UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2005
OR
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File No. 0-17204
INFINITY, INC.
| Colorado (State or of Incorporation) |
84-1070066 (I.R.S. Employer Identification Number) |
950 Seventeenth Street, Suite 800, Denver, Colorado 80202
(Address of Principal Executive Offices, Including Zip Code)
(720) 932-7800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Check whether the Registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
As of May 12, 2005, 13,302,388 shares of the Registrant’s $0.0001 par value Common Stock were outstanding.
TABLE OF CONTENTS
PART I Financial Information |
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Item 1.Financial Statements |
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| 27 | ||||||||
| 27 | ||||||||
| 27 | ||||||||
| 27 | ||||||||
| 28 | ||||||||
| 29 | ||||||||
| Certification of Principal Executive Officer | ||||||||
| Certification of Principal Financial and Accounting Officer | ||||||||
| Certification of Principal Executive Officer and Principal Financial and Accounting Officer | ||||||||
| Calculation of the Maximum Notes Balance | ||||||||
2
INFINITY, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
| Mar. 31, 2005 | Dec. 31, 2004 | |||||||
| (in thousands, except share and per share data) | ||||||||
ASSETS |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 12,477 | $ | 3,052 | ||||
Accounts receivable, less allowance for doubtful accounts of
$85 (2005 and 2004) |
3,422 | 3,494 | ||||||
Note receivable |
— | 1,581 | ||||||
Inventories |
425 | 286 | ||||||
Prepaid expenses and other |
389 | 654 | ||||||
Total current assets |
16,713 | 9,067 | ||||||
Property and equipment, at cost, less accumulated depreciation |
9,584 | 8,764 | ||||||
Oil and gas properties, using full cost accounting net of
accumulated depreciation, depletion, amortization |
||||||||
Subject to amortization |
32,107 | 28,792 | ||||||
Not subject to amortization |
25,495 | 15,595 | ||||||
Intangible assets, at cost, less accumulated amortization |
2,722 | 1,497 | ||||||
Note receivable |
1,577 | — | ||||||
Other assets, net |
333 | 333 | ||||||
Total assets |
$ | 88,531 | $ | 64,048 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current Liabilities |
||||||||
Note payable and current portion of long-term debt |
$ | 159 | $ | 284 | ||||
Accounts payable |
4,061 | 4,001 | ||||||
Accrued expenses |
5,491 | 4,497 | ||||||
Total current liabilities |
9,711 | 8,782 | ||||||
Long-term liabilities |
||||||||
Production taxes payable |
342 | 469 | ||||||
Asset retirement obligations |
660 | 635 | ||||||
Long-term debt, less current portion |
25,866 | 11,330 | ||||||
8% subordinated convertible notes payable |
— | 2,493 | ||||||
7% subordinated convertible notes payable |
5,566 | 11,517 | ||||||
Total liabilities |
42,145 | 35,226 | ||||||
Commitments and contingencies |
||||||||
Stockholders’ equity |
||||||||
Common stock, par value $.0001, authorized 300,000,000 shares,
issued and outstanding 12,532,927 (2005) and 10,628,196 (2004)
shares |
1 | 1 | ||||||
Additional paid-in-capital |
70,591 | 43,363 | ||||||
Accumulated deficit |
(24,206 | ) | (14,542 | ) | ||||
Total stockholders’ equity |
46,386 | 28,822 | ||||||
Total liabilities and stockholders’ equity |
$ | 88,531 | $ | 64,048 | ||||
See Notes to Unaudited Consolidated Financial Statements
3
INFINITY, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
| For the Three Months Ended March 31, | ||||||||
| 2005 | 2004 | |||||||
