Notes Payable - Bank.

3 Months Ended

Mar. 31, 2013

Notes Payable Bank [Abstract]

Notes Payable Bank [Text Block]

Note 4. Notes Payable – Bank.

The following summarizes the balances of bank notes payable at March 31, 2013 and December 31, 2012:

	March 31, 2013		December 31, 2012
Short-term notes payable, bank:
Crown Bank promissory note	$	450,000	$	500,000
Central Bank line of credit		100,000		100,000
Central Bank promissory note		100,020		0
Total short-term notes payable, bank	$	550,020	$	600,000
Long-term notes payable, bank:
Central Bank promissory note	$	0	$	100,025

Crown Bank Loan

On March 27, 2013, the Company refinanced its $500,000 promissory note with Crown Bank (the “Crown Loan”). Pursuant to the amendment, a principal reduction payment of $50,000 was made on March 27, 2013, with a second $50,000 reduction due on January 15, 2014. The note matures on February 15, 2014, and bears interest at the prime rate plus one percent, but never less than 6.0% (currently 6.0%). The Crown Loan remains secured by all Company assets and continues to be guaranteed by James L. Davis, a director of the Company and William S. Reiling, a greater than 5% shareholder of the Company (see Note 6 for consideration paid to the guarantors in the form of equity). On the renewal date, it was determined that a substantial modification of the terms of the note was made as the present value of the cash flows under the new promissory note was greater than 10% higher than the present value of the cash flows under the original note. Accordingly, the value of the warrants issued pursuant to this arrangement were recorded as recorded as debt issuance cost and are being expensed as debt extinguishment expense as they are earned. The Company recognized $100,576 of debt extinguishment expense related to the warrants and $2,500 of debt extinguishment expense related to bank fees during the three months ended March 31, 2013.

Central Bank Loans

On January 17, 2013, the Company renewed its $100,025 Central Bank loan. The renewed loan matures on January 17, 2014, and bears interest at the prime rate plus one percent, with a minimum annual rate of 5.0% (currently 5.0%). On May 11, 2013, the Company renewed its $100,000 Central Bank line of credit. The renewed line of credit matures on January 17, 2014, and bears interest at the prime rate plus one percent, with a minimum annual rate of 5.0% (currently 5%). The Central Bank facilities (the “Central Loans”) are guaranteed by an individual investor (see Note 6 for consideration paid to the guarantor in the form of equity). On the renewal dates, it was determined that a substantial modification of the terms of the Central Loans was made as the present value of the cash flows under the new promissory notes were greater than 10% higher than the present value of the cash flows under the original note. Accordingly, the value of the warrants issued pursuant to this arrangement were recorded as recorded as debt issuance cost and are being expensed as debt extinguishment expense as they are earned. The Company recognized $6,985 of debt extinguishment expense related to the Central Loans during the three months ended March 31, 2013.