(6)	LINE OF CREDIT

On March 29, 2016, the Company entered into 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. As amended by the March 2017 amendment, the revolving line of credit commitment reduces in four $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 the product of (i) 50% multiplied by (ii) 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 March 31, 2017, the revolving line of credit rate was 4.73% and the reducing revolving loan rate was 4.73%. At March 31, 2017, the Company had approximately $1.3 million of borrowings outstanding under the revolving line of credit and approximately $716,000 available for borrowing under the revolving line of credit. At March 31, 2017, the Company had $8.0 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) a fixed charge coverage ratio for the immediately preceding twelve months of not less than 1.25 to 1.00 for the quarter ending December 31, 2017 and each quarter thereafter, and (iii) to generate at least $870,000 of EBITDA in each of the first three quarters of 2017.

As disclosed in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations--Recent Developments” below, the Company decided to discontinue the strategic assessment begun in the second quarter of 2016 and as a result incurred $104,000 in expenses associated with this strategic assessment in the first quarter of 2017. When the Credit Facility was amended in March 2017, the Bank agreed to exclude up to $120,000 of such expenses in determining compliance with the Credit Facility EBITDA covenant for each of the first three quarters of 2017. Therefore, for purposes of determining compliance with the Credit Facility EBITDA covenant in the first quarter of 2017, the Company generated $881,000 in EBITDA and was in compliance with the EBITDA covenant as of March 31, 2017. The Company also was in compliance with the other amended Credit Facility covenants as of March 31, 2017. In addition, capital expenditures may not exceed $180,000 per quarter. 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 then-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 Facility covenants. There can be no assurances that the Bank will not change the terms of the Credit Facility or cease to forbear or continue to extend credit to the Company. Any such actions or failure by the Company to maintain compliance with the Credit Facility in the future could have a material adverse effect on the Company.