EXHIBIT 10.1
SECURED PROMISSORY NOTE

$5,000,000   October 31, 2005

     FOR VALUE RECEIVED, XYBERNAUT CORPORATION, a Delaware corporation, and
XYBERNAUT SOLUTIONS, INC., a Virginia corporation, debtors and chapter 11
debtors-in-possession (together, “Borrower”) (Case No. 05-12801), hereby
unconditionally and jointly and severally promise to pay to the order of LC
CAPITAL MASTER FUND, LTD., a Cayman Islands company (“Holder” or “LC Fund”), in
lawful money of the United States of America and in immediately available funds,
the lesser of (i) the principal sum of Five Million Dollars ($5,000,000) (the
“Commitment Amount”) and (ii) the aggregate unpaid principal amount of all loans
made by or through Holder to Borrower pursuant to this Note (the “Loans”),
together with interest accrued thereon and fees and expenses payable hereunder
(the “Obligations”).
     This Promissory Note (this “Note”) is the Note referred to in and is
executed and delivered in connection with that certain Security Agreement dated
as of October 31, 2005, by and between Borrower and Holder (as the same may from
time to time be amended, modified or supplemented or restated, the “Security
Agreement”), a copy of which is attached hereto as Exhibit A. Additional rights
of Holder are set forth in the Security Agreement. All capitalized terms used
herein and not otherwise defined herein shall have the respective meanings given
to them in the Security Agreement.
1. Borrowings. Holder agrees to make Loans from time to time on each requested
borrowing date on and after the date hereof until 30 days before the Maturity
Date in an aggregate principal amount not to exceed the Commitment Amount on the
terms and conditions set forth herein. As a condition precedent to the making of
each Loan, the Holder shall have received a loan request (in the form of
Exhibit B attached hereto, together with a schedule of the payments to be made
by the Borrower with the proceeds thereof, a “Loan Request”) , together with
telephonic notice thereof, from the Borrower on or before 12:00 noon at least
three (3) business days prior to the requested date of such borrowing. Amounts
repaid hereunder may not be reborrowed. Each request must be in a minimum amount
of $50,000 and, if greater, shall be in integral multiples of $10,000.
2. Repayment. Except for those obligations payable on an earlier date, the
Obligations shall be due and payable in full on October 31, 2006 (the “Maturity
Date”).
3. Interest. The outstanding principal balance of this Note shall bear interest
from the date of advancement thereof at a rate per annum (computed on the basis
of a 360-day year, actual days elapsed) of nine percent (9.0 %). Interest
accrued on this Note shall be payable in cash monthly in arrears.

 

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4. Place of Payment. All amounts payable hereunder shall be payable by wire
transfer to Holder in accordance with wire transfer instructions to be
separately provided to Borrower in writing, unless another manner of payment
shall be specified in writing by Holder.
5. Application of Payments, Default Rate. Payment on this Note shall be applied
first to accrued interest, if any, and thereafter to the outstanding principal
balance hereof. Any repayment on the Loan hereunder not paid when due, whether
at stated maturity, by acceleration or otherwise, shall bear interest at the
rate per annum equal to five percent (5.0%) above the stated interest.
6. Security. The full amount of the Obligations are secured by the Collateral
identified and described as security therefor in the Security Agreement executed
by and delivered by Borrower. Borrower shall not, directly or indirectly,
create, permit or suffer to exist, and shall defend the Collateral against and
take such other action as is necessary to remove, any Lien on or in the
Collateral, or in any portion thereof, except as permitted pursuant to the
Security Agreement.
7. Use of Proceeds. (a) Borrower covenants that the Loans shall be used solely
as follows: working capital needs, general corporate purposes, the costs and
expenses associated with the bankruptcy cases of Borrower, all to the extent
permitted under the Budget (“Operating Uses”), in each case, as approved by the
Holder in accordance with the procedures set forth in the last sentence of this
paragraph 7 (which approval will not be unreasonably withheld) and then only in
the amounts and for the items set forth in the Budget; provided, however, that
up to but not exceeding $1.5 million of Loans (the “GUC Loan”) shall be made
available to the Borrower in the manner described in the following sentence for
the sole purpose of establishing an escrow to pay general unsecured creditors a
distribution under a chapter 11 plan(s) (the “GUC Escrow”). The GUC Escrow shall
be funded in the following manner: For each $1.00 of Loans advanced for
Operating Uses (and not for Loans advanced to pay fees and expenses payable to
Holder hereunder or under the Security Agreement or to pay fees and expenses of
professionals retained in the Case pursuant to order of the Court), an
additional $1.00 of Loans shall be advanced to the GUC Escrow.
(b) Borrower further covenants that, except with respect to the GUC Loan, the
Borrower will only make a Loan Request hereunder to the extent the Borrower has
insufficient cash from operations to make the payments set forth on the payment
schedule attached to the relevant Loan Request after utilization and application
of all available trade credit. Borrower further covenants that the Loans shall
not be used to pay any obligation not contemplated by the Budget and set forth
in the schedule attached to the Loan Request. Holder agrees to notify the
Borrower by 5:00 p.m. on the day following the date such Loan Request is made
whether or not it consents to the payment of such scheduled payments as provided
in the first sentence of this paragraph 7.

