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Debt Obligations and Liquidity
6 Months Ended
Jun. 30, 2011
Debt Obligations and Liquidity [Abstract]  
Debt Obligations and Liquidity
NOTE 4: Debt Obligations and Liquidity
The Company had the following debt obligations.
The Company had a revolving loan with PNC Bank (“PNC”) which matured on December 31, 2010 (the “Loan Agreement”).
The Loan Agreement allowed for repayment to be made within ten days of the maturity date before a default in debt would be declared. Outstanding principal under the Loan Agreement amounted to $825,000 on December 31, 2010. On January 3, 2011, the revolving loan was repaid with an advance of $825,000 from Fairford Holdings, Limited, a British Virgin Islands Company (”Fairford”), As of June 30, 2011, Fairford beneficially owned 63.7% of the Company’s outstanding Class A common stock. On January 20, 2011, the board of directors approved the terms of Fairford’s advancement and the form of demand note. Subsequent to the advancement and approval by the board of directors, the Company issued to Fairford a demand note, in the aggregate principal amount of $825,000 bearing interest at LIBOR plus 4%.
In October 2010, in order to supplement the Company’s liquidity, Fairford advanced $500,000 to the Company. Subsequent to the advancement, the Company issued to Fairford a demand note, in the aggregate principal amount of $500,000 bearing interest at LIBOR plus 4%. The advances from Fairford of $1,325,000 documented in the form of two demand promissory notes were repaid and cancelled on May 10, 2011. Accumulated interest under the promissory notes amounted to $23,919.
In March 2011, the Company received a purchase order for EIM licenses in the UK totaling approximately $6 million and received payment of approximately $7 million in May 2011, which includes VAT tax remittance. The EIM license agreement expands services provided to an existing customer and the revenue will be recognized over the term of the three-year license and service agreement. The license agreement does contain a termination clause which enables the customer to cancel the agreement after two years of service and return 80% of the unearned prepaid license fee. The maximum prepaid fee which could be claimed would be approximately $1.5 million. The Company believes that this source of liquidity along with the cash on hand, and anticipated increased cash generated from future operating activities will be sufficient to support its operations over the next twelve months.