NOTE E - AMOUNTS DUE FROM FACTOR

The Company assigns certain of its trade receivables on a pre-approved, non-recourse basis to our Factor. Since these are assigned on a non-recourse basis, the factored trade receivables and related repayment obligations are not separately recorded in the Company’s consolidated balance sheets. The Factoring Agreement provides for financing 80% of uncollected non-recourse receivables assigned to the factor, and 50% of qualifying inventory up to a maximum borrowing on inventory of $1,000,000. Financing of approximately $1,977,000 is available at March 31, 2015. Any outstanding amounts due to the factor are payable upon demand and bear interest at the prime rate of interest charged by the factor, which is 5.25% at March 31, 2015. Any amount due to the factor is also secured by the Company’s trade accounts receivable and inventory. There were no borrowings outstanding under this agreement at March 31, 2015. Any advances under the Factoring Agreement are made at the sole discretion of Merchant, based on their assessment of receivables, inventory, and our financial condition at the time of each request for an advance.

Under this Factoring Agreement, the Company assigned receivables of $8,917,127 and $11,370,850 during the years ended March 31, 2015 and 2014, respectively. The uncollected balance of non-recourse receivables held by a factor amounted to $1,217,311 and $1,397,951 at March 31, 2015 and 2014. Collected cash maintained on deposit with the factor earns interest at the factor’s prime rate of interest less two percentage points (effective rate of 1.25%) at March 31, 2015 and 2014.