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8. Fees. On the date hereof, Borrower shall pay to Holder an advance commitment
fee of three percent (3%) of the Commitment Amount (the “Commitment Fee”).
9. Collateral Sales. Borrower is presently engaged in and will continue to
engage in efforts to sell Collateral (particularly, Collateral consisting of
intellectual property identified on Exhibit 2 to the Security Agreement). The
proceeds of the sale or other disposition of Collateral (subject only to the
final sentence of this Section 9), net only of the expenses directly
attributable (excluding any commission, incentive or similar fee payable to IPI
(defined below)) to such sale or disposition (“Collateral Proceeds”), shall upon
Borrower’s receipt be paid to Holder to reduce the Obligations. In addition,
Holder shall be entitled to receive and shall be paid in cash fifteen percent
(15%) of the gross sales price or consideration to be paid or transferred to
Borrower or the Borrower estates in respect of the sale or other disposition of
property, whether directly or indirectly and including by way of a sale of
Borrower’s business (including by way of a section 363 sale as part of a chapter
11 plan(s)), that had been included in the Collateral (even if the Loans have
been repaid) (the “Sale Premium”).1 For avoidance of doubt, (a) while no Event
of Default exists, Collateral consisting of accounts receivable and inventory
created in the ordinary course of business may be used by Borrower as permitted
in the Budget, and (b) the Sale Premium shall be a continuing obligation of
Borrower after all other Obligations of Borrower hereunder are paid in full,
which continuing obligation shall expire one (1) year after confirmation of a
chapter 11 plan(s) for Borrower.
10. Warrants. Should both or either of the entities comprising Borrower
reorganize through a chapter 11 plan, Holder shall be entitled to receive
warrants for the purchase of ten percent (10%) of the capital stock of Borrower
(on a fully diluted basis), with a seven (7) year term and strike price of
$0.01, and such warrants (the “Warrants”) shall be subject to anti-dilution
protection and customary minority shareholder protections. The Warrants shall
entitle LC Fund to appoint, at its election, a member of, or observer to, the
reorganized Borrower Board of Directors.
 

1   For purposes of illustration of the Sale Premium, (a) in the case of a sale
of Collateral that yields gross proceeds of $1,000,000 and net proceeds (net of
the direct costs of sale) of $900,000 at a time when $2,000,000 in Loans is
outstanding under the Note, $900,000 would be applied against the $2,000,000 in
the following manner: $150,000 would be for the Sale Premium and $750,000 would
be applied against outstanding accrued interest and the balance against
outstanding principal; (b) in the same case as set forth in part (a) above but
where the Loans made under the Note had already been paid in full, LC Fund would
be paid $150,000.

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11. Sales Process/Plan Milestones. Borrower covenants to take the actions to
cause the events set forth on Exhibit C to occur by the dates indicated thereon
(the “Milestones”).
12. Conditions Precedent. Holder’s obligation to make the initial and each
successive Loan hereunder is subject to the satisfaction of the following
conditions precedent:

  (a)   Interim and Final Orders. The Court shall have issued the Financing
Orders, including an interim or final order, as appropriate, (1) approving the
terms of this Promissory Note, authorizing the transactions contemplated hereby
and by the Security Agreement, and granting Holder perfected, valid, and
enforceable first priority liens and security interests upon all real and
personal property, including intellectual property, of Borrower, all on terms
and conditions acceptable to Holder; (2) granting Holder a superpriority
administrative expense claim in the amount of the Obligations; (3) prohibiting
any liens that would be senior to or pari passu with the Liens securing the
Obligations (except as permitted under this Note and the Security Agreement);
(4) authorizing and directing Borrower to pay Holder’s fees and expenses in
connection with or payable under this Note and the Security Agreement;
(5) containing such other terms and conditions as Holder may determine; and
(6) such Financing Orders shall be in full force and effect and shall not have
been amended, stayed or vacated. The Financing Orders or a separate order of the
Court shall provide that portions of this Note and motions related hereto that
describe the Milestones shall be filed under seal, although such information
shall be available to the committees appointed under Section 1102 of the
Bankruptcy Code and the Office of the United States Trustee.     (b)   Security
Agreement and Ancillary Documents. Borrower shall have executed and delivered to
Holder the Security Agreement and such other documents necessary to grant to
Holder a perfected first priority security interest in and lien on the
Collateral, all in form and substance satisfactory to Holder.     (c)  
Collateral Value/Appraisals. Borrower has delivered to Holder (1) the
Intellectual Asset Valuation Report, dated June 27, 2005, prepared by IPI
Innovations Financial Services, Inc. (“IPI”) that values the Collateral
consisting of the intellectual property identified on Exhibit 2 to the Security
Agreement (the “IPI Valuation”) and (2) current certified inventory and accounts
receivable reports, demonstrating that the Collateral supports repayment of the
Obligations. IPI has not withdrawn or modified or disavowed the IPI Valuation.

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  (d)   No Defaults. No Default or Event of Default shall have occurred and be
continuing or would result from the proposed Borrowing.     (e)  
Representations and Warranties. All representations and warranties contained
herein or in the Security Agreement shall be true and correct on and as of the
date of such Borrowing (or if such representation or warranty expressly relates
to an earlier date, then as of such earlier date). In addition to the
representations and warranties set forth below, Borrower shall be required to
present to Holder, in a form and with such detail as is satisfactory to Holder
(certified as being true and accurate) a September 30, 2005 balance sheet for
Xybernaut Solutions, Inc. that shall not indicate a material adverse change in
the assets and liabilities of Xybernaut Solutions, Inc. in comparison to the
Xybernaut Solutions, Inc. balance sheet at Exhibit D hereto.     (f)   Fees and
Expenses Paid. Holder’s fees and expenses, including the Commitment Fee, shall
have been paid in full in cash.

13. Default. Each of the following events shall be an “Event of Default”
hereunder:

  (a)   Borrower fails to pay timely any principal amount when due under this
Note on the date the same becomes due and payable or any other amounts due under
this Note on the date the same becomes due and payable;     (b)   A breach by
Borrower of any covenant, agreement, representation or warranty under this Note,
the Security Agreement or any Financing Order;     (c)   Any challenge in a
legal proceeding to the validity or enforceability of this Note, the Security
Agreement or any Financing Order or any term hereunder or thereunder;     (d)  
Alfred Fasola or a replacement satisfactory to Holder shall no longer be
employed or retained by Borrower as its financial advisor;     (e)   IPI or a
replacement satisfactory to Holder shall no longer be employed or retained by
Borrower as its financial advisor with respect to the disposition of
intellectual property;     (f)   An “Event of Default” has occurred and is
continuing under and as defined in the Security Agreement;     (g)   Failure of
the Borrower to meet any of the Milestones;

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  (h)   The filing of any motion to approve a sale of all or a substantial
portion of the Borrower’s assets, unless the Holder consents or the motion is
accompanied by a Bona Fide Offer that would yield sufficient proceeds to pay the
Obligations in full (including, for the avoidance of doubt, the Sale Premium);  
  (i)   The filing of any plan(s) of reorganization for the Borrower which does
not provide for the payment in cash in full of the Obligations on or before the
Maturity Date and the issuance of the Warrants;     (j)   Action by the Official
Committee Unsecured Creditors appointed in the Borrower’s chapter 11 cases (the
“Case”) to cause or support, whether directly or indirectly, or to consent to, a
conversion of the Case to a chapter 7 liquidation or the appointment of a
trustee or an examiner in the Case with expanded powers;     (k)   Dismissal of
the Case, conversion of the Case to a chapter 7 liquidation or the appointment
of a trustee or an examiner in the Case with expanded powers;     (l)   The
occurrence of a material adverse change in (1) the condition or business
prospects (financial or otherwise) of Borrower, or (2) the value or salability
of the Collateral, each taken as a whole, since the Petition Date; and     (m)  
The filing of a motion to approve post-petition financing that will be secured
by Liens on the Collateral that are equal or senior to the Liens granted to
Holder in connection herewith.

