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4. PROMISSORY NOTES RECEIVABLE
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6 Months Ended |
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Sep. 30, 2012
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| Notes to Financial Statements | |
| PROMISSORY NOTES RECEIVABLE |
On December 17, 2010 the Company entered into agreement with Montclair Technology, LLC (the “Borrower”) and Michael Williams (the “Guarantor”) to loan funds to the Borrower in an amount of up to $200,000. The Guarantor owns a patent and has proprietary know-how to develop oil refining and regeneration plants and Borrower desires to grant the Company a license to use and employ the technology in Kazakhstan. As further inducement for the Company to loan funds to the Borrower, Guarantor has agreed to guarantee Borrower’s obligations under any promissory note made by Borrower pursuant to this agreement.
On December 17, 2010 Borrower issued the Company a promissory note for $50,000 with interest rate of 18% per annum. After the first transfer in December 2010, the Company made additional transfers starting January 19, 2011 through September 27, 2011 in the amount of $150,000. Borrower may prepay any or all accrued and unpaid interest and unpaid principal at any time without penalty. The outstanding principal and unpaid accrued interest under this promissory note is due one year after the transfer.
As a result, the Company treated the loan as a promissory note receivable in its financial statements. At September 30, 2012 promissory notes receivable amounted to $220,875, with $200,000 principal amount and $20,875 representing the amount of interest accrued.
Because as of September 30, 2012 the initial advance of $200,000 plus interest is in default, the Company created a 100% provision for the outstanding principal and interest on the notes in the amount of $220,875. The timing of the collection of the promissory note is uncertain and the ability to collect the principal and interest in full is unlikely from either the Borrower or the Guarantor. Due to the timing uncertainty, accrual of interest income stopped in the quarter ended December 31, 2011.
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