XML 56 R17.htm IDEA: XBRL DOCUMENT

NOTES PAYABLE

9 Months Ended

Sep. 30, 2012

10.	NOTES PAYABLE

Notes payable consists of the following as of September 30, 2012:

Promissory note payable, unsecured, bearing interest at 5% simple interest per annum, due in weekly principal and interest payments of $250, maturing on March 10, 2015.	$	30,307

Less amounts due within one year		11,769

Long-term portion of notes payable	$	18.538

As of September 30, 2012, principal payments on the notes payable are as follows:

2012	$	2,887
2013		12,152
2014		12,540
2015		2,728
2016		—
Thereafter		—

	$	30,307

On March 18, 2011, the Chief Executive Officer transferred all financial interest in GKR. Accordingly, all transactions of the Company with GKR subsequent to March 18, 2011, are not classified with those of related parties, and the note payable due them was converted to a convertible debenture as of September 8, 2011. Accordingly the balance due under that obligation is classified with the convertible debenture balance as of September 30, 2012 and December 31, 2011. See Note 11. CONVERTIBLE DEBENTURES for further discussion.

On February 18, 2011, the Company’s wholly owned subsidiary, Trebor Industries, Inc., entered into a Forbearance Agreement with Branch Banking and Trust Company (“BBT”) for the promissory note in the principal amount of $1,000,000 in favor of BBT (the “Term Loan”) and the promissory note in the principal amount of $199,991 in favor of BBT (the “Second Note”). The Term Loan and Second Note are collectively referred to as the “Secured Notes”. The Secured Notes are secured by the Company's Fort Lauderdale facilities and personally guaranteed by the Company’s chief executive officer. As previously disclosed, the Company failed to bring the Secured Notes current and in January 2011 BBT accelerated the full principal and accrued interest due under the Secured Notes, as well as initiated collection and legal action. The Forbearance Agreement effectively extended the maturity date of the Secured Notes to May 22, 2012. The Secured Notes were consolidated under a Consolidated and Restated Promissory Note in the principal amount of $1,053,993, effective November 22, 2010, (the “Consolidated Note”). The maturity date of the Consolidated Note was May 22, 2012. The interest rate on the Consolidated Note was 7.5% per annum. Pursuant to the Forbearance Agreement the Company paid $33,000 to BBT at closing. In addition to the monthly interest only payments required under the Consolidated Note, Trebor was required to pay BBT $6,028 by February 28, 2011, and monthly payments of approximately $3,555 on March 10, 2011, April 10, 2011, and May 10, 2011, to satisfy disbursements, costs and expenses associated with the Forbearance Agreement.

On or about April 27, 2012, the Company received a default notice from BBT under its Forbearance Agreement on the mortgage underlying the Company’s real estate. BBT subsequently received judgment of foreclosure, as the 17th Judicial Circuit of the Circuit Court of Broward County awarded BBT a final judgment in the amount of $1,123,269.

On August 16, 2012 the Company’s real estate was sold through a court ordered auction for approximately $824,000, an amount approximately $300,000 less than the final judgment amount. At the time of the sale, carrying value of the building, building improvements, and land was $1,641,075, mortgage balance was $1,053,997, accrued interest was $15,609, and accrued real estate taxes was $45,006. After reversing all amounts associated with the foreclosed property and recording $300,569 adjustment for difference between the sale and final judgment amount the Company recorded a $307,108 loss on foreclosure. This adjustment and loss are an estimate and are pending final resolution with the mortgage lender who both foreclosed and purchased the property. Until resolution, the Company will maintain a liability for the shortfall, recorded in other liabilities on the balance sheet. The Company continues to occupy the property, has not received notice to vacant, and is working out final terms with the bank on a lease. Accordingly, the note payable on the mortgage was written off during the third quarter ended September 30, 2012 along with the real estate and accumulated depreciation, while the shortfall liability was recorded and will remain until resolution as noted above.

In February 2011, the Company converted a vendor payable into an unsecured promissory note as reflected above and below in note payable balances as of September 30, 2012 and December 31, 2011, respectively. Principal and interest payments of $2,000 per month were to begin on February 28, 2011, and continue through August 31, 2012, maturity. Since the Company was in arrears on payments, on June 1, 2012, the Company restructured the Note with the vendor. Effective June 5, 2012, the Company began making payments under the restructured term as reflected in the terms above stated with the balance at September 30, 2012.

Notes payable consists of the following as of December 31, 2011:

Promissory note payable secured by a first mortgage on the real property of the Company having a carrying value of $1,093,562 at December 31, 2011, bearing interest at 7.5% per annum, due in monthly interest only payments beginning on February 22, 2011, maturing on May 22, 2012, with balloon payment of principal and any accrued and unpaid interest.	$	1,053,993

Promissory note payable, unsecured, bearing interest at 5% per annum, due in monthly principal and interest payments of $2000, maturing on August 31, 2012.		33,314
		1,087,307

Less amounts due within one year		1,087,307

Long-term portion of notes payable	$	—