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8. BANK LOANS AND NOTES PAYABLE

3 Months Ended

Sep. 30, 2013

The Company's debt consisted of the following as of September 30, 2013 and June 30, 2013:

	September 30, 2013		June 30, 2013
Bank loans and notes payable-current	$	923,545	$	885,786
Bank loans and notes payable-long term		2,309,161		2,395,802
Total	$	3,232,705	$	3,281,588

Bank loans and notes payable consisted of the following at September 30, 2013 and June 30, 2013:

	September 30, 2013		June 30, 2013

Bank loan payable of principal and interest at a rate equal to prime plus 1.50%, as defined, subject to a floor of 4.75% with any principal due at maturity on January 1, 2014; collateralized by accounts receivable and inventory related to a specific customer contract.	$	213,750	$	213,750

Note payable to the seller of Tier Electronics LLC payable in annual installments of $450,000 on January 21, 2013 and $495,000 on January 21, 2014. Interest accrues at a rate of 8% and is payable monthly. The promissory note is collateralized by the Company’s membership interest in its wholly-owned subsidiary Tier Electronics LLC. See note (a) below.		495,000		495,000

Note payable to Wisconsin Department of Commerce payable in monthly installments of $23,685, including interest at 2%, with the final payment due May 1, 2018; collateralized by equipment purchased with the loan proceeds and substantially all assets of the Company not otherwise collateralized. The Company is required to maintain and increase a specified number of employees, and the interest rate is increased in certain cases for failure to meet this requirement. See note (b) below.		1,136,196		1,136,195

Bank loan payable in fixed monthly payments of $6,800 of principal and interest at a rate of .25% below prime, as defined, subject to a floor of 5% as of June 30, 2013 and 2012 with any principal due at maturity on June 1, 2018; collateralized by the building and land.		661,492		673,339

Note payable in fixed monthly installments of $6,716 of principal and interest at a rate of 5.5% with any principal due at maturity on May 1, 2028; collateralized by the building and land.		726,268		734,227

Bank loan payable in monthly installments of $21,000 of principal and interest at a rate equal to prime, as defined, subject to a floor of 4.25%, paid in full during fiscal 2014.		-		29,076
	$	3,232,705	$	3,281,588

(a)

If the federal capital gains tax rate exceeds 15% and or the State of Wisconsin capital gains tax rate exceeds 5.425% at any time prior to the payment in full of the unpaid principal balance and accrued interest on the promissory note, then the principal amount of the promissory note shall be retroactively increased by an amount equal to the product of (a) the aggregate amount of federal and state capital gain realized by the Seller or Seller’s sole member, as applicable, in connection with the acquisition, multiplied by (b) the difference between (i) the combined federal and State of Wisconsin capital gains tax rate as of the date of calculation, minus (ii) the combined federal and State of Wisconsin capital gains tax rate of 20.425% as of January 21, 2011. Any adjustment to the principal amount of the promissory note shall be effected by increasing the amount of the last payment due under the promissory note without affecting the next regularly scheduled payment(s) under the promissory note. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed, effectively raising the top rate for capital gains to 20%. The Company recorded an additional $45,000 of principal due under this note as other expense for the year ended June 30, 2013.

(b)	As of April 2013, the Wisconsin Department of Commerce granted the Company a 12 month deferral of the required installment payments of $22,800. On March 1, 2014, fifty equal monthly installments of $23,685 will commence through April 1, 2018 with the final installment due on May 1, 2018.

Maximum aggregate annual principal payments for fiscal periods subsequent to September 30, 2013 are as follows:

2014 (nine months)	$	836,711
2015		351,156
2016		361,075
2017		371,418
2018		358,400
2019 and thereafter		953,946
	$	3,232,705

- 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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