(3)

Debt

On November 10, 2010, the Company secured a senior credit facility of up to $65 million from a banking group led by Comerica Bank that includes Bank of the West and U.S. Bank. The credit facility, which will mature on November 10, 2015, includes a $20 million term loan, a $25 million revolving credit line and a $20 million acquisition line. Interest rates under the new credit agreement are at either LIBOR plus a range of 175 to 275 basis points, or at Comerica Bank's prime rate plus a range of 75 to 175 basis points. Commitment fees on the revolving credit line and acquisition line are 25 basis points and 35 basis points, respectively.

On June 27, 2011, the Company completed a $14 million private placement of debt and equity with Mill Road Capital L.P. ("Mill Road"). Of the $14 million, $7 million is an interest-bearing, five-year subordinated note. The fair value of the $7 million in debt was estimated to be $5,960,000 as of June 27, 2011.

Long-term debt as of January 31, 2012 and 2011 consisted of the following:

	January 31, 2012		January 31, 2011
Revolving credit line (a)	$	5,000,000	$	10,023,000
Term loan (b)		17,150,000		20,000,000
Acquistition credit line (c)		16,251,000		8,215,000
Mill Road debt (d)		6,337,000		-
Secured and other notes payable (e)		5,450,000		5,033,000
Subtotal		50,188,000		43,271,000
Less current installments		4,478,000		3,505,000
Total	$	45,710,000	$	39,766,000

(a)

The Company is required to repay the outstanding principal under the revolving credit line on November 10, 2015. Interest accrues at the Company's option at either (i) the Base Rate plus a specified margin ranging between 75 and 150 basis points depending on the Company's consolidated total debt to consolidated EBITDA ratio or (ii) the Eurodollar Rate plus a specified margin ranging between 175 and 250 basis points depending on the Company's consolidated total debt to consolidated EBITDA ratio. In the case of interest that is based on the Base Rate, interest is payable monthly in arrears on the first day of each month. In the case of interest that is based on the Eurodollar Rate, interest is payable at the end of each interest period, which is defined as one, two, three or six months after the applicable advance is disbursed to the Company (except that with respect to six month interest periods, interest is payable at three month intervals). The outstanding balance from revolving credit lines at January 31, 2012 was $5,000,000. The revolving credit line is limited to 85% of eligible accounts receivable, which equates to $21,245,000 as of January 31, 2012. The available amount on the revolving credit line was $16,245,000 as of January 31, 2012. The interest rate applicable at January 31, 2012 was 3.18%.

(b)

The Company is required to repay the $20 million five-year term loan in equal quarterly principal installments of $500,000 commencing on February 1, 2011 until November 10, 2015, the maturity date, when all remaining outstanding principal plus accrued interest thereon is due and payable in full. Interest accrues at a specified margin plus either: (i) the greatest of (a) the prime rate announced by Comerica Bank, (b) the federal funds effective rate as published by the Federal Reserve Bank of New York plus 1.0%, and (c) a daily adjusting LIBOR rate plus 1.0%; or (ii) a rate based on LIBOR. The Company refers to the rates described in clauses (i) and (ii) in the preceding sentence, respectively, as the "Base Rate" and as the "Eurodollar Rate." The specific per annum interest rate will be, at the Company's option, either (I) the Base Rate plus a specified margin ranging between 100 and 175 basis points depending on the Company's consolidated total debt to consolidated EBITDA ratio or (II) the Eurodollar Rate plus a specified margin ranging between 200 and 275 basis points depending on the company's consolidated total debt to consolidated EBITDA ratio. In the case of interest that is based on the Base Rate, interest is payable monthly in arrears on the first day of each month. In the case of interest that is based on the Eurodollar Rate, interest is payable at the end of each interest period, which is defined as one, two, three or six months after the applicable loan is disbursed to the Company (except that with respect to six month interest periods, interest is payable at three month intervals). Excess cash flow payments as required under the credit agreement are applied to the term loan. During fiscal year 2012, the Company made an excess cash flow payment of $850,000 as a result of an excess cash flow obligation for fiscal year ended January 31, 2011. The outstanding balance from term loans at January 31, 2012 was $17,150,000. The interest rate applicable at January 31, 2012 was 3.43%.

