BIO-key restructured its US$4-million note receivable from InterAct911 Mobile Systems, a wholly-owned subsidiary of InterAct911. Under the original terms of the note, the first scheduled principal repayment, equal to approximately $1.3 million, was due to be paid to BIO-key in Dec. 2010. In connection with the restructuring, BIO-key deferred $834,000 of this first payment into three equal payments due over the course of the first three quarters of 2011. In exchange for this deferral, Interact911 made a cash principal repayment of $500,000, agreed to increase the interest rate on the deferred amount from six percent to 12 percent and agreed to have the owner of its corporate parent, Silkroad Equity, forfeit all of the eight million warrants previously granted to it.
BIO-key restructured its US$4-million note receivable from InterAct911 Mobile Systems, a wholly-owned subsidiary of InterAct911. Under the original terms of the note, the first scheduled principal repayment, equal to approximately $1.3 million, was due to be paid to BIO-key in Dec. 2010. In connection with the restructuring, BIO-key deferred $834,000 of this first payment into three equal payments due over the course of the first three quarters of 2011. In exchange for this deferral, Interact911 made a cash principal repayment of $500,000, agreed to increase the interest rate on the deferred amount from six percent to 12 percent and agreed to have the owner of its corporate parent, Silkroad Equity, forfeit all of the eight million warrants previously granted to it.
In a separate transaction, effective as of Dec. 31, 2010, BIO-key and The Shaar Fund agreed to restructure their existing arrangements. Specifically, The Shaar Fund agreed to exchange such preferred stock and convertible note for a new nonconvertible secured promissory note with repayment terms that coincide with the note receivable repayment terms from InterAct911. As such, the company expects that future cash flow generated by the Interact911 note receivable will offset future cash payments owed to The Shaar Fund. As part of this agreement, the company has eliminated all of its remaining preferred stock. The company also agreed to exchange all existing 5.1-million warrants previously issued by the company to The Shaar Fund for a five-year warrant to allow the Shaar Fund to purchase up to an aggregate of 8-million shares of the company common stock at an exercise price of $0.30 per share.