3. SHORT TERM DEBT

9 Months Ended

Sep. 30, 2014

Debt Disclosure [Abstract]

3. SHORT TERM DEBT

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

	September 30, 2014		December 31, 2013
Note payable - asset purchase agreement (a)	$	700	$	--
Note payable – related party (b)		5,946		21
Notes payable (c)		1,086		435
	$	7,732	$	456

(a)   In June 2014, the Company reclassified to short-term debt its unsecured convertible promissory note with SOAdesk for $700,000 with an annual interest rate of 5% as per the Asset Purchase Agreement.  The note was originally scheduled to mature on March 31, 2010 but was subsequently amended and through a series of amendments, the maturity date was extended to June 30, 2015.  At September 30, 2014, the Company was indebted to SOAdesk in the amount of $700,000 in principal and $165,000 in interest. At December 31, 2013, this debt was classified as long-term debt but subsequently has been reclassified to short term debt.

The note is convertible into shares of Series B Convertible Preferred Stock at the rate of one share per every $150 of principal and interest due under the note.  The Company is obligated to repay any principal of the loan with fifty percent of any gross proceeds of any Series B Preferred capital raised through maturity of the note.  The note is convertible at the holder’s option at any time or at maturity.

(b) From 2012 through 2014, the Company entered into various short-term notes payable with John Broderick, the Chief Executive Officer and Chief Financial Officer, for various working capital needs. The notes bear interest at 12% and were unsecured. At December 31, 2013, the Company was indebted to Mr. Broderick in the approximate amount of $6,000. In February 2014, the debt of $6,000 and approximate interest of $500 was paid in full.

During 2013, the Company entered into a short-term note payable with Antony Castagno, the Chief Technology Officer, for various working capital needs. The note was non-interest bearing and unsecured. At December 31, 2013, the Company was indebted to Mr. Castagno in the approximate amount of $15,000. No interest was paid in fiscal 2013.  In March 2014, Mr. Castagno amended the note extending the term date till December 31, 2014 and the note bears interest at 10%.  At September 30, 2014, the Company was indebted to Mr. Castagno in the amount of $15,000 in principal and approximately $800 in interest.

From time to time during 2012 through 2014, 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, are unsecured and mature on June 30, 2015. In June 2014, the Company reclassified its outstanding debt with Mr. Steffens to short term debt.  At September 30, 2014, the Company was indebted to Mr. Steffens in the approximate amount of $5,931,000 of principal and $949,000 in interest.  At December 31, 2013, the Company was indebted to Mr. Steffens in the approximate amount of $4,398,000 of principal and $505,000 in interest. In March 2014, Mr. Steffens agreed to extend the maturity date of all outstanding short term notes until June 30, 2015. As such this amount was classified as long term debt at December 31, 2013.

(c) The Company has issued a series of short-term promissory notes with private lenders, which provide for short term borrowings, both secured by accounts receivable and unsecured.  The notes in the aggregate principal amount of $50,000 and $435,000, respectively, as of September 30, 2014 and December 31, 2013, bear interest between 10% and 36% per annum.  The Company repaid approximately $385,000 of the outstanding notes and $52,000 of interest in fiscal 2014.

In January 2014, the Company reclassified to short-term debt its unsecured convertible promissory note with SOAdesk that was entered into as part of the Asset Purchase Agreement with SOAdesk for $1,000,000 with an annual interest rate of 5% and a maturity date of January 14, 2015.  At September 30, 2014, the Company was indebted to SOAdesk in the amount of $700,000 in principal and $198,000 in interest. The note is only 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 Company’s Common Stock.  At December 31, 2013, the Company was indebted to SOAdesk in the amount of $700,000 of principal and $172,000 in interest and was classified as long term debt but subsequently had been reclassified to short-term debt.

In June 2014, the Company reclassified to short-term debt its unsecured promissory note with certain private lenders that was originally entered into in March 2012 for $336,000 at an interest rate of 12% and a maturity date of March 31, 2013.  In March 2014, the maturity date of the note was extended to June 30, 2015 and reclassified to long term debt at December 31, 2013.  At September 30, 2014, the Company was indebted to these private lenders in the amount of $336,000 in principal and $103,000 in interest.