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12. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT | 9 Months Ended | 12 Months Ended
--- | --- | ---
Jun. 30, 2012 | Sep. 30, 2011
Notes to Financial Statements |  |
12. NOTES PAYABLE, CAPITALIZED LEASES AND LONG TERM DEBT | Notes payable, capitalized leases and long term debt as of June 30, 2012 and September 30, 2011 consisted of the following: BFI Finance Corp Secured Credit Facility On December 9, 2008 TransTech entered into a $1,000,000 secured credit facility with BFI Finance Corp to fund its operations. The rate is prime interest + 2.5%, with a floor for prime interest of 5.5%. On June 12, 2012, the secured credit facility was renewed for 6 months, with a floor for Prime of 4.5%. The eligible borrowing is based on 80% of eligible trade accounts receivable, not to exceed $700,000, and 35% of inventory value, not to exceed $300,000, for a total cap of $1,000,000. As of June 30, 2012, the outstanding balance under this facility was $504,643. The secured credit facility is guaranteed by James Gingo, the President of TransTech. Capitalized Leases TransTech has capitalized leases for equipment. The leases have a remaining lease term of 12-37 months. The aggregate future minimum lease payments under capital leases, to the extent the leases have early cancellation options and excluding escalation charges, are as follows:
Years Ended June 30, |  | Total |
2012 |  | $ | 15,490 |
2013 |  |  | 5,289 |
2014 |  |  | 3,312 |
2015 |  |  | 276 |
2016 |  |  | 0 |
Total |  |  | 24,367 |
Less current portion of capitalized leases |  |  | (3,237 | )
Long term capital leases |  | $ | 21,130 |
The imputed interest rate in the capitalized leases is approximately 10.5%. Related Party Notes Payable The Company acquired its 100% interest in TransTech by issuing a Promissory Note (“Note”) to James Gingo, the President of TransTech, in the amount of $2,300,000, plus interest at the rate of three and one-half percent (3.5%) per annum from the date of the Note. The Note is secured by a security interest in the stock and assets of TransTech, and is payable over a period of three (3) years as follows: (i) The sum of $650,000, the amount of any accrued interest due on the Bonderson debt of $600,000 owed by James Gingo to the Bonderson Family Living Trust (“Bonderson Debt”) and interest on the unpaid balance, shall be paid to Seller on the earlier of: (A) the one (1) year anniversary of the closing date; or (B) on the closing of $2,500,000 or more in aggregate financing (whether debt, equity or some combination thereof) after the closing date. On June 8, 2011, the Company paid $650,000 and accrued interest of $80,500 to Mr. Gingo. (ii) The sum of $650,000, the amount of any accrued interest due on the Bonderson debt owed by James Gingo and interest on the unpaid balance shall be paid to Seller on the earlier of: (A) the two (2) year anniversary of the closing date; or (B) on the closing of $5,000,000 or more in aggregate financing (whether debt, equity or some combination thereof) after the closing date. On July 31, 2012, the Company paid the $650,000 and accrued interest of $66,136 due to Mr. Gingo. (iii) The remaining balance of the Note and interest thereon shall be paid to Seller on the earlier of: (A) the three year anniversary of the closing date; or (B) on the closing of $7,500,000 or more in aggregate financing (whether debt, equity or some combination thereof) after the closing date. On February 27, 2007, the Company entered into a demand note with former CEO and President, Bradley E. Sparks totaling $50,000 plus loan fees of $750. As of June 30, 2012, the outstanding note payable totaled $50,750 consisting of the note payable to Mr. Sparks. Interest expense accrues on the note at a rate of 18% per annum. Accrued interest of $49,004 as of June 30, 2012 on the note payable is recorded in the balance sheet in accrued expenses and other liabilities. Under the terms of the demand note, arrears in payment of the principal amount or any interest shall bear interest at the rate of 30% per annum. Mr. Sparks has not demanded repayment of the demand note and it continues to bear interest at the original rate of 18% per annum. The unpaid interest at the penalty rate through June 30, 2012 was $15,397. On September 30, 2009, the Company entered into a second demand note with former CEO and President, Bradley E. Sparks totaling $22,478. As of June 30, 2012, the outstanding note payable totaled $22,478 consisting of the note payable to Mr. Sparks. Interest expense accrues on the note at a rate of 8% per annum, with a default interest rate of 12%. Accrued interest of $4,946 as of June 30, 2012 on the notes payable is recorded in the balance sheet in accrued expenses and other liabilities. On April 30, 2009, accounts payable owed to Lynn Felsinger, a consultant, totaling $82,000 were converted into a demand note. As of June 30, 2012, the outstanding note payable totaled $79,500. An affiliate of Mr. Erickson, our Chief Executive Officer, Juliz I Limited Partnership, loaned the Company operating funds during fiscal 2009. The balance outstanding at June 30, 2012 is $34,630 plus interest of $9,708. On July 25, 2012, the Company paid $22,630. Additionally, Mr. Erickson incurred expenses on behalf of the Company for a total of $24,322 during the 2009 fiscal year. This balance was converted into a loan as of September 30, 2009. On June 19, 2012, the Company paid $24,322. Unpaid accrued interest was $5,294 as of June 30, 2012. Aggregate maturities for notes payable, capitalized leases and long term debt by year are as follows:
Years Ended June 30, |  | Total |
2012 |  | $ | 2,507,491 |
2013 |  |  | 4,586 |
2014 |  |  | 1,054 |
2015 |  |  | 0 |
2016 |  |  | 0 |
Total |  | $ | 2,513,131 |
| Notes payable, capitalized leases and long term debt as of September 30, 2011 and 2010 consisted of the following:
|  | September 30, |  |  | September 30, |
|  | 2011 |  |  | 2010 |
BFI Finance Corp Secured Credit Facility |  | $ | 506,377 |  |  | $ | 643,334 |
TransTech capitalized leases, net of capitalized interest |  |  | 31,216 |  |  |  | 54,437 |
Related party notes payable- |  |  |  |  |  |  |  |
James Gingo Promissory Note |  |  | 1,650,000 |  |  |  | 2,300,000 |
RATLAB |  |  | 150,000 |  |  |  | - |
Bradley E. Sparks |  |  | 73,228 |  |  |  | 50,750 |
Lynn Felsinger |  |  | 82,000 |  |  |  | 82,000 |
Ronald P. Erickson and affiliated parties |  |  | 58,952 |  |  |  | 58,952 |
Total debt |  |  | 2,551,773 |  |  |  | 3,189,473 |
Less current portion of long term debt |  |  | (1,537,191 | ) |  |  | (1,513,495 | )
Long term debt |  | $ | 1,014,582 |  |  | $ | 1,675,978 |
BFI Finance Corp Secured Credit Facility On December 9, 2008 TransTech entered into a $1,000,000 secured credit facility with BFI Finance Corp to fund its operations. The rate is prime interest + 2.5%, with a floor for prime interest of 5.5%. On June 12, 2011, the secured credit facility was renewed for 6 months, with a floor for Prime of 4.5%. The eligible borrowing is based on 80% of eligible trade accounts receivable, not to exceed $700,000, and 35% of inventory value, not to exceed $300,000, for a total cap of $1,000,000. As of September 30, 2011, the outstanding balance under this facility was $506.377. The secured credit facility is guaranteed by James Gingo, the President of TransTech. Capitalized Leases TransTech has capitalized leases for equipment. The leases have a remaining lease term of 6-46 months. The aggregate future minimum lease payments under capital leases, to the extent the leases have early cancellation options and excluding escalation charges, are as follows:
Years Ended September 30, |  | Total |
2012 |  | $ | 16,634 |
2013 |  |  | 13,928 |
2014 |  |  | 3,806 |
2015 |  |  | 2,760 |
2016 |  |  | 0 |
Total |  |  | 37,128 |
Less current portion of capitalized leases |  |  | (5,912 | )
Long term capital leases |  | $ | 31,216 |
