6. Notes Payable
At November 1, 2010, the Company had notes payable due to G.S. Beckwith Gilbert of $15,261,000. On May 9, 2011, as a result of the transactions described in Private Placement below, the Companys outstanding notes payable to G.S. Beckwith Gilbert were reduced by $10,000,000, and a new note payable was issued to G.S. Beckwith Gilbert in the amount of $4,815,000. The new note payable bears a maturity date of November 1, 2014 originally had an annual interest rate of 9%, payable as follows: interest at the annual rate of 6% would be payable in cash, and the remaining interest of 3% per annum would be payable at the option of the Company in cash or "paid in kind" and added to the principal of the note payable.
On September 6, 2011, the Company entered into an amendment to the note payable agreement, reducing the annual interest rate from 9% to an annual rate of 6%, payable in cash, and the Companys option to pay the remaining interest of 3% per annum in cash or paid in kind was discontinued. Interest payments will be made annually on October 31 of each year.
During fiscal year 2011, the Company paid fiscal year 2011 interest to G.S. Beckwith Gilbert of $912,000, representing the entire fiscal year 2011 interest due, thereby meeting the payment requirements of the loan agreement. Total payments for interest made to G.S. Beckwith Gilbert in fiscal year 2011 were $1,358,000, including the remaining fiscal year 2010 interest payment.
During fiscal year 2012, the Company paid fiscal year 2012 interest to G.S. Beckwith Gilbert of $293,000, representing the entire fiscal year 2012 interest due, thereby meeting the payment requirements of the loan agreement. In August 2012, the Company made a $50,000 principal payment, bringing the principal amount of the note payable due to G.S. Beckwith Gilbert to $4,765,000 on October 31, 2012.
The Company has received a commitment from G.S. Beckwith Gilbert, dated January 17, 2013, that if the Company, at any time, is unable to meet its obligations through January 17, 2014, G.S. Beckwith Gilbert will provide the necessary continuing financial support to the Company in order for the Company to meet such obligations. Such commitment for financial support may be in the form of additional advances or loans to the Company, in addition to the deferral of principal and/or interest payments due on the existing loans, if deemed necessary. The note payable is secured by the Companys assets.