(

)

Long-term Debt and Note Payable to Bank

The Company has credit facilities consisting of a real estate term loan, as amended and restated (the “Virginia Real Estate Loan”), a supplemental real estate term loan, as amended and restated (the “North Carolina Real Estate Loan”) and a Revolving Credit Note (“Revolver”).

Both the Virginia Real Estate Loan and the North Carolina Real Estate Loan are with Pinnacle Bank (“Pinnacle”), have a fixed interest rate of

3.95%

and are secured by a

first

priority lien on all of the Company’s personal property and assets, all money, goods, machinery, equipment, fixtures, inventory, accounts, chattel paper, letter of credit rights, deposit accounts, commercial tort claims, documents, instruments, investment property and general intangibles now owned or hereafter acquired by the Company and wherever located, as well as a

first

lien deed of trust on the Company’s real property.

Long-term debt as of

October 31, 2018

and

2017

consists of the following:

	October 31,
	2018		2017
Virginia Real Estate Loan ($6.5 million original principal) payable in monthly installments of $31,812, including interest (at 3.95%), with final payment of $3,644,211 due May 1, 2024	$	4,774,252	$	4,960,738
North Carolina Real Estate Loan ($2.24 million original principal) payable in monthly installments of $10,963, including interest (at 3.95%), with final payment of $1,255,850 due May 1, 2024		1,645,332		1,709,595
Total long-term debt		6,419,584		6,670,333
Less current installments		260,954		250,726
Long-term debt, excluding current installments	$	6,158,630	$	6,419,607

The Revolver with Pinnacle provides the Company with a

$7.0

million revolving line of credit (“Revolving Loan”) for the working capital needs of the Company. Under the Revolver, Pinnacle provides the Company with

one

or more revolving loans in a collective maximum principal amount of

$7.0

million. The Company

may

borrow, repay, and reborrow at any time or from time to time while the Revolving Loan is in effect.

The applicable margin in the Revolving Credit Note has a floor on the interest rate for the Revolving Credit Note such that the rate will never be less than

2.50%

per annum. The Revolving Loan accrues interest at LIBOR plus

2.50%

(resulting in a

4.74%

rate at

October 31, 2018).

The Revolving Loan is payable in monthly payments of interest only with principal and any outstanding interest due and payable at maturity.

April 10, 2018,

the Company entered into a Fourth Loan Modification Agreement with Pinnacle to modify the Credit Agreement dated

April 26, 2016

entered into between the Company and Pinnacle and the term loans dated

April 26, 2016.

The Fourth Loan Modification Agreement extended the maturity date of the Revolving Loan to

September 30, 2019

and modified

two

financial covenants for the Company.

Also on

April 10, 2018,

the Company entered into a Special Project Loan Agreement and Special Project Revolver with Pinnacle which provided the Company with a

$6.0

million revolving line of credit (the “Special Project Revolