(6)	LINE OF CREDIT

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 Forbearance Agreement, 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. Subject to any actions the Bank may take pursuant to the Notice Letter, the reducing revolving loan currently 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 September 30, 2017, the revolving line of credit rate was 4.99% and the reducing revolving loan rate was 4.99%. At September 30, 2017, the Company had approximately $894,000 of borrowings outstanding under the revolving line of credit and approximately $506,000 available for borrowing under the revolving line of credit. Pursuant to the Notice Letter, the Bank states that it will charge interest at the default interest rate, LIBOR plus 5%, retroactively to December 31, 2016. At September 30, 2017, the Company had $7.9 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. In addition, capital expenditures may not exceed $180,000 per quarter. As a result of the March 2017 amendment to the Credit Facility, dividends and stock repurchases are not permitted under the Credit Facility.

As disclosed in Note 2, the Company was not in compliance with the required $870,000 of EBITDA in the second quarter ended June 30, 2017 and did not make a required $500,000 payment at June 30, 2017 to decrease the reducing revolving loan from $8.0 million to $7.5 million. On July 21, 2017, the Company received the Notice Letter. The Company also did not make a required $500,000 payment at September 30, 2017 to decrease the reducing revolving loan to $7.0 million. The Bank reduced the Company’s revolving line of credit from $1.4 million to $1.1 million on October 1, 2017 as required by the Forbearance Agreement. Due to these facts, all Bank debt totaling $8.8 million is classified as current as of September 30, 2017. Company is taking the actions described in Note 2 to address the issues raised by the Notice Letter.