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13. Subsequent Events
6 Months Ended
Jun. 30, 2011
Subsequent Events [Text Block]
13. Subsequent Events

On August 5, 2011, we reached agreement with Hale Capital Partners, L.P. to terminate our previously announced rights offering and Hale’s obligation to backstop the rights offering.  We also agreed to modify certain payment obligations under our understanding senior secured note.

Under the terms of a Settlement Agreement between us and Hale, Hale has released us from our obligation to conduct the rights offering and from certain other representations in the Securities Purchase Agreement.  We, in turn, released Hale from its backstop obligations.  As a result, we will not be conducting the rights offering and will withdraw the related registration statement (registration no, 333-169174) previously filed with the SEC.  Hale will not be required to convert any portion of the $10.5 million senior secured note into shares of our common stock.

Interest accrues on the senior secured note at a rate equal to the prime rate as published in the Wall Street Journal as of the first business day of each interest period plus 4.75% per annum and is payable at the end of each month.  Through June 30, 2011, we had the option to defer the monthly interest payments otherwise due and to have the amount of interest deferred added to the principal balance of the senior secured note. We elected this option for all interest accruing through June 30, 2011.  In connection with the Settlement Agreement, Hale has agreed to continue this option with respect to monthly interest payments on up to $3 million of principal on the senior secured note through June 30, 2012.

Our scheduled payment obligations under the senior secured note, assuming that we pay all of the interest current, will be approximately $250,000 per month through June 30, 2012 and will average approximately $415,000 per month for the remaining 24 months until maturity.