DEBT

9 Months Ended

Sep. 30, 2011

DEBT

DEBT

8.  DEBT

On August 8, 2011, we entered into a business loan agreement and a promissory note (together the “Agreement”) with UMB Bank Colorado, N.A. (“UMB Bank”), for a $7.5 million secured revolving line of credit for one year from August 1, 2011 to August 1, 2012.  Under this agreement, borrowings bore interest, at our option at the time of borrowing, of the thirty, sixty or ninety day LIBOR index, plus 3.25%.  The interest rate was to never be less than 4.00% per annum.  Under this agreement we granted UMB Bank a security interest in all of our present and future accounts receivable, general intangibles, and owned real property.  In addition, under this agreement, we were subject to certain financial covenants, which included maintaining 1) a ratio of total liabilities to tangible net worth of less than 1.0 to 1.0, 2) a tangible net worth of at least $83 million and 3) unencumbered liquid assets, defined as cash, certificate of deposits and marketable securities, of at least $10 million measured on the last day of each fiscal quarter.  As of September 30, 2011, we were in compliance with our covenants, except for the tangible net worth requirement of $83 million. On October 31, 2011, we received a waiver of this covenant from UMB Bank.

On November 2, 2011, we reached an agreement with UMB Bank to amend the Agreement, whereby the secured line of credit will remain at $7.5 million, however, certain provisions will be amended. The amount available under the line will be subject to adjustment for any proceeds received on a sale of our assets classified as held for sale on our condensed consolidated Balance Sheets but in no event will it fall below $5 million.  In addition, borrowings will bear interest, at our option at the time of borrowing, of the thirty, sixty or ninety day LIBOR index, plus 3.75% and the interest rate shall never be less than 4.50% per annum.  Under the amendment, UMB Bank will continue to retain a security interest in all of our present and future accounts receivable, general intangibles, and owned real property.  In addition, our financial covenant to maintain a minimum tangible net worth will be decreased from at least $83 million to at least $75 million, and our financial covenant to maintain unencumbered liquid assets will be decreased from at least $10 million to at least $6.5 million as measured on the last day of each fiscal quarter.  The definition of our tangible net worth requirement will also be amended to exclude in the calculation any gains or losses associated with a sale of our assets classified as held for sale on our Condensed Consolidated Balance Sheets.  We expect to finalize this amendment in November 2011 and it will be effective through August 1, 2012.