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4. Note Receivable
6 Months Ended
Dec. 31, 2013
Receivables [Abstract]  
NOTES RECEIVABLE

Note receivable of $400,000 and $375,000 at December 31, 2013 and June 30, 2013 respectively, represents a note due from American Citizenship Center, LLC (“ACC”), a related party. The $400,000 balance at December 31, 2013 represents the outstanding amount drawn on a $400,000 credit line. The note is secured by all assets of ACC and bears interest at the rate of 7.5% per annum.

 

ACC’s first payment under the note agreement of $100,000 was due not later than December 31, 2013. ACC failed to make that payment and defaulted on the note.

 

The Company believes its interests are best served by working with ACC and subsequent to December 31, 2013, the parties renegotiated new terms for the note delaying repayments until June 2014 when a $25,000 payment is due, followed by a July 2014 payment of $25,000 and subsequent monthly payments of $50,000 until the note is paid in full. In addition, the interest rate increased from 7.5% to 9%, a loan restructuring fee of $25,000 was added to the note balance and will be recognized when paid, certain warrants held by the Company were extended and re-priced, payment of accounting services fees of $3,000 per month for January 2014 through March 2014 were deferred and added to the note balance, and finally, a personal guarantee for $50,000 was obtained from the founding partner of ACC.

 

The Company has reviewed ACC’s current projections and has discussed its new business plan and believes the new plan will provide for repayment of the ACC note under payment terms discussed above. The new plan is based upon the assumption that immigration reform will not be passed by congress. If immigration reform is passed in the next few months, it is assumed the impact on ACC’s business plan would be positive. No provision for collectability has been recorded as of December 31, 2013 as current ACC financial projections indicate the note will be paid under amended terms.