Note 7. Line of Credit

3 Months Ended

Sep. 30, 2014

Notes

Note 7. Line of Credit

NOTE 7.  LINE OF CREDIT

Interest on the line of credit is based on the 90-day LIBOR rate (.24% as of September 30, 2014) plus 3.5%.  The line of credit is collateralized by accounts receivable and inventories.  Borrowing limitations are based on approximately 45% of eligible inventory and up to 80% of eligible accounts receivable, up to a maximum credit facility of $2,435,880.  Interest payments on the line are due monthly.  As of September 30, 2014, the borrowing base was $2,435,880 resulting in $1,263,809 of available credit on the line.

The line of credit agreement includes covenants requiring us to maintain certain financial ratios.  As of September 30, 2014, we were in compliance with all loan covenants.  The line of credit matures on January 31, 2015.  We believe that amounts available under the line of credit as well as cash generated from operating activities will continue to be sufficient to meet our short-term operating requirements. However, we and our bank have agreed to not extend the line of credit beyond the current maturity date.  Therefore, we are seeking replacement financing for the line of credit.  Failure to obtain replacement financing would have a material adverse effect on our business operations. All borrowings under the line of credit are presented as current liabilities in the accompanying consolidated balance sheet.