Note 4 - Debt - Subsequent Events

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

4

. Debt

– Subsequent Events

                   

	June 30		December 31
	2018		2017
Term loan	$	2,355,861	$	2,545,421
Revolving line of credit		500,000		500,000
		2,855,861		3,045,421
Less current portion		2,855,861		3,045,421
Total long-term debt	$	-	$	-

The original

September 30, 2015

$3.25

million term loan requires monthly term loan payments, under a

ten

-year amortization, consisting of principal of

$27,080

plus interest with a balloon payment for the outstanding balance due and payable on

September 30, 2018.

Effective with an

April 11, 2018

loan agreement amendment, under similar monthly payment and interest rate terms, the term loan’s balloon payment due date has been extended from

September 30, 2018

to

April 29, 2019.

The term loan's interest rate is based on the

30

-day LIBOR plus

2.25%

and was

4.26%

at

June 30, 2018.

Effective with an

April 11, 2018

loan amendment, the revolving line of credit’s term has been extended from

April 30, 2018

to

April 29, 2019

and the revolver’s maximum borrowing amount has been reduced from

$3.5

million to

$2.0

million. At

June 30, 2018,

outstanding borrowings under the revolving line of credit were

$500,000.

The interest rate on revolver borrowings is identical to the term loan.

Borrowings under the lending agreements continued to be secured by all tangible and intangible assets of the Company, a whole life insurance policy on the life of the Company's Chief Executive Officer, which was assigned to the lender, and by a mortgage on the real estate of the Company's headquarters.

The loan agreements, including the

April 2018

loan amendment, include quarterly financial covenants requiring the Company to maintain net tangible worth of

not

less than

$9.5

million, and i) a cumulative minimum EBITDA requirement of

$400,000;

$600,000;

and

$800,000

for the fiscal periods ending

June 30, 2018;

September 30, 2018;

and

December 31, 2018;

respectively; and ii) a minimum EBITDA of

$200,000

for the quarter ended

March 31, 2019.

As defined, EBITDA equals the Company's consolidated net income for such period, before interest expense, income tax expense, depreciation and amortization, and management fees, and further adjusted to exclude any gain or loss on the sale of assets, other extraordinary gains or losses, and any

one

-time adjustment approved by the lender.

At

June 30, 2018,

the Company was current on all principal and interest payments due to its lender. In

July 2018,

management voluntarily elected to redeem the cash surrender value (CSV) of the Company’s whole life insurance policy maintained on the life of the Company’s Board of Directors’ Chairman and former Chief Executive Officer. Upon redemption and related receipt of the

$3.07

million CSV proceeds, the Company simultaneously remitted to its lender

$2.86

million of the CSV proceeds to be applied towards the full reduction of its outstanding term loan and revolver loan balances. Following this series of

July 2018

transactions, the balances of the Company’s term loan, revolver loan, and life insurance policy balances were

zero

. Based upon the aforementioned

July 2018

activity, the Company has presented the

June 30, 2018

balances of the life insurance policy, term loan, and revolver loan as current assets and current liabilities, respectively, in the

June 30, 2018

condensed consolidated balance sheets.