounts on long-term borrowings		(71	)		(172	)
Subtotal		1,038			1,810
Less: Current maturies of long-term debt		(731	)		(855	)
Long-term debt	$	307		$	955

For a full description of the Company’s debt financing, reference is made to Note 10, Debt, of the Company’s 2011 Form 10-K.

Future maturities of remaining borrowings are (in thousands):

Year ending December 31,	Long-Term Debt
2012 October through December	$	13
2013		804
2014		59
2015		65
2016		72
2017 and thereafter		96
Gross long-term borrowings		1,109
Less: discounts on long-term borrowings		(71	)
Total commitment, net		1,038
Less: portion classified as current		(731	)
Long-term borrowings, net	$	307