     Upon the occurrence of an Event of Default hereunder, but subject to the
terms of the Financing Orders, all unpaid principal, accrued interest and other
amounts owing hereunder shall, at the option of Holder, be immediately due,
payable and collectible by Holder pursuant to applicable law and the commitments
hereunder terminated. Upon the occurrence of an Event of Default based upon:
(x) a breach of the representations and warranties contained in Section 14; or
(y) Section 13(j) of the Note, the funds, if any, in the GUC Escrow shall
immediately be refunded, irrevocably, to LC Fund. Upon an Event of Default under
Sections 13(g), (j), (k) or (l), Borrower consents to the immediate modification
of the automatic stay of Section 362 of the Bankruptcy Code to the extent
necessary to permit Holder to exercise all rights and remedies under this Note
and the Security Agreement. Upon an Event of Default under the other parts of
Section 13, if after five (5) days written notice from Holder the default has
not been cured, Borrower consents to the immediate modification of the automatic
stay of Section 362 of the Bankruptcy Code to the extent necessary to permit
Holder to exercise all rights and remedies under this Note and the Security
Agreement.

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14. Representations and Warranties of Borrower. Borrower hereby represents and
warrants to the Holder that:

  (a)   Organization and Good Standing. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
has all requisite corporate power and authority to carry on its business as now
conducted.     (b)   Authorization. The execution, delivery and performance by
Borrower of this Note and the Security Agreement are within Borrower’s corporate
power; have been duly authorized by all necessary or proper corporate action
and, on the date of initial funding of the Loan hereunder and on each subsequent
funding date, will be authorized by a Financing Order which remains in full
force and effect and has not been amended, stayed or vacated; will not violate
any applicable law; does not require the consent or approval of any governmental
authority or any other person (other than entry of the applicable Financing
Order) and except such consents as have been obtained.     (c)   Valid
Obligation. This Note and Security Agreement constitute valid and legally
binding obligations of Borrower, enforceable against Borrower in accordance with
their terms.     (d)   Non-contravention of Other Instruments. Borrower is not
in violation or default (i) of any provision of its Certificate of Incorporation
or Bylaws, or (ii) in any material respect of any post-petition instrument,
judgment, order, writ, decree or contract to which it is a party or by which it
is bound which violation or default would have a material adverse effect on
Borrower or its subsidiaries, taken as a whole. The execution, delivery and
performance of this Note and the Security Agreement, and the consummation of the
transactions contemplated hereby and thereby, will not result in any such
violation or be in conflict with or constitute, with or without the passage of
time and giving of notice, either a default under any such post-petition
provision, instrument, judgment, order, writ, decree or contract (including but
not limited to any credit agreements, guaranties or debt related agreements to
which Borrower or any affiliate of Borrower may be a party) or an event that
results in the creation of any lien, charge or encumbrance upon any assets of
Borrower or its Subsidiaries or the suspension, revocation, impairment,
forfeiture, or nonrenewal of any material permit, license, authorization, or
approval applicable to Borrower, its business or operations or any of its assets
or properties.     (e)   Title to Collateral. Borrower owns and holds good and
marketable title to the assets and property, including, without limitation,
intangible property and contract rights (including without limitation the
intellectual property identified on Exhibit 2 to the Security Agreement),
constituting the Collateral and that there are no liens, claims or encumbrances
on the Collateral other than those consisting of Permitted Liens and with
respect to the intellectual property identified on Exhibit 2 to the Security

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      Agreement, other than the licenses, assignments or other transfers of
rights or interests, covenants not to sue, or adverse claims, with respect to
such property (“Adverse Interests”) that are identified as Permitted Liens,
there are no Adverse Interests, and any maintenance fees with respect to such
property are current.     (f)   Balance Sheets. The balance sheets attached as
Exhibit C hereto (as of September 30, 2005 for Xybernaut Corporation and
August 31, 2005 for Xybernaut Solutions, Inc.) in all material respects fairly
represent the assets and liabilities of Borrower as of the dates set forth
therein.