The imputed interest rate in the capitalized leases is approximately 10.5%. Related Party Notes Payable The Company acquired its 100% interest in TransTech by issuing a Promissory Note (“Note”) to James Gingo, the President of TransTech, in the amount of $2,300,000, plus interest at the rate of three and one-half percent (3.5%) per annum from the date of the Note. The Note is secured by a security interest in the stock and assets of TransTech, and is payable over a period of three (3) years as follows: (i) The sum of $650,000, the amount of any accrued interest due on the Bonderson debt of $600,000 owed by James Gingo to the Bonderson Family Living Trust (“Bonderson Debt”) and interest on the unpaid balance, shall be paid to Seller on the earlier of: (A) the one (1) year anniversary of the closing date; or (B) on the closing of $2,500,000 or more in aggregate financing (whether debt, equity or some combination thereof) after the closing date. On June 8, 2011, we paid $650,000 and accrued interest of $80,500 to Mr. Gingo. (ii) The sum of $650,000, the amount of any accrued interest due on the Bonderson debt owed by James Gingo and interest on the unpaid balance shall be paid to Seller on the earlier of: (A) the two (2) year anniversary of the closing date; or (B) on the closing of $5,000,000 or more in aggregate financing (whether debt, equity or some combination thereof) after the closing date; and (iii) The remaining balance of the Note and interest thereon shall be paid to Seller on the earlier of: (A) the three year anniversary of the closing date; or (B) on the closing of $7,500,000 or more in aggregate financing (whether debt, equity or some combination thereof) after the closing date. On February 27, 2007, the Company entered into a demand note with former CEO and President, Bradley E. Sparks totaling $50,000 plus loan fees of $750. As of September 30, 2011, the outstanding note payable totaled $50,750 consisting of the note payable to Mr. Sparks. Interest expense accrues on the note at a rate of 18% per annum. Accrued interest of $42,146 as of September 30, 2011 on the note payable is recorded in the balance sheet in accrued expenses and other liabilities. Any delays in repayment of the principal and accrued interest on the note payable upon demand result in a penalty interest rate of 30% per annum. The interest due to Mr. Sparks became in arrears on February 16, 2008 and has not been paid as of the date of this filing. Mr. Sparks has not demanded repayment of the note as of the date of this filing. On September 30, 2009, the Company entered into a second demand note with former CEO and President, Bradley E. Sparks totaling $22,478. As of September 30, 2011, the outstanding note payable totaled $22,478 consisting of the note payable to Mr. Sparks. Interest expense accrues on the note at a rate of 8% per annum, with a default interest rate of 12%. Accrued interest of $3,597 as of September 30, 2011 on the notes payable is recorded in the balance sheet in accrued expenses and other liabilities. On April 30, 2009, accounts payable owed to Lynn Felsinger, a consultant, totaling $82,000 was converted into a demand note. Ms. Felsinger has not demanded repayment of the note as of the date of this filing. Mr. Ronald Erickson, our Chief Executive Officer, converted outstanding debt with accrued interest in the amount of $152,971 into 1,019,806 shares of common stock of the Company valued at $0.15 per share on March 27, 2009. In addition, an affiliate of Mr. Erickson’s, Juliz I Limited Partnership, loaned the Company operating funds during fiscal 2009. The balance outstanding at September 30, 2011 is $34,630 plus interest of $7,628. Additionally, Mr. Erickson incurred expenses on behalf of the Company for a total of $24,322 during the 2009 fiscal year. This balance was converted into a loan as of September 30, 2009 which bears interest at 8%. Accrued interest was $3,892 as of September 30, 2011. Aggregate maturities for notes payable, capitalized leases and long term debt by year are as follows:
Years Ended September 30, |  | Total |
2012 |  | $ | 1,537,191 |
2013 |  |  | 1,011,710 |
2014 |  |  | 551 |
2015 |  |  | 2,321 |
2016 |  |  | 0 |
Total |  | $ | 2,551,773 |

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- Definition The entire disclosure for debt and capital lease obligations can be reported. 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. Also includes descriptions and amounts of capital leasing arrangements that consist of direct financing, sales type and leveraged leases. Disclosure may include the effect on the balance sheet and the income statement resulting from a change in lease classification for leases that at inception would have been classified differently had guidance been in effect at the inception of the original lease. + References No definition available. + Details
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