LONG-TERM DEBT

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

LONG-TERM DEBT

NOTE 5. LONG-TERM DEBT

Long-term loan and notes payable to related party consist of the following (in thousands):

	March 31,     2012	December 31, 2011
Note payable – related party (a)	$       --	$      532
Other long-term debt (b)	700	1,384
	$  700	$  1,916

a) From time to time during 2010 and 2011, the Company entered into several short term notes payable with John L. (Launny) Steffens, the Chairman of the Board of Directors, for various working capital needs. The notes bear interest at 12% per year and are unsecured. At December 31, 2011, the Company was indebted to Mr. Steffens in the amount of $3,065,000 of which $1,665,000 was reclassified from long term debt. (See Note 4) In March 2012, Mr. Steffens converted $3,000,000 of his debt, which included $50,000 which was lent to the Company in the first quarter of 2012, into 20,000,000 shares of common stock of the Company at a price of $0.15 per share. In March 2012, Mr. Steffens agreed to refinance $465,000 of debt, of which only $115,000 was outstanding as of December 31, 2011, and $417,000 of accrued interest at an interest rate of 12% and a maturity date of March 31, 2013. As such this amount has been reclassified to long term debt as of December 31, 2011. The amount has been reclassified as short term debt as of March 31, 2012.

b) In January 2010, as part of the Asset Purchase Agreement, the Company entered into an unsecured Convertible Promissory Note with SOAdesk in the amount of $1,000,000. The note bears interest at 5% and is due November 14, 2015. The note is convertible into shares of the Company’s common stock at the rate of one share for every $0.15 of principal and interest due under the note. The note is convertible at the option of the holder with one-third convertible in January 2011, two-thirds convertible in January 2012, and the entire note convertible in January 2013 or at maturity. In March 2012, SOAdesk elected to convert $300,000 of the outstanding note balance into 2,000,000 shares of the Company’s Common Stock.

In March 2012, certain private lenders agreed to refinance $83,000 of debt and $301,000 of accrued interest at an interest rate of 12% and a maturity date of March 31, 2013. As such this amount had been classified as long term debt as of December 31, 2011. The amount has been reclassified as short term debt as of March 31, 2012.