| (in thousands, except per share data) | ||||||||
Revenue |
||||||||
Oilfield service operations |
$ | 4,070 | $ | 2,195 | ||||
Exploration and production |
1,445 | 1,371 | ||||||
Total revenue |
5,515 | 3,566 | ||||||
Cost of revenue |
||||||||
Oilfield service operations |
2,004 | 1,420 | ||||||
Oil and gas production expenses |
439 | 363 | ||||||
Oil and gas production taxes |
169 | 156 | ||||||
Total cost of revenue |
2,612 | 1,939 | ||||||
Gross profit |
2,903 | 1,627 | ||||||
General and administrative expenses |
1,280 | 1,262 | ||||||
Depreciation, depletion,
amortization and accretion |
1,586 | 1,047 | ||||||
Operating income (loss) |
37 | (682 | ) | |||||
Other income (expense) |
||||||||
Interest and other income |
78 | 39 | ||||||
Amortization of loan discount
and costs |
(8,357 | ) | (843 | ) | ||||
Early extinguishment of debt |
(904 | ) | (517 | ) | ||||
Interest expense |
(517 | ) | (279 | ) | ||||
Loss on sales of other assets |
(1 | ) | — | |||||
Total other income (expense) |
(9,701 | ) | (1,083 | ) | ||||
Net loss before income taxes |
(9,664 | ) | (1,765 | ) | ||||
Income tax benefit |
— | — | ||||||
Net loss |
$ | (9,664 | ) | $ | (1,765 | ) | ||
Basic and diluted net loss per share |
$ | (0.83 | ) | $ | (0.19 | ) | ||
Weighted average basic and diluted
shares outstanding |
11,619 | 9,196 | ||||||
See Notes to Unaudited Consolidated Financial Statements
4
INFINITY, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
| For the Three Months Ended March 31, | ||||||||
| 2005 | 2004 | |||||||
| (in thousands) | ||||||||
Net loss |
$ | (9,664 | ) | $ | (1,765 | ) | ||
Reclassifications, net of tax expense |
— | 98 | ||||||
Comprehensive loss |
$ | (9,664 | ) | $ | (1,667 | ) | ||
See Notes to Unaudited Consolidated Financial Statements
5
INFINITY, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
| Additional | ||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| (in thousands, except share data) | ||||||||||||||||||||
Balance, December 31,
2004 |
10,628,196 | $ | 1 | $ | 43,363 | $ | (14,542 | ) | $ | 28,822 | ||||||||||
Issuance of common
stock upon the
exercise of options
and warrants |
603,656 | — | 3,979 | — | 3,979 | |||||||||||||||
Conversion of 8%
subordinated
convertible notes and
accrued interest into
common stock |
517,296 | — | 2,524 | — | 2,524 | |||||||||||||||
Conversion of 7%
subordinated
convertible notes and
accrued interest into
common stock |
783,779 | — | 6,095 | — | 6,095 | |||||||||||||||
Issuance of warrants
to purchase 1,656,240
common shares |
— | — | 6,529 | — | 6,529 | |||||||||||||||
Costs from previous
equity placement
financing |
— | — | (7 | ) | — | (7 | ) | |||||||||||||
Beneficial conversion
feature of senior
secured Notes |
— | — | 8,108 | — | 8,108 | |||||||||||||||
Net loss |
— | — | — | (9,664 | ) | (9,664 | ) | |||||||||||||
Balance, March 31, 2005 |
12,532,927 | $ | 1 | $ | 70,591 | $ | (24,206 | ) | $ | 46,386 | ||||||||||
See Notes to Unaudited Consolidated Financial Statements
6
INFINITY, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
| For the Three Months Ended March 31, | ||||||||
| 2005 | 2004 | |||||||
| (in thousands) | ||||||||
Cash flows from operating activities |
||||||||
Net loss |
$ | (9,664 | ) | $ | (1,765 | ) | ||
Adjustments to reconcile net loss to net cash
provided by operating activities: |
||||||||
Depreciation, depletion, amortization and
accretion |
1,586 | 1,047 | ||||||
Amortization of loan discount and costs |
8,357 | 161 | ||||||
Expense related to early extinguishment of debt |
681 | 682 | ||||||
