Notes and Loans Payable
|12 Months Ended|
Oct. 31, 2010
|Debt Disclosure [Abstract]|
|Notes and Loans Payable||
NOTE 13 - NOTES AND LOANS PAYABLE
A summary of notes and loans payable at October 31, 2010 and 2009 is as follows:
In connection with the secured convertible debenture noted above and the Cash Control Framework Agreement (see below), we carried $1,271,170 deferred financing costs as an asset on the consolidated balance sheet at October 31, 2009, which represents $1,694,893 in financing closing costs we incurred, net of $423,723 in amortization expense at October 31, 2009. During the year ended October 31, 2010 and 2009, deferred financing cost of $1,271,170 and $242,128, respectively was written off to expense.
On March 16, 2009, the Company and the holder of the secured convertible debenture (the Noteholder) entered into a Cash Control Framework Agreement, pursuant to which it is assumed that, subject to the Company being fully compliant with the terms of this agreement and those set out in the Transaction Documents entered into between the Company and the Noteholder on February 21, 2008, no adverse actions will be taken by the Noteholder. The agreement provides, among other things, for the placement of approximately $2.15 million into a segregated cash account. Under the terms of the agreement, we may request the release of funds from the account from time to time for working capital purposes, subject to the Noteholders consent and agreed upon terms and conditions. Under the terms of the agreement, we must also adhere to a strict cost cutting program which involves reducing our SG&A, R&D and capital expenditure by an annualized $3.35 million.
On January 18, 2011, the noteholder notified us in writing that it had waived its right to demand repayment of the loan as a result of our failure to observe certain specified loan covenants. The agreement was extended for a further period of 12 months and now expires on March 16, 2012. During the extension period, parties closed the facility in March 2011. We believe that the terms of this agreement may provide us with sufficient liquidity to operate for fiscal 2011.
On or around July 2010 the Company entered into a Financing Agreement with an affiliate of CCM Holdings, Fort Advisors LLC under which Fort Advisors agreed to make advances of up to $500,000 against certain invoices and contracts for which the Company paid 20% against each invoice that was financed.
See Note 16 of the Consolidated Financial Statement for current information on the Cash Control Framework Agreement and the breaches of covenants disclosed in the paragraph immediately above.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://www.xbrl.org/2003/role/presentationRef