(c)

With respect to any credit advance under this line that is used to finance eligible acquisitions, the Company is required to make quarterly principal payments commencing one year after the date such credit advance is made, until November 10, 2015, the maturity date (when all remaining outstanding principal plus accrued interest thereon is due and payable in full). No principal payments are due during the first year. The amount of such quarterly principal payments is 1.25% of the aggregate original principal amount of such credit advance during the second year, increasing to 2.50% during the third year and increasing to 3.75% during the fourth and fifth years. The interest rate applicable at January 31, 2012 was 3.43%.

Interest on the acquisition credit line accrues at the Company's option at either (i) the Base Rate plus a specified margin ranging between 100 and 175 basis points depending on the Company's consolidated total debt to consolidated EBITDA ratio or (ii) the Eurodollar Rate plus a specified margin ranging between 200 and 275 basis points depending on the Company's consolidated total debt to consolidated EBITDA ratio. In the case of interest that is based on the Base Rate, interest is payable monthly in arrears on the first day of each month following the disbursement of an advance. In the case of interest that is based on the Eurodollar Rate, interest is payable at the end of each interest period, which is defined as one, two, three or six months after the applicable advance is disbursed to us (except that with respect to six month interest periods, interest is payable at three month intervals). The outstanding balance from acquisitions at January 31, 2012 was $14,000,000.

With respect to any credit advance under this line that is used to finance the purchase of eligible machinery and equipment, the Company is required to make principal payments in an amount equal to 5% of the aggregate original principal amount of such credit advance. Such principal payments are due quarterly after the date such credit advance is made, until November 10, 2015, the maturity date (when all remaining outstanding principal plus accrued interest thereon is due and payable in full). The outstanding balance from equipment credit advances at January 31, 2012 was $2,251,000.

(d)

The Mill Road outstanding balance at January 31, 2012 of $6,337,000 was calculated based on the fair value of the debt. The balance consists of $7,215,000 in debt and $61,000 in derivative liability partially offset by $939,000 in debt discount. The outstanding principal and accrued and unpaid interest is due and payable on June 27, 2016. Interest accrues at a rate of 10.0% per annum, which amount is payable quarterly, with the first payment due and paid on August 31, 2011. In addition, interest also accrues at a rate of 5.0% per annum, which amount is added automatically to the unpaid principal amount of the subordinated note on each date cash interest is payable.

(e)	In addition to the senior credit facility, the Company has an additional $4,224,000 at January 31, 2012 in equipment line balances which were used to finance various test equipment with terms of 60 months for each equipment schedule at interest rates ranging from 0.00% to 7.42%.

The Company's 50% owned subsidiary, NQA, Inc., has total borrowings of $1,226,000 at January 31, 2012 for its prior acquisitions of Unitek Technical Services, Inc., TRA Certification, Inc. and International Management Systems, Inc. Advances under the business acquisitions line of credit bear interest, at the option of NQA, at a fluctuating rate equal to the lender's corporate base rate plus 0.5% or at a fixed rate based on the Federal Home Loan Bank Advance Rate plus 3.0%. Advances under the business acquisitions line of credit are due and payable, at the option of NQA, 3 or 5 years from the advance date and are subject to additional interest charges in the event of prepayment.

Fees related to debt are amortized over the life of the loans. As of January 31, 2012 the net amount of capitalized loan fees was $1,391,000.

Substantially all the assets of the Company are pledged as collateral.

Both the senior credit facility and the Mill Road Capital agreements impose certain financial covenants on the Company which are determined as of the end of each fiscal quarter. The Company was in compliance with these covenants as of January 31, 2012.

Maturities of long-term debt for five fiscal years subsequent to January 31, 2012 are as follows:

2013	$	4,478,000
2014		5,061,000
2015		5,741,000
2016		28,380,000
2017		6,528,000
	$	50,188,000

A reasonable estimate of fair value for the Company's fixed rate debt was based on a discounted cash flow analysis. The carrying amount of variable rate debt, including borrowings under the Company's revolving lines of credit, approximate their fair values.

The carrying amounts and estimated fair values of the Company's financial instruments are:

	2012		2012		2011		2011
	Carrying		Estimated		Carrying		Estimated
	amount		fair value		amount		fair value
Secured and other notes payable	$	45,188,000	$	45,084,000	$	33,248,000	$	33,141,000
Revolving lines of credit		5,000,000		5,000,000		10,023,000		10,023,000