Loss on sales of other assets |
1 | — | ||||||
Change in assets and liabilities |
||||||||
(Increase) decrease in accounts receivable |
72 | (232 | ) | |||||
Increase in inventories |
(139 | ) | (36 | ) | ||||
(Increase) decrease in prepaid expenses and
other |
265 | (96 | ) | |||||
Increase (decrease) in accounts payable |
60 | (249 | ) | |||||
Increase in accrued liabilities |
728 | 731 | ||||||
Net cash provided by operating activities |
1,947 | 243 | ||||||
Cash flows from investing activities |
||||||||
Capital expenditures – exploration and production |
(14,064 | ) | (1,997 | ) | ||||
Capital expenditures – oilfield services |
(1,080 | ) | (103 | ) | ||||
Proceeds from sale of fixed assets – exploration
and production |
133 | — | ||||||
Proceeds from sale of fixed assets – oilfield
services |
1 | 2 | ||||||
Acquisitions – exploration and production, net of
cash acquired |
— | (516 | ) | |||||
Payments on note receivable |
4 | 4 | ||||||
Increase in other assets |
— | (245 | ) | |||||
Net cash used in investing activities |
(15,006 | ) | (2,855 | ) | ||||
Cash flows from financing activities
|
||||||||
Proceeds from notes payable |
— | 275 | ||||||
Proceeds from borrowings on long-term debt |
30,000 | 390 | ||||||
Proceeds from issuance of common stock |
3,979 | 4,060 | ||||||
Debt and
equity issuance costs |
(2,124 | ) | (18 | ) | ||||
Repayment of notes payable |
(119 | ) | — | |||||
Repayment of long-term debt |
(9,252 | ) | (1,647 | ) | ||||
Net cash provided by financing activities |
22,484 | 3,060 | ||||||
Net increase in cash and cash equivalents |
9,425 | 448 | ||||||
Cash and cash equivalents, beginning of period |
3,052 | 727 | ||||||
Cash and cash equivalents, end of period |
$ | 12,477 | $ | 1,175 | ||||
See Notes to Unaudited Consolidated Financial Statements
7
INFINITY, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Three Months Ended March 31, | ||||||||
| 2005 | 2004 | |||||||
| (in thousands) | ||||||||
Supplemental cash flow disclosures: |
||||||||
Cash paid for interest, net of amounts capitalized |
$ | — | $ | 35 | ||||
Non-cash transactions: |
||||||||
Non-cash costs capitalized in the full cost pool
for oil and gas properties |
586 | 176 | ||||||
Conversion of subordinated convertible notes and
accrued interest to common stock |
8,795 | 132 | ||||||
Issuance of warrants in conjunction with the
issuance of debt recorded as debt discount |
6,529 | — | ||||||
Issuance of common stock to partially repay
related party debt |
— | 500 | ||||||
Issuance of 2,106 shares of common stock in
cashless exercise of warrants during 2005 |
— | — | ||||||
See Notes to Unaudited Consolidated Financial Statements
8
INFINITY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies
Nature of Operations
The Company and its subsidiaries are engaged in the acquisition, exploration, development and production of natural gas and crude oil in the United States and the acquisition and exploration of properties in Nicaragua. In addition, the Company provides oilfield services in the Mid-Continent region and in Northeast Wyoming.
Basis of Presentation
The unaudited consolidated financial statements include the accounts of Infinity, Inc. and its wholly-owned subsidiaries, including Infinity Oil and Gas of Wyoming, Inc. (“Infinity-Wyoming”), Infinity Oil and Gas of Texas, Inc. (“Infinity-Texas”), Infinity Oil and Gas of Kansas, Inc. (“Infinity-Kansas”) and Consolidated Oil Well Services, Inc. (“Consolidated”). All significant intercompany balances and transactions have been eliminated in consolidation.
