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Note 9 - Debt

12 Months Ended

Dec. 31, 2013

9. Debt

Credit Facilities

On December 22, 2011, we entered into a $4.5 million revolving line of credit with Rosenthal & Rosenthal. The total loan amount available to us under the line of credit is equal to 85% of our 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 our domestic assets. 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 $4.5 million amount of the credit facility 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 of 1% if the Credit Facility is terminated prior to December 31, 2014. We are 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. We were in compliance with the financial covenants at December 31, 2013. At December 31, 2013, there was a debit/negative balance on the line of credit of $218 thousand, which is included in the Consolidated Balance Sheets under the caption “Cash and cash equivalents.” At December 31, 2012, borrowings under the line of credit were $1.6 million, and are recorded in the Consolidated Balance Sheets as a current liability under the caption “Credit line borrowings.”

Additionally, the Company’s subsidiary in the United Kingdom has an invoice discounting arrangement whereby the amount available for borrowing is based at 80% of the eligible sales ledger of the U.K. subsidiary. The interest rate for borrowing under this arrangement is 3.02%. There was nothing outstanding under this arrangement at December 31, 2013.

Borrowings

The components of our debt at December 31, 2013 and 2012 are summarized in the table below (in thousands):

	December 31,
	2013			2012
Unsecured Convertible Notes (1)	$	6,145		$	1,500
Convertible Promissory Note - TLC Investments LLC (2)		-			500
Cognovit Note - Keystone Ruby, LLC (3)		223			277
Letter of Credit Agreement - Mark Plush (4)		-			250
Unsecured Promissory Note - Quercus Trust (5)		70			70
Discounts on long-term borrowings		(2,368	)		(48	)

Subtotal		4,070			2,549

Less: Current maturies of long-term debt		(59	)		(756	)

Long-term debt	$	4,011		$	1,793

(1)

Of the balance at December 31, 2013, $500 thousand of the notes mature on December 31, 2015, and $5,645 thousand mature on December 31, 2016. All notes bear interest at 5%, and are convertible into our common stock at $0.23 per share as follows (in thousands):

April 30, 2013	$	500
July 31, 2013		1,750
September 30, 2013		1,850
October 31, 2013		700
December 31, 2013		150
January 31, 2014		295
February 28, 2014		900
	$	6,145

(2)

As a provision of the settlement agreement between us and the former owners of EFLS, our obligation to pay the $500 thousand promissory note was cancelled in its entirety during the second quarter of 2013. See Note 11, “Settlement of Acquisition Obligations.”

(3)

Note matures on April 1, 2017 and bears interest at 10%. Per the terms of the note, if we did not renew the lease of our Solon facility by December 31, 2013, the note became payable immediately. The lease was renewed prior to December 31, 2013.

(4)

On July 3, 2013, the Letter of Credit Agreement was paid in full. Per the terms of the LOC, it matured on August 11, 2013, and bore interest at 12.5%. The LOC was collateralized by a cash deposit with an insurance company issuing our contract performance bonds and by 32% of the unpledged stock of Crescent Lighting, Ltd. (“CLL”), a subsidiary of the Company. As an incentive to enter into the LOC, we issued five-year, detached warrants to purchase 125,000 shares of common stock at an exercise price of $0.01 per share. See Note 16, Related Party Transactions.

(5)

Note matures on June 1, 2109 and bears interest at 1%.

Future maturities of remaining borrowings are summarized in the table below (in thousands):

Year ending December 31,	Long-Term Debt
2014	$	59
2015		566
2016		5,717
2017		26
2018		-
2019 and thereafter		70
Gross long-term borrowings		6,438
Less: discounts on long-term borrowings		(2,368	)
Total commitment, net		4,070

Less: portion classified as current		(59	)
Long-term borrowings, net	$	4,011

- Definition

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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