Note 4. Long-Term Debt

The Company has a revolving credit agreement with Community Bank, N.A., which currently provides for borrowings of up to $10,000,000 and bears interest at either the 30, 60 or 90 day LIBOR (the 90 day LIBOR at August 31, 2017 and 2016 was 1.31% and 0.81%, respectively) plus 1.75% or the bank’s reference rate (4.25% and 3.5% at August 31, 2017 and 2016). Borrowings are secured by substantially all assets of the Company. The credit agreement, expires in March 2019. The amounts outstanding under this line of credit as of August 31, 2017 and 2016 were $6,967,000 and zero, respectively. The line of credit agreement contains certain nonfinancial and financial covenants, including the maintenance of certain financial ratios. As of August 31, 2017, the Company was in compliance with all such covenants.

On May 15, 2017, the Company entered into a $5,400,000 loan agreement with Community Bank. The proceeds of the loan were used to purchase the building that houses the Company’s corporate headquarters and distribution center located in Anaheim, California. This loan is payable in 35 regular monthly payments of $27,142 and one irregular last payment of $5,001,607 due on the maturity of the loan on May 16, 2020. The loan is secured by a deed of trust to the Lakeview Property and bears interest at the bank’s reference rate (1.79% at May 31, 2017) plus 1.70%. At August 31, 2017, the outstanding balance of this loan was $5,365,000.