Summary of Significant Accounting Policies
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States for interim financial information. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted in this Quarterly Report on Form 10-Q pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). A summary of Infinity’s significant accounting policies is herein incorporated by reference from the Annual Report on Form 10-K for the year ended December 31, 2004 of Infinity. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain reclassifications have been made to the prior period to conform to the classifications used in the current period. These reclassifications did not have an impact on previously reported results of operations. The results of operations for the three months ended March 31, 2005 are not necessarily indicative of the results that may be expected for the year ended December 31, 2005. The accompanying unaudited consolidated financial statements should be read in conjunction with Infinity’s audited consolidated financial statements for the year ended December 31, 2004.
The preparation of unaudited consolidated financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates with regard to the unaudited consolidated financial statements include the estimated carrying value of unproved properties, the estimate of proved oil and gas reserve volumes and the related present value of estimated future net cash flows and the ceiling test applied to capitalized oil and gas properties and the realization of deferred tax assets.
Oil and Gas Properties
The Company follows the full cost method of accounting for oil and gas properties. Accordingly, all costs associated with property acquisition, exploration, and development activities are capitalized. Exploration and development costs include dry hole costs, geological and geophysical costs, direct overhead related to exploration and development activities, estimated future costs of site restoration, dismantlement and abandonment activities, and other costs incurred for the purpose of finding oil and gas reserves. Salaries and benefits paid to employees involved in the acquisition, exploration and development of properties, as well as other internal costs that can be directly identified with acquisition, exploration and development activities, are also capitalized. The Company capitalized $220,000 and $95,000 of internal costs during the three months ended March 31, 2005 and 2004, respectively. Costs associated with production and general corporate activities are expensed in the period incurred.
The Company performs an impairment analysis whenever events or changes in circumstances indicate an asset’s carrying amount may not be recoverable. Cash flows used in this impairment analysis are determined based upon estimates of proved oil and gas reserves, current prices, and the costs to extract those reserves. Downward revisions in estimated reserve quantities, increases in future cost estimates, depressed oil and gas prices, or the reclassification of
9
unevaluated costs to costs subject to amortization without a corresponding increase in proved reserves could cause the Company to reduce the carrying amounts of its properties. Under full cost accounting rules, capitalized costs, excluding the future cash outflows associated with settling asset retirement obligations that have been accrued in the full cost pool, less accumulated amortization and related deferred income taxes, may not exceed an amount equal to the sum of the present value discounted at ten percent of estimated future net revenue less estimated future expenditures to be incurred in developing and producing the proved reserves, less any related income tax effects. If capitalized costs exceed the limit, the excess must be charged to expense. This is referred to as the “full cost ceiling limitation.” The expense may not be reversed in future periods. At the end of each quarter, a full cost ceiling limitation calculation is made.
At March 31, 2005, the full cost ceiling limitation exceeded the carrying amount of oil and gas properties subject to amortization, based upon a natural gas price of approximately $6.91 per Mcf and an oil price of approximately $52.50 per barrel in effect at that date. In the prior year period, the Company did not record a ceiling writedown.
A decline in prices received for oil and gas sales or an increase in operating costs subsequent to the measurement date or reductions in estimated economically recoverable quantities could result in a requirement that Infinity recognize an additional ceiling write-down of oil and gas properties in a future period. Normal dispositions of oil and gas properties are accounted for as adjustments of capitalized costs, with no gain or loss recognized.
