Note 9 - Long-term Debt

12 Months Ended

Dec. 31, 2012

Debt Disclosure [Text Block]

Note 9— Long-term Debt

Subordinated Notes Payable

On January 25, 2008, we entered into a Note Purchase Agreement (the “MATT Agreement”) with MATT Inc. Pursuant to the terms of the MATT Agreement: (i) MATT Inc. invested $5,000,000 in the Company and the Company issued MATT Inc. a subordinated promissory note due October 16, 2016 with 4.46% interest per annum (the “MATT Note”); (ii) the exercise price of MATT Inc.’s outstanding Series 1 Warrant to purchase 1,000,000 shares of our common stock was reduced from $12.50 per share to $2.75 per share; (iii) the exercise price of MATT Inc.’s outstanding Series 2 Warrant to purchase 1,000,000 shares of our common stock was reduced from $15.00 per share to $2.75 per share (see Note 10); and (iv) the Amended and Restated Support Agreement between The Company and MATT Inc. was terminated, which terminated MATT Inc.’s obligation to provide us with the use of a corporate jet for up to 25 hours per year through October 2016.  Debt issuance costs of $24,580 related to this transaction have been capitalized within the other assets section of the balance sheet and are being amortized to interest expense over the life of the note.  The balance of deferred debt issuance costs was approximately $11,000 and $13,500 at December 31, 2012 and 2011 respectively and is included in other assets.

MATT note payable consisted of the following:

	December 31, 2012			December 31, 2011
Notes Payable, face amount	$	5,000,000		$	5,000,000
Discounts on Notes:
Revaluation of Warrants		(1,341,692	)		(1,341,692	)
Termination of Jet Rights		(878,942	)		(878,942	)
Accumulated Amortization		1,255,596			1,000,574
Total Discounts		(965,038	)		(1,220,060	)
Accrued Interest		1,204,980			877,132
MATT Note Payable, net	$	5,239,942		$	4,657,072

On January 25, 2008, we entered into a Note Purchase Agreement (the “RSI Agreement”) with Richard L. Scott Investments, LLC (“RSI”). Pursuant to the terms of the RSI Agreement: (i) RSI invested $2,000,000 in the Company and the Company issued RSI a subordinated promissory note due March 21, 2016 with 4.46% interest per annum (the “RSI Note”); (ii) the exercise price of RSI’s outstanding Series 2 Warrant to purchase 500,000 shares of our common stock was reduced from $4.00 per share to $2.75 per share, (See Note 10); and (iii) the exercise price of RSI’s outstanding Series 3 Warrant to purchase 500,000 shares of our common stock was reduced from $7.00 per share to $2.75 per share. Debt issuance costs of $15,901 related to this transaction have been capitalized within the Other Assets section of the balance sheet and are being amortized to interest expense over the life of the note. The balance of deferred debt issuance costs was approximately $6,300 and $8,200 at December 31, 2012 and 2011 respectively and is included in other assets.

RSI note payable consisted of the following:

	December 31, 2012			December 31, 2011
Notes Payable, face amount	$	2,000,000		$	2,000,000
Discounts on Notes:
Revaluation of Warrants		(263,690	)		(263,690	)
Accumulated Amortization		159,560			127,152
Total Discounts		(104,130	)		(136,538	)
Accrued Interest		481,993			350,853
RSI Notes Payable, net	$	2,377,863		$	2,214,315

Loans Payable

On November 10, 2011 in conjunction with the acquisition of Insider Guides, Inc., the Company assumed loans payable consisting of a growth capital term loan and three equipment term loans. The loans payable are collateralized by substantially all the assets of the Company. Under the Loan and Security Agreement Number 2 (“LSA2”) growth term and equipment term loans, dated December 13, 2010, principal and interest are payable monthly at a fixed interest rate of 12.50% per annum, and the loans are due September 2014.  Under the Supplemental Loan and Security Agreement (“SLSA”), dated November 21, 2008, principal and interest are payable in monthly at a fixed interest rate of 12.60% per annum, and the loan was repaid by April 2012. Under the Supplement Number 2 Loan and Security Agreement (“S2LSA”) dated January 22, 2010, principal and interest are payable in monthly at  a fixed interest rate of 12.50% per annum, and the loan is due June 2013.  On February 13, 2012, the loans payable and security agreements were amended and restated to include additional debt covenants. The amendment includes limitations of additional $6 million of bank borrowing and indebtedness for leased office equipment.  The amendment requires that the Company’s unrestricted cash and accounts receivable be greater than or equal to 200% of the borrowers indebtedness and the Company’s unrestricted cash be greater than or equal to the aggregate amount of interest that will accrue and be payable through the maturity date of loans payable and security agreement.  At December 31, 2012, the Company was in compliance with the amended loans payable and security agreements debt covenants.

Capital Leases

During the first quarter 2012, the Company executed two non-cancelable master lease agreements one for $1.5 million with Dell Financial Services, and one for $500,000 with HP Financial Services.  Both are for the purchase or lease of equipment for our data centers. The HP Financial Services master lease agreement was increased to $1.5 million in the second quarter 2012.  Principal and interest are payable monthly at interest rates of ranging from 4.5% to 7.99% per annum, rates varying based on the type of equipment purchased.  The capital leases are secured by the leased equipment, and outstanding principal and interest are due respectively in January and March 2015.

The following is a schedule of the long term debt:

	Borrowings		Interest Rates				December 31, 2012			December 31, 2011
Growth Term Loans:
LSA2	$	97,500			12.50	%	$	125,679		$	290,960
Equipment Term Loans:
SLSA		2,500,000			12.60	%		-			272,172
S2LSA		2,500,000			12.50	%		496,381			1,336,342
LSA2		8,607			12.50	%		1,762,061			2,889,838
	$	5,106,107						2,384,121			4,789,312
Capital Leases		1,500,000	6.46	-	7.99	%	$	1,397,970			-
		1,500,000	4.5	-	7.40	%	$	308,833			-
	$	3,000,000						1,706,803			-
Loans payable - current portion								1,903,368			2,405,191
Capital lease - current portion								648,573
Long term debt - current portion							$	2,551,941		$	2,405,191
Loans payable - long term portion								480,753			2,384,121
MATT Note payable		5,000,000			4.46	%		5,000,000			5,000,000
RSI Note payable		2,000,000			4.46	%		2,000,000			2,000,000
								7,480,753			9,384,121
Add: Accrued interest								1,686,973			1,227,985
Less: unamortized discounts								(1,069,168	)		(1,356,598	)
Total notes payable - long term portion								8,098,558			9,255,508
Capital lease - long term portion								1,058,230			-
Long term debt, net of discounts							$	9,156,788		$	9,255,508

The following is a schedule of the aggregate maturities of the loans payable and subordinated notes including accrued interest:

Years ending December 31:
2013		2,556,542
2014		1,173,155
2015		361,227
2016		-
2017		8,686,973
Total	$	12,777,897