Line of Credit and Long Term Debt

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

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. Effective April 30, 2018, the Company entered into a second modification agreement (“Modification Agreement”) with Access National Bank to amend the existing Loan Agreement. The Modification Agreement extended the maturity date of the facility through April 30, 2019 and added an additional financial covenant requiring the Company to maintain consolidated minimum adjusted earnings before interest, taxes, depreciation and amortization, plus share-based compensation, plush non-cash charges (EBITDA) (as defined in the Modification Agreement) of at least two times interest expense to be measured as of the last day of each quarterly period.

The Loan Agreement requires that the Company meet the following financial covenants on a quarterly basis: (i) maintain a minimum adjusted tangible net worth of at least $2.0 million, (ii) maintain minimum consolidated adjusted EBITDA of at least two times interest expense and (iii) maintain a current ratio of 1.10:1.

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. As of September 30, 2018, the Company was eligible to borrow up to $4.8 million under the borrowing base formula.

Capital Leases and Other Term Obligations

Capital leases and other term obligations consisted of the following:

	SEPTEMBER 30, 2018						DECEMBER 31, 2017
	Current		Non-Current				Current		Non-Current
	Portion		Portion		Total		Portion		Portion		Total
	(Unaudited)						(Unaudited)
Capital Lease Obligations (1)	$	105,712	$	151,037	$	256,749	$	101,591	$	232,109	$	333,700
Deferred Rent Liability (2)		45,043		64,006		109,049		70,021		78,336		148,357
Short term installment borrowings (3)		62,066		-		62,066		133,250		-		133,250
Total Other Term Obligations	$	107,109	$	64,006	$	171,115	$	203,271	$	78,336	$	281,607
Total Capital Leases and Other
Term Obligations	$	212,821	$	215,043			$	304,862	$	310,445

(1) As more fully described in Note 7, the Company entered into capital leases to acquire computer hardware and software for its client facing infrastructure and two automobiles that expire between 2020 and 2021.

(2) The Company has two long term building lease obligations that contain fixed rent escalations and rent abatements. The Company has recognized a deferred rent liability related to the difference between actual cash rent paid and rent recognized for financial reporting purposes.

(3) The Company annually finances the cost of its commercial liability insurance premiums for a period of less than 12 months.

Capital Lease Obligations

Minimum lease payments required under capital leases range from $695 to $8,900, respectively, and these leases expire in March 2020. The following sets forth the Company’s future minimum payment obligations under these capital lease agreements for fiscal years ending September 30 (unaudited):

2018	$	121,951
2019		121,951
2020		36,432
Total principal and interest payments		280,334
Less: portion representing interest		23,585
Present value of minimum lease payments
under capital leases		256,749
Less: current portion		105,712
Capital leases, net of current portion	$	151,037