Note 9. Long-Term Debt

6 Months Ended

Jan. 31, 2013

Note 9. Long-Term Debt

Long-term debt consists of:

	January 31,			July 31,
	2013			2012
5% Note payable to Bayview Loan Servicing, LLC, payable in monthly installments of $5,433 including interest, collateralized by real property. Due to foreclosure of the building, the entire balance has been eliminated. (1)	$	—		$	946,279

12% Note payable to Frontline Asset Management, payable in monthly installments of interest only, due in full on March 1, 2013 (2)		378,959			508,492

48.956% Note payable to Amicus Funding Group, LLC, payable in monthly installments of approximately $467, collateralized by real property due in full on September 1, 2013 (3)		6,297			6,297

10% Note payable to Cameo Properties, LLC payable in monthly installments of interest only, due in full on December 27, 2014 (4)		250,000			250,000

		635,256			1,711,068
Less Current Portion		(385,256	)		(1,460,189	)
	$	250,000		$	250,879

Principal maturities for long-term debt are as follows for the second quarters ended January 31:

2013	$	385,256
2014		250,000
2015		—
2016		—
2017		—
Thereafter		—
	$	635,256

(1) In November 2007, the Company refinanced the first mortgage loan on its Mooresville, North Carolina building (the “property”) with Bayview. On July 25, 2012, Frontline, the junior lien holder noticed a foreclosure hearing and sale to take place on August 22, 2012, and the sale of the property to an assignee of Frontline, which was the only bidder, was completed on September 14, 2012. The Company debt to Bayview was reduced to zero upon the completion of the sale.

(2) On February 26, 2010, the Company entered into a loan agreement with Frontline. The loan provides for payments to the Company of $2,000,000 with interest at a fixed annual rate of 12%. On March 1, 2012, an Addendum to the original Promissory Note, dated February 26, 2010, was entered into which amended the term of the note to provide for interest only payments, due on the last day of every month until maturity date March 30, 2013, when all principal and accrued interest shall be due and payable. On April 11, 2011, Frontline assigned $850,279 of its debt to Windsor Capital, Inc. (“Windsor”). On April 19, 2011, Frontline partially assigned $437,309 to Kisumu S.A. (“Kisumu”) and Kisumu immediately converted the assigned note for 1,041,212 shares of Common Stock at a fair value price of $0.42 per share. On April 19, 2011, Frontline assigned $420,000 to Eurolink Corporation (“Eurolink”) and Eurolink immediately converted the assigned note for 1,000,000 shares of Common Stock at a fair value price of $0.42 per share. On December 27, 2011, Frontline purchased two electric vehicles for $255,000. On the same day Frontline assigned $250,000 to Cameo Properties, LLC. On April 26, 2012, the Company assigned $112,500 of its note receivable with CET to Frontline which reduced the balance due to Frontline by $112,500. On September 13, 2012, Frontline converted $39,000 of accrued interest for 1,300,000 shares of Common Stock at a discounted value price of $0.30 per share. On October 2, 2012, Frontline purchased our receivable with CET at $0.10 on the dollar for $70,786, which reduced the Company’s accrued interest by $43,726 and debt by $27,060. On October 2, 2012, Frontline converted $12,180 for 1,450,000 shares of Common Stock at a discounted value price of $0.0084 per share. On November 13, 2012, Frontline partially assigned $17,280 to Kisumu and Kisumu immediately converted the assigned note for 3,200,000 shares of Common Stock at a discounted value price of $0.0054 per share. On December 26, 2012, Frontline partially assigned $112,200 to Kisumu and Kisumu converted the assigned note for 18,700,000 shares of Common Stock at a discounted price of $0.006 per share.

Loans under the Frontline loan agreement are secured by a junior deed of trust on the Company’s property located at 158 Rolling Hill Road, Mooresville, North Carolina. On August 22, 2012, the foreclosure by Frontline of the property took place, pursuant to a notice of foreclosure and sale dated July 25, 2012, and the foreclosure sale to an assignee of Frontline, which was the only bidder, was completed on September 14, 2012. Frontline received $50,000 upon the sale of the foreclosed property and this amount reduced the debt to Frontline.

Interest expense for the three months ended January 31, 2013 and 2012, was $12,135 and $15,244, respectively . Interest expense for the six months ended January 31, 2013 and 2012, was $27,423 and $32,904, respectively.

(3) On March 11, 2011, the Company financed $7,992 for office equipment with Amicus Funding Group, LLC (“Amicus”) and monthly payments including interest of 48.956% are approximately $477. During the three months ended January 31, 2013 and 2012, the Company repaid $0 and $380, respectively. During the six months ended January 31, 2013 and 2012, the Company repaid $0 and $895, respectively. The Company is in default on this note.

Interest expense for the three months ended January 31, 2013 and 2012, was $461 and $819, respectively. Interest expense for the six months ended January 31, 2013 and 2012, was $1,028 and $1,703, respectively.

(4) The Company entered into a Loan Agreement, dated as of July 14, 2011, with Cameo Properties LLC (“Cameo”) and was amended on October 14, 2011 (the “Amended Loan Agreement”). Each Note issued under the Amended Loan Agreement is due three years from the date of its issuance. The Amended Loan Agreement provides for loans to the Company of up to $750,000 (the “Loan”), with a minimum initial loan of $250,000 within 60 days of the date of the Loan Agreement, and up to an additional $500,000 within the first year and a half from execution of the Amended Loan Agreement. This is not a revolving facility, and any principal repaid by the Company will not be available for additional advances to the Company under the Amended Loan Agreement. The Company cannot, without the Lender’s consent, prepay all or part of the Loan. The notes evidencing the installments of the loans bear interest payable monthly in arrears at the rate of 10% per annum, and mature and are due and payable three years from the date of issuance. On December 27, 2011, Frontline assigned $250,000 of its receivable to Cameo.

Interest expense for the three months ended January 31, 2013 and 2012, was $6,301 and $2,937, respectively. Interest expense for the six months ended January 31, 2013 and 2012, was $12,603 and $2,937, respectively.

Li-ion Motors Corp. 10-Q