15. Waiver. Borrower waives presentment and demand for payment, notice of
dishonor, protest and notice of protest of this Note, and shall pay all costs of
collection w hen incurred, including, without limitation, reasonable attorneys’
fees, costs and other expenses.
     The right to plead any and all statutes of limitations as a defense to any
demands hereunder is hereby waived to the full extent permitted by law.
16. Indemnification. Borrower agrees to indemnify Holder for any fees, costs and
expenses (including counsel fees and expenses) incurred in connection with this
Note, the Security Agreement and any order approving same, other than fees,
costs and expenses arising directly as a result of Holder’s gross negligence or
willful misconduct.
17. Governing Law. This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York, excluding conflict of laws
principles that would cause the application of laws of any other jurisdiction,
except to the extent governed by the Bankruptcy Code.
18. Successors and Assigns. The provisions of this Note and the Security
Agreement shall inure to the benefit of and be binding on any successor to
Borrower and to any successor or assign of Holder; provided, however, that the
Borrower’s rights and obligations hereunder may not be assigned without the
consent of Holder, and provided further that Holder may only assign its rights
and obligations hereunder to an affiliate of Holder, or to any other person
provided that Holder’s obligations hereunder to make Loans to the Borrower have
then been terminated.
19. Payment Procedures. Payments of principal and interest on this Note shall be
made to the Holder at its principal office in New York City, in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debt. If any payment of
principal or interest on this Note shall become due on a day that is not a
business day, such payment shall be made on the next succeeding day that is a
business day.

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20. Press Releases. Borrower will not use Holder’s or its affiliates’ name(s) in
any press release without Holder’s prior written consent.

              BORROWER   XYBERNAUT CORPORATION         XYBERNAUT SOLUTIONS, INC.
   
 
           
 
  By:   /s/ Perry L. Nolen
 
   
 
                Name: Perry L. Nolen    
 
                Title: President & CEO    
 
            HOLDER   LC CAPITAL MASTER FUND, LTD.    
 
           
 
  By:   /s/ Richard F. Conway
 
   
 
                Name: Richard F. Conway    
 
                Title: Director    

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EXHIBIT A
Security Agreement

 

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EXHIBIT B
Loan Request Form

 

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LOAN REQUEST
Date:                     , ___

     
To:
  LC CAPITAL MASTER FUND, LTD. (“LC Fund”), under that certain Secured
Promissory Note, dated as of October ___, 2005 (as amended, restated, or
otherwise modified from time to time, the “Note Agreement”), among Xybernaut
Corp. and Xybernaut Solutions, Inc. and LC Fund.

Ladies and Gentlemen:
          Reference is made to the above described Note Agreement. Terms defined
in the Note Agreement, wherever used herein unless otherwise defined herein,
shall have the same meanings herein as are prescribed by the Note Agreement. The
undersigned Borrower hereby irrevocably notifies you of the borrowing specified
below:

  1.   The Business Day of the proposed Borrowing is                     , ___.
    2.   The aggregate amount of the proposed Borrowing is
$                    .

          The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the proposed borrowing,
before and after giving effect thereto and to the application of the proceeds
therefrom;

  a)   The representations and warranties of Borrower contained in the Note
Agreement and the related Security Agreement are true and correct in all
material respects as though made on and as of the date hereof, other than any
such representation or warranty which relates to a specified prior date, and
except to the extent that LC Fund has been notified by Borrower that any
representation or warranty is not correct and explicitly waived in writing
compliance with such representation or warranty; and     b)   No event has
occurred and is continuing, or would result from the proposed borrowing, which
constitutes a Default or an Event of Default.

 

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This Loan Request is issued pursuant to and is subject to the Note Agreement.
EXECUTED as of the date first written above.

                      BORROWER:    
 
                    XYBERNAUT CORP.         XYBERNAUT SOLUTIONS, INC.    
 
               
 
  By:                               Name:        
 
         
 
        Title:        
 
         
 
   

 

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EXHIBIT C
[CONFIDENTIAL]2
 

2   Confidential Treatment has been requested for the redacted portion. The
confidential, redacted portions have been filed separately with the SEC.

