Debt Obligations

Our debt obligations for continuing operations consist of the following:



	December 31, 2012			March 31, 2013
Obligations to Secured Lenders:
Line of Credit: $3,000,000 principal and $9,188 accrued interest in December 2012 and March 2013	$	3,009,188		$	3,009,188
Capital lease obligation: $3,146,110 principal, $31,344 accrued interest in December 2012; $2,984,095 principal, $29,730 accrued interest in March 2013	3,177,454			3,013,825
Obligations to Other Creditors:
June/ July 2012 Bridge Notes: $7,100,000 principal, $214,751 accrued interest, less $1,504,353 debt discount in December 2012; $7,100,000 principal, $209,938 accrued interest, less $1,079,927 debt discount in March 2013	5,810,398			6,230,011
January 2013 Bridge Notes: $1,650,000 principal, $708,003 debt discount in March 2013	—			941,997
Other obligations	63,510			55,498
Debt obligations of continuing operations, current and non-current	12,060,550			13,250,519
Less: obligations classified as current, net of amortization of debt discounts	(9,578,723		)	(10,970,497		)
Debt obligations of continuing operations, non-current	$	2,481,827		$	2,280,022

The following disclosures reflect the status of our debt obligations for our continuing operations on an instrument by instrument basis as they existed as of December 31, 2012 and provide a summary of significant payment and other activities related to the outstanding debt instruments during the first three months of 2013.

Line of Credit

On May 7, 2012, we obtained a revolving line of credit from a bank that initially provided us with the ability to draw up to $10.0 million in working capital advances at a variable interest rate represented by the greater of (i) 5.25% or (ii) the bank’s prime rate, plus 2.00% (the "Line of Credit"). The credit facility requires monthly interest payments on outstanding advances and is scheduled to expire on May 7, 2014. The amount of advances that we can draw down under the facility is dependent upon our future levels of eligible accounts receivables and inventories and our compliance with certain financial covenants. Under the original credit facility, there were two significant financial covenants that we were required to meet in order to continue to have the ability to draw down under the Line of Credit. These covenants consisted of a “Performance to Plan” covenant and a minimum asset coverage ratio of 1.25 to 1.00 of unrestricted cash balances maintained at the bank plus eligible accounts receivables above the level of advances outstanding under the line.

During 2012 and through the first quarter of 2013, we have not been in compliance with the quarterly “Performance to Plan” financial covenant under the Line of Credit. As of March 31, 2013, we were not in compliance with the asset coverage ratio covenant. Our senior secured lender has not declared a default in the Line of Credit during these periods that we have been in violation of the covenants and we are currently negotiating a mutually acceptable waiver and amendment with the bank.

The bank has a senior secured position on substantially all of our assets other than our renewable energy segment's wind farm assets, which are held for sale as of March 31, 2013, and certain equipment acquired under a capital lease arrangement.

Capital lease obligation

On November 6, 2012, we entered into an equipment sale and leaseback financing arrangement that provides us with access to a total of $3,250,000 to finance the acquisition of certain equipment to be employed in our continuing operations. As of March 31, 2013, we had used a total of $2,103,530 of the amount available to us to acquire equipment and the remaining $1,146,470 was being held in an irrevocable escrow account. The arrangement calls for payments of $111,846 on or before the fifteenth of each month through October 15, 2015 and a final payment of $691,846 on November 6, 2015. During the first three months of 2013, we made total payments of $335,537, of which $173,521 represented the implied interest cost.

We have the option to prepay the present value of the remaining scheduled lease obligations at any time in a lump sum. The discount rate used to calculate the lump sum will depend on the timing of the prepayment as follows: (i) 4.0% if the prepayment is made prior to November 6, 2013, (ii) 18.0% if the prepayment is made between November 7, 2013 and November 6, 2014, and (iii) 23.0% if the prepayment is made on or after November 7, 2014.

The proceeds held in escrow are classified as restricted assets on the accompanying condensed consolidated balance sheets with the cash balance specifically designated for future equipment purchases and available to us only upon meeting certain contractual requirements. The lease obligation is secured by both the equipment that is acquired under the arrangement and the balance of restricted cash held in escrow.

The following table sets forth the total minimum lease payments under capital leases for equipment along with the present value of the net minimum lease payments as of March 31, 2013:



Nine months ending December 31, 2013	$	1,006,610
Twelve months ending December 31, 2014	1,342,146
Twelve months ending December 31, 2015	1,810,301
Total minimum lease payments	4,159,057
Less: Amount representing interest	(1,174,962		)
Total present value of net minimum lease payments	2,984,095
Less: Current portion of the present value of minimum lease payments	(736,737		)
Capital lease obligation, net of current portion	$	2,247,358

June/July 2012 Bridge Notes

During June and July 2012, we received gross proceeds of $7,100,000 from the sale of senior subordinated bridge notes (June/ July 2012 Bridge Notes) and warrants.

