Note 8. Line of Credit

3 Months Ended

Sep. 30, 2016

Notes

Note 8. Line of Credit

NOTE 8.  LINE OF CREDIT

There was no outstanding balance on the line of credit as of September 30, 2016, or as of June 30, 2016. The $1.0 million line of credit was effective September 21, 2016. Interest on the line of credit is based on the prime rate plus 5%.  It is collateralized by inventory and accounts receivable.  Borrowing limitations are based on 85% of eligible accounts receivable and $700,000 of eligible inventory.  The current borrowing base on the line of credit would be approximately $3.3 million.  Presently the line of credit is on stand-by status.  The Company pays $2,000 per month as a minimum access fee to the line of credit.  If the Company determines to activate the line it is required to provide the lender with 45 days’ notice of intent to begin borrowing.  The line of credit has a maturity date of September 21, 2017.  The line of credit has no negative loan covenants, however, once the line of credit is activated there are affirmative covenants to provide regular accounts receivable reports and financial statements.