 

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EXHIBIT D
Balance Sheets

 

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Xybernaut Corporation
Balance Sheet
9/30/2005

                      2005             September        
ASSETS
               
 
               
Current assets:
               
Cash In Banks
    232,934          
Petty Cash
    300          
Restricted Cash
    —          
Pre Petiton Accounts receivable
    223,714          
Post Petiton Accounts receivable
    351,745          
Less AR — Other, Reserve, Contra
    (500,221 )        
Inventory
    2,358,800          
Prepaid and other current assets
    830,187          
DTDF — Japan
    680,099          
DTDF — GmbH
    12,533,177          
DTDF — Gmbh R&D
    4,820,238          
DTDF — China
    286,197          
DTDF — XSI
    (354,977 )        
DTDF — Korea
    293,924          
DTDF — Reserve
    (18,000,000 )        
 
               
 
               
Total current assets
            3,756,117  
 
               
 
               
Fixed assets:
               
Property and equipment
    2,148,276          
Less: accumulated depreciation
    (1,947,084 )        
 
               
 
               
Total fixed assets
            201,192  
 
               
 
               
Other assets:
               
Investment in subsidiaries
    605,584          
Patents, net
    772,092          
Trademarks, net
    31,996          
Tooling, net
    —          
Other
    189,411          
 
               
 
               
Total other assets
            1,599,083  
 
               
 
               
TOTAL ASSETS
            5,556,392  
 
               
 
               
LIABILITIES AND EQUITY
               
 
               
Current liabilities:
               
Post-Petition Liabilities
               
Accounts payable
    203,184          
Accrued restructuring costs
    53,465          
Deferred product and warranty revenue
    261,396          
Accrued Professional fees
    232,377          
Accrued Purchases
    252,833          
Salaries / commission payable
    120,971          
 
               
 
               
Total Post Petition Liabilities
            1,124,226  
 
               
 
               
Pre-Petition Liabilities
               
Priority Claims
    120,322          
Secured Debts
    —          
Unsecured Debt
    1,622,079          
Accrued expenses
    476,162          
 
               
 
               
Total Pre Petition Liabilities
            2,218,563  
 
               
 
               
Total current liabilities
            3,342,789  
 
               
 
               
Long term liabilities:
            —  
 
               
 
               
Total liabilities
            3,342,789  
 
               
 
               
Stockholders’ equity:
               
Common stock
    1,946,209          
Additional paid-in capital
    183,745,591          
Cumulative translation adjustment
    38,695          
Accumulated other comprehensive income (XSI)
    37,130          
Retained earnings, beginning
    (171,411,927 )        
Current earnings
    (12,142,094 )        
 
               
 
               
Total stockholders’ equity
            2,213,604  
 
               
 
               
TOTAL LIABILITIES AND EQUITY
            5,556,392  
 
               

 

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Xybernaut Solutions, Inc.
BALANCE SHEET
As of August 31, 2005

                 
Current Assets
               
Cash
  $ 251,425.91          
Pre-Petition Accounts Receivable
    198,026.21          
Post-Petition Accounts Receivable
    438,593.65          
Receivables from Officers
    —          
Employees, Affiliates
               
Note Receivables
    —          
Inventory
    —          
Other Current Assets:
               
Due to / From Xybernaut
    423,799.16          
Unbilled Accounts Receivable
    372,769.34          
Prepaid Other
    21,141.01          
Accounts Receivalbe Other XSI
    337.00          
Employee Advances
    (287.00 )        
Total Current Assets
            1,705,808.28  
 
               
Fixed Assets
               
Land
  $ —          
Buildings
    —          
Equipment, Furniture & Fixtures
    425,790.48          
Less Accumulated Depreciation
    (341,878.93 )        
Total Fixed Assets
            83,911.55  
 
               
Other Assets
               
Retainage
    22,738.00          
Deposits
    6,750.10          
Total Other Assets
            29,488.10  
 
               
Total Assets
            1,819,207.93  
 
               
Post-Petition Liabilities
               
Accounts Payable
    105,713.27          
Salaries Payable
    68,785.00          
Commissions Payable
    332.64          
Accrued Vacation
    74,035.76          
Accrued Rent & Storage
    16,236.13          
Taxes Payable
    207.66          
Accrued Interest
Deferred Revenue
    139,015.01          
Total Post-Petition Liabilities
            404,325.47  
 
               
Pre-Petition Liabilities
               
Priority Claims
    21,888.15          
Secured Debts
    0.00          
Unsecured Debtor
    26,523.99          
Total Pre-Petition Liabilities
    48,412.14          
 
               
Owners Equity (Deficit)
               
Capital Stock or Owner Investment
    15,849.68          
Paid In Capital Surplus
    605,059.88          
Retained Earnings (Deficit)
               
Pre-Petition
    762,123.22          
Post-Petition
    (16,562.45 )        
Total Owners Equity
            1,366,470.33  
 
               
Total Liabilities and Owner’s Equity
            1,819,207.93