Line of Credit and Long Term Debt

Commercial Loan Agreement Facility

On June 15, 2017, the Company entered into a Loan and Security Agreement with Access National Bank (the “Loan Agreement”). The Loan Agreement provides for a $5.0 million working capital revolving line of credit through April 30, 2018 and replaces the Company’s prior credit facility with Cardinal Bank.

The available amount under the working capital line of credit is subject to a borrowing base, which is equal to the lesser of (i) $5.0 million or (ii) 70% of the net unpaid balance of the Company’s eligible accounts receivable. The interest rate for the working capital line of credit is the Wall Street Journal prime rate plus 1.0%. The facility is secured by a first lien security interest on all of the Company’s personal property, including its accounts receivable, general intangibles, inventory and equipment maintained in the United States.

The Loan Agreement requires that the Company (i) maintain a minimum adjusted tangible net worth of at least $4.0 million for the quarter ending December 31, 2017, increasing to $4.5 million for each quarter thereafter and (ii) maintain a current ratio of 1.10:1 tested quarterly.

Under the previous credit facility with Cardinal Bank the Company was advanced and repaid approximately $3.3 million during the six month period ended June 30, 2017. The Company had no advances under the current credit facility with Access National Bank at June 30, 2017.

As of June 30, 2017, the Company was eligible to borrow up to $5.0 million under the borrowing base formula.

Long-Term Debt

Long-term debt consisted of the following:

	JUNE 30,		DECEMBER 31,
	2017		2016
	(Unaudited)
Cardinal Bank mortgage dated December 17, 2010 (1)	$	-	$	432,367
Cardinal Bank term note dated December 31, 2011 (2)		-		74,681

Total		-		507,048
Less: current portion		-		94,868

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

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

(1) On December 17, 2010, the Company entered into a real estate purchase agreement to acquire the Lewis Center Facility for approximately $677,000 and financed a significant portion of the purchase price with a $528,000 ten-year mortgage with Cardinal Bank. On May 22, 2017, the Company completed the sale of this real estate asset and paid off the balance of the mortgage. See Note 3 for additional information regarding the sale of the property.

(2) On December 31, 2011, the Company entered into a $4.0 million 5-year term note with Cardinal Bank 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 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 and financed the purchase of these vehicles under a capital lease agreement for $80,527. Minimum lease payments required under current capital leases range from $695 to $1,210 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 June 30, 2017:

2017	$	22,500
2018		22,500
2019		22,500
2020		21,115

Total principal and interest payments		88,615
Less: portion representing interest		9,469
Present value of minimum lease payments under capital lease agreements		79,146
Less: current portion		18,027
Capital lease obligations, net of current portion	$	61,119