Aggregate capitalized costs relating to the Company’s oil and gas producing activities, and related accumulated depreciation, depletion, amortization and ceiling write-down are as follows:
| As of | ||||||||
| March 31, | December 31, | |||||||
| 2005 | 2004 | |||||||
| (in thousands) | ||||||||
Proved oil and gas properties |
$ | 45,774 | $ | 41,210 | ||||
Unproved oil and gas properties |
25,495 | 15,595 | ||||||
Total |
71,269 | 56,805 | ||||||
Less accumulated depreciation, depletion,
and amortization and ceiling write-downs |
(13,667 | ) | (12,418 | ) | ||||
Net capitalized costs |
$ | 57,602 | $ | 44,387 | ||||
Depletion of proved oil and gas properties is computed on the units-of-production method, with oil and gas being converted to a common unit of measure based on their relative energy content, whereby capitalized costs, as adjusted for future development costs and asset retirement obligations, are amortized over the total estimated proved reserve quantities. The costs of wells in progress and unevaluated properties, including any related capitalized interest, are not being amortized. On a quarterly basis, such costs are evaluated for inclusion in the costs to be amortized resulting from the determination of proved reserves, impairments, or reductions in value. To the extent that the evaluation indicates these properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized. Abandonment of unproved properties are accounted for as an adjustment to capitalized costs related to proved oil and gas properties, with no losses recognized.
Proceeds from the sales of oil and gas properties are accounted for as adjustments to capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in income. Expenditures for maintenance and repairs are charged to production expense in the period incurred.
The SEC’s full cost accounting rules prohibit recognition of income in current operations for services performed by the Company on oil and natural gas properties in which the Company has an interest, but rather require amounts to be treated as a reimbursement of costs with any excess of fees over costs credited to the full cost pool and recognized through lower cost amortization only as production occurs.
10
Income Taxes
Income taxes are provided for the tax effects of the transactions reported in the unaudited consolidated financial statements and consist of taxes currently due plus deferred taxes related to temporary differences between the tax and financial basis of property and equipment and other assets, oil and gas properties, and net operating loss carry-forwards using enacted tax rates in effect for the year in which the differences are expected to reverse.
The deferred tax assets and liabilities represent the future tax return consequences of those temporary differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that are not expected to be realized based on available evidence that it is more likely than not to be realized in the form of a deferred tax valuation allowance. The Company has provided a valuation allowance equal to its deferred tax asset.
Note 2 — Derivative Instruments and Hedging Activities
The Company accounts for derivative instruments or hedging activities under the provisions of Statement of Financial Accounting Standards No 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”). SFAS No. 133 requires the Company to record derivative instruments at their fair value. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income (loss) and are recognized in the statement of operations when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges, if any, are recognized in earnings.
The Company periodically enters into fixed price delivery contracts to manage price risk with regard to a portion of its natural gas production. Fixed price delivery contracts that do not meet certain requirements are accounted for using cash flow hedge accounting. Under this method, realized gains and losses on qualifying hedges are recognized in gas revenues when the associated revenue stream occurs and the resulting cash flows are reported as cash flows from operations. To qualify as a hedge, these contracts must be designated as a cash flow hedge and changes in their value must correlate with changes in the price of anticipated future production such that the Company’s exposure to the effects of commodity price is reduced. If the contract is not a cashflow hedge, changes in the fair value are recorded in the Company’s statement of operations currently. If a derivative financial instrument accounted for using cashflow hedge accounting, such as the contracts discussed above, is settled before the date of the anticipated transaction, the Company carries forward the accumulated change in value of the contract and includes it in the measurement of the related transaction.
During the quarter ended March 31, 2004, the Company had a fixed price delivery contract that was designated as a cash flow hedge as follows:
| MMBtu | Amount | |||||||
| Effective Dates | Per Day | Per MMBtu | ||||||
April 1, 2003 — March 31, 2004 |
3,500 | $ | 4.71 | |||||
During the three months ended March 31, 2004, the Company reclassified out of other comprehensive income, income of approximately $155,000 on the contract, which have been included in natural gas revenue in the accompanying unaudited consolidated statement of operations and in cash provided by operating activities in the accompanying unaudited consolidated statement of cash flows. The fair value of the fixed price delivery contracts was calculated using the twelve month forecasted sales price for the Henry Hub gas delivery point less a historical differential for the actual delivery point and the quantities and prices fixed in the contracts.
