8. Line of Credit and Long Term Debt

Commercial Loan Agreement Facility

On April 28, 2016, the Company entered into a Business Loan Agreement with Cardinal Bank (the “Loan Agreement”) for a $6.0 million working capital credit facility. On November 4, 2016, the Company entered into a modification of its Loan Agreement that: 1) decreased the Company’s borrowing base as a percentage of qualified government and commercial receivables from 75% to 65% and 2) decreased the minimum after-tax net income requirement from $200,000 to $1.00 for the fourth quarter of 2016. On April 11, 2017, the Company entered into a Change in Terms Agreement to extend the maturity date the working capital credit facility from April 30, 2017 to July 31, 2017.

The available amount under the revolving line of credit is subject to a borrowing base, which is equal to the lesser of (i) $6.0 million or (ii) 65% of qualified government and commercial accounts receivables, less any amounts outstanding on the Company’s $4.0 million term loan with Cardinal Bank. The interest rate for the revolving line of credit is the Wall Street Journal prime rate plus 0.75%, with a floor of 4.25%.

The Loan Agreement requires that the Company (i) maintain a minimum tangible net worth of at least $6.5 million; (ii) generate a minimum after-tax net income of at least $1.00 and (iii) maintain a current ratio of 1.1:1 tested quarterly.

Under the credit facility the Company was advanced and repaid approximately $2.4 million during the three month period ended March 31, 2017. There was no balance outstanding against the Company’s credit facility at March 31, 2017. As of March 31, 2017, the Company was eligible to borrow up to $4.9 million under the borrowing base formula.

Long-Term Debt

Long-term debt consisted of the following:

	MARCH 31,		DECEMBER 31,
	2017		2016
	(Unaudited)
Cardinal Bank mortgage dated December 17, 2010 (1)	$	427,483	$	432,367
Cardinal Bank term note dated December 31, 2011 (2)		-		74,681

Total		427,483		507,048
Less: current portion		20,491		94,868

Long-term debt, net of current portion	$	406,992	$	412,180

Long-term debt related to assets held for sale, net of current portion	$	406,992	$	412,180

(1) On December 17, 2010, the Company entered into a real estate purchase agreement to acquire operations and call center facility in Columbus, Ohio for approximately $677,000 and financed a significant portion of the purchase price with a $528,000 ten-year mortgage with Cardinal Bank. The mortgage loan bears interest at 6.0% with monthly principal and interest payments of approximately $3,800, and matures on December 17, 2020. The mortgage loan principal and interest payments are based on a twenty-year amortization with the unpaid balance due at maturity. The mortgage loan is secured by the real estate. This mortgage obligation was classified separately as a liability held for sale on the condensed consolidated balance sheets. See Note 3 for additional information regarding the planned sale of the Lewis Center Facility.

(2) On December 31, 2011, the Company entered into a $4.0 million 5-year term note with Cardinal Bank (“Cardinal Bank Term Note”) to fund a portion of the purchase price paid in connection with the asset purchase agreement with Avalon Global Solutions, Inc. dated December 30, 2011. The term note bears interest at 4.5% with monthly principal and interest payments of approximately $74,694, and matured on December 30, 2016. The term note was secured under a corporate security agreement. The Company paid the last scheduled installment on January 6, 2017.

Capital Lease Obligations

As more fully described in Note 6, the Company acquired two new automobiles at a cost of $93,301 (€87,300) and financed the purchase of these vehicles under a capital lease agreement for $80,527 (€75,400). These automobiles will be used by the Company’s sales office in the United Kingdom. Minimum lease payments required under current capital leases range from $695 (€651) to $1,210 (€1,130) and these leases expire in March 2021. The following sets forth the Company’s future minimum payment obligations under these capital lease agreements for fiscal years ending March 31, 2017:

2017	$	22,850
2018		22,850
2019		22,850
2020		22,838

Total principal and interest payments		91,388
Less: portion representing interest		10,861
Present value of minimum lease payments under capital lease agreements		80,527
Less: current portion		22,850
Capital lease obligations, net of current portion	$	57,677