The significant terms of the June/ July 2012 Bridge Term Notes are as follows: (i) scheduled maturity dates of eighteen months from the date of issuance, (ii) interest at 12.0% per annum, (iii) quarterly interest obligations payable in cash, (iv) principal payable in cash and can be prepaid, in whole or in part, at any time without penalty, (v) no conversion rights, and (vi) unsecured and subordinate to our secured Line of Credit.

January 2013 Bridge Notes

On January 24, 2013, we entered into agreements with certain accredited investors for the sale and purchase of $1,800,000 of unsecured 0% nonconvertible promissory notes (the “January 2013 Bridge Notes”) and warrants to purchase shares of our common stock. The January 2013 Bridge Notes include a $300,000 original issue discount; provided, however, if the January 2013 Bridge Notes are repaid in full on or before July 1, 2013, then the total principal amount due under the January 2013 Bridge Notes is reduced to $1,625,000, which, as a result, would lower the original issue discount to $125,000. At closing, we received gross proceeds of $1,500,000.

The January 2013 Bridge Notes are unsecured obligations. Except for the original issue discount, the January 2013 Bridge Notes do not carry interest unless and until there is an event of default, in which case the outstanding balance would carry interest at 18% per annum. The January 2013 Bridge Notes call for monthly amortization payments of $150,000 due and payable on the first business day of each month commencing on March 1, 2013. The January 2013 Bridge Notes were originally set to mature on December 31, 2013; however, the maturity date was subject to change in the event we did not (i) raise net proceeds of at least $3.0 million from one or more non-dilutive financings or other capital raising transactions by April 30, 2013 and (ii) obtain at least a six month extension of the maturity date from holders of at least 75% of the principal amount of the June/July 2012 Bridge Notes. We did not fulfill the conditions required by April 30, 2013, and as a result, the maturity dates under the January 2013 Bridge Notes were changed to September 1, 2013.

We can prepay the January 2013 Bridge Notes, in whole or in part, at any time without penalty and, if we repay the January 2013 Bridge Notes in full on or before July 1, 2013, then the amount of the original issue discount is reduced to $125,000. Upon the occurrence of an event of default, the investors have the right to demand repayment of all or part of the January 2013 Bridge Notes and, if we fail to repay the amount so demanded within 30 days, then we must pay a 20% premium.

Each investor received a warrant entitling the investor to purchase shares of our common stock equal in number to 100% of the purchase price for such investor's bridge note divided by $1.00. The aggregate number of shares underlying the warrants is 1,500,000. We paid our placement agent a cash fee of $112,500 and issued the placement agent a warrant to purchase 45,000 shares of our common stock, with terms substantially the same as the investor warrants described above, in consideration for the placement agent's services in connection with the transaction.

We determined that the warrant contracts represent freestanding derivative instruments (see Notes 9 and 10) and allocated $705,000 of the proceeds to the derivative instruments, representing the fair value of the warrants on the transaction date. The remaining proceeds of $795,000 were allocated to the debt instruments on a residual basis. The difference between the face amount of the debt instruments of $1,800,000 and the proceeds allocated to the debt instruments resulted in an implied debt discount of $1,005,000 that is being amortized to interest expense on the effective interest rate method over the expected remaining life (through September 1, 2013) of the debt instruments.

In addition, we allocated total costs of $137,500 incurred in connection with the transaction between the derivative warrants ($64,625) and debt instruments ($72,875) on a relative fair value basis. The portion allocated to the derivative warrants was recognized immediately as interest expense and the portion allocated to the debt instruments was deferred and is being amortized to interest expense on the effective interest rate method over the expected life of the debt instruments.

Collateral and Covenants

Other than the covenant violations related to the Line of Credit that are discussed above, we were in compliance with the existing covenants and other requirements of our other debt instruments as of March 31, 2013.

Debt Maturities

The table below shows scheduled maturities of our long term debt obligations of our continuing operations for each of the following periods until maturity:



Twelve months ending March 31:	Debt Maturities		Amortization of Discount			Net Maturities of Debt Obligations
2014	$	12,758,427	$	(1,787,930	)	$	10,970,497
2015	939,878					939,878
2016	1,340,144					1,340,144
	$	15,038,449	$	(1,787,930	)	$	13,250,519