(7)

DEBT

Debt consists of the following:

	December 31,
	2015			2016
Revolving credit agreement with a bank not to exceed $2.0 million, at a LIBOR rate plus 2.90%, collateralized by substantially all of the assets of the Company, due in March 2018.		207,578			-
Prepaid Loan Fees		-			-

Revolving credit agreement with a bank not to exceed $2.0 million, at a LIBOR rate plus 3.75%, collateralized by substantially all of the assets of the Company, due in March 2018.		-			945,682
Prepaid Loan Fees		-			(94,676	)

$10.0 million reducing revolving loan with a bank, at a LIBOR rate plus 2.90% with mandatory quarterly payments of approximately $500,000, collateralized by substantially all of the assets of the Company, due in March 2021.		10,000,000			-

$10.0 million reducing revolving loan with a bank, at a LIBOR rate plus 3.75% with mandatory quarterly payments of approximately $500,000, collateralized by substantially all of the assets of the Company, due in March 2021.		-			9,000,000


		10,207,578			9,851,006
Less - current maturities		(1,500,000	)		(2,500,000	)

Long-term debt, net of current maturities	$	8,707,578		$	7,351,006

Credit Facility

On March 29, 2016, the Company entered into a new Loan and Security Agreement with Guaranty Bank and Trust Company, which was subsequently amended, most recently on March 30, 2017 (as amended, the “Credit Facility”). The Credit Facility initially consisted of a $2.0 million revolving line of credit and a $10.0 million reducing revolving loan. The revolving line of credit matures on March 31, 2018. The revolving line of credit commitment reduces in $300,000 increments during 2017 through maturity from $2.0 million to $800,000. The reducing revolving loan matures on March 31, 2021 and requires mandatory reductions of $500,000 per calendar quarter, with a further reduction on April 30, 2018 equal to 50% of EBITDA for 2017 minus capital expenditures for 2017, interest payments on the Credit Facility paid in 2017, $2.0 million, and cash taxes paid during 2017. The reducing revolving loan allows the Company to drawdown, repay and re-draw loans advanced to it within the available balance. Interest varies between LIBOR plus 3.10% and LIBOR plus 3.75% depending on the Company’s funded debt-to-EBITDA ratio. As of December 31, 2016, the revolving line of credit rate was 3.52% and the reducing revolving loan rate was 3.52%. At December 31, 2016, the Company had approximately $946,000 of borrowings outstanding under the revolving line of credit and approximately $1.1 million available for borrowing under the revolving line of credit. At December 31, 2016, the Company had $9.0 million of borrowings outstanding under the reducing revolving loan. The Credit Facility is collateralized by substantially all of the assets of the Company. As amended by the March 2017 amendment, the Credit Facility requires the Company to maintain (i) a funded debt-to-EBITDA ratio of no more than 2.5 to 1.00 for the twelve months ending December 31, 2017 and thereafter, (ii) net worth of at least $1.0 million (increased by 25% of any net income after taxes of the Company in 2017 and thereafter), and (iii) a fixed charge coverage ratio of not less than 1.25 to 1.00 for the quarter ending December 31, 2017 and each quarter thereafter, and to generate at least $870,000 of EBITDA in each of the first three quarters of 2017. In addition, capital expenditures may not exceed $180,000 per quater. After entering into the Credit Facility in March 2016, dividends and stock repurchases were prohibited under the Credit Facility and, as a result of the March 2017 amendment to the Credit Facility, dividends and stock repurchases currently are not permitted under the Credit Facility.

The March 2017 amendment to the Credit Facility also included a forbearance by the bank regarding covenant defaults by the Company as of December 31, 2016 with respect to the ten-existing funded debt-to-EBITDA ratio of no more than 3.15 to 1.00 for the twelve months ended December 31, 2016, fixed charge coverage ratio of at least 1.35 to 1.00 for the quarter ended December 31, 2016 and EBITDA of at least $650,000 for the quarter ended December 31, 2016. The forbearance remains in effect provided that the Company complies with the amended Credit Agreement covenants.

On March 30, 2016, the Company terminated its credit facility with Compass Bank. The Company repaid the outstanding $10.6 million principal amount plus accrued interest under the credit agreement with Compass Bank with borrowings under the new Credit Facility.

Scheduled Maturities

The scheduled maturities of debt are as follows:

Year	Amount

2017	$	2,500,000
2018		2,851,006
2019		2,000,000
2020		2,000,000
2021		500,000

	$	9,851,006