Note 7. Current Liabilities and Debt Obligations

Accounts Payable and Other Accrued Payables

As of December 31, 2013 and 2012, the accounts payable and other accrued payables consisted of $17.3 million and $16.4 million, respectively, in trade account payables and $6.0 million and $6.7 million, respectively, in accrued payables.

Senior Revolving Credit Facility

On July 31, 2013, we amended our $30 million revolving credit facility (the “Facility”) with Wells Fargo Capital Finance, LLC (“Wells Fargo”) to extend the maturity date to November 13, 2014 from May 17, 2014. On March 27, 2014, we further amended the Facility to extend the maturity date to November 13, 2015. In addition, Wells Fargo issued a waiver of certain existing defaults under the Facility including failure to maintain required EBITDA (as defined in the Facility) covenants. The March 2014 amendment also amends the terms of the Facility with respect to repayment on the term loan component. Since 2010, the principal of the term loan component has been repaid in quarterly installments of $93,750. The amended Facility requires quarterly installment payments of $250,000 beginning July 1, 2014, with a final installment of the unpaid principal amount payable on November 13, 2015, the maturity date of the amended Facility. In consideration for the closing of this amendment, we paid Wells Fargo a fee of $75,000, plus expenses related to the closing.

The interest rate on the term loan component is the same as that on the revolving credit component of the Facility, which is the higher of the Wells Fargo Bank “prime rate” plus 1%, the Federal Funds rate plus 1.5%, or the 3-month LIBOR rate plus 2%. In lieu of having interest charged at the foregoing rates, the Company may elect to have the interest on all or a portion of the advances on the revolving credit component be a rate based on the LIBOR Rate (as defined in the Facility) plus 3.75%. As of December 31, 2013, we have not elected the LIBOR Rate option. Borrowings under the Facility are collateralized by substantially all of the Company’s assets including inventory, equipment, and accounts receivable.

As of December 31, 2013, the interest rate on the Facility was 4.25%. We incurred interest expense in the amount of $0.6 million, $0.8 million, and $0.7 million for the years ended December 31, 2013, 2012, and 2011, respectively, on the Facility.

On April 8, 2011, a portion of the Senior Redeemable Preferred Stock was redeemed (see Note 8 – Redeemable Preferred Stock). Additionally, on May 11, 2012, the Facility was amended to allow for the redemption of Senior Redeemable Preferred Stock, under certain conditions, at a discount from par value plus accrued dividends of at least 10%, at an aggregate price not to exceed $4.0 million. On May 16, 2012 and on August 24, 2012, a portion of the Senior Redeemable Preferred Stock was redeemed (see Note 8 – Redeemable Preferred Stock).

On December 17, 2012, Wells Fargo consented to the payment of approximately $7.6 million of the ITL note.

On June 11, 2013, the Facility was further amended to allow for the further redemption of Senior Redeemable Preferred Stock, under certain conditions, at a discount from par value plus accrued dividends of at least 10%, at an aggregate price not to exceed $2.0 million. On June 14, 2013, a portion of the Senior Redeemable Preferred Stock was redeemed (see Note 8 – Redeemable Preferred Stock).

The Facility has various covenants that may, among other things, affect our ability to merge with another entity, sell or transfer certain assets, pay dividends and make other distributions beyond certain limitations. The financial covenants also include minimum EBITDA, minimum recurring revenue and a limit on capital expenditures. In conjunction with the March 2014 amendment, Wells Fargo issued a waiver of certain existing defaults under the Facility including failure to maintain required EBITDA covenants. Prior to the March 2014 amendment, the term loan component of the Facility amortizes at 5% per year, which is paid in quarterly installments and is classified as current on the consolidated balance sheets. Effective July 1, 2014, the quarterly installment repayments will be $250,000. The remaining balance of the term loan, or $5.5 million, and the revolving component of the Facility mature over the period 2014 and 2015.

At December 31, 2013, we had outstanding borrowings of $19.8 million on the Facility, which included the $6.2 million term loan, of which $0.7 million was short-term. At December 31, 2012, the outstanding borrowings on the Facility were $18.9 million, which included the $6.6 million term loan, of which $0.4 million was short-term. At December 31, 2013 and 2012, we had unused borrowing availability on the Facility of $9.2 million and $2.2 million, respectively. The effective weighted average interest rates on the outstanding borrowings under the Facility were 5.3% and 5.6% for the years ended December 31, 2013 and 2012, respectively.

The following are maturities of the Facility presented by year (in thousands):

	2014		2015		Total
Short-term:
Term loan	$	688	$	----	$	688	¹
Long-term:
Term loan	$	----	$	5,500	$	5,500	¹
Revolving credit		----		13,641		13,641	²
Subtotal	$	----	$	19,141	$	19,141
Total	$	688	$	19,141	$	19,829

1	The principal will be repaid in 2 quarterly installments of $93,750 in the first half of 2014, and effective July 1, 2014, quarterly installments of $250,000, with a final installment of the unpaid principal amount payable on November 13, 2015.

2	Balance due represents balance as of December 31, 2013, with fluctuating balances based on working capital requirements of the Company.