During 2004, the Company entered into fixed price delivery contracts for 2,000 MMBtu per day from April 1, 2004 until March 31, 2006. The price for the period April 1, 2004 until March 31, 2005 was $4.40 per MMBtu and the price for the period April 1, 2005 until March 31, 2006 is $4.15 per MMBtu. Sales under these fixed price contracts are accounted for as normal sales agreements under the exemption in SFAS No. 133.
During April 2005, the Company entered into a costless collar arrangement covering 12,250 barrels (50 barrels of crude oil per day) from May 1, 2005 through December 31, 2005 with a floor price of $50.00 per barrel and a ceiling price of $65.70 per barrel. The derivative contract was designated as a cash flow hedge.
11
Note 3 — Stock Options
The Company applies Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for its stock option plans. Accordingly, no compensation cost has been recognized for options granted to employees under the stock option plans because the fair value of the stock equaled or was less than the option exercise price at the date of grant. Had compensation costs for employee stock options under the Company’s plan been determined based upon the fair value at the grant date for awards under the plan consistent with the methodology prescribed under SFAS No. 123, “Accounting for Stock-Based Compensation”, the Company’s net loss and loss per share would have been as follows:
| For the Three Months | ||||||||
| Ended March 31, | ||||||||
| 2005 | 2004 | |||||||
| (in thousands) | ||||||||
Net loss as reported |
$ | (9,664 | ) | $ | (1,765 | ) | ||
Deduct: Total stock-based employee compensation expense,
determined under fair value based method for all awards, net of tax |
(1,096 | ) | — | |||||
Pro forma net loss |
$ | (10,760 | ) | $ | (1,765 | ) | ||
Basic and diluted loss per share as reported |
$ | (0.83 | ) | $ | (0.19 | ) | ||
Basic and diluted loss per share-pro forma |
$ | (0.93 | ) | $ | (0.19 | ) | ||
Options on 165,000 shares of common stock were granted during February 2005 at a strike price of $8.50 per share. The estimated fair value of the options granted utilizing the Black-Scholes pricing model was based on a weighted average risk-free interest rate of 4.0%, expected option life of 10 years, expected volatility of approximately 70%, and no expected dividends.
12
Note 4 — Long-Term Debt and Convertible Notes Payable
Long-term debt consists of the following:
| As of | ||||||||
| March 31, | December 31, | |||||||
| 2005 | 2004 | |||||||
| (dollars in thousands) | ||||||||
Senior secured notes (the “Notes”) due
January 13, 2009, with interest
calculated quarterly at 3-Month LIBOR
plus 6.75% (9.87% as of April 1, 2005)
due on a quarterly basis. The Company
is not required to make periodic
principal payments prior to maturity,
unless the outstanding balance exceeds
the maximum Notes balance. The Company
can redeem the Notes at any time with
cash at a premium or at par with stock,
priced at a discount to market. The
balance of $30,000 at March 31, 2005 is
net of discount of $6,219 associated
with the value of warrants issued in
conjunction with the Notes |
$ | 23,781 | $ | — | ||||
8% subordinated convertible notes
payable, due June 13, 2006, which were
called for redemption on February 28,
2005 |
— | 2,493 | ||||||
7% subordinated convertible notes
payable, due April 22, 2007, which have
been called for redemption on April 22,
2005 |
5,566 | 11,517 | ||||||
$25,000 development credit facility
with U.S. Bank, repaid in full and
terminated on January 13, 2005 |
— | 5,000 | ||||||
Note payable to seller (for a 50%
interest in an airplane), with interest
at 7.25% due on a quarterly basis. The
Company is required to make annual
principal payments equal to 5% of the
current outstanding principal until
paid in full. The seller can call the
note if the bank calls its note for the
original purchase of the airplane. The
note is collateralized by the Company’s
50% interest in the airplane with a net
book value of $2,138 |
2,203 | 2,326 | ||||||
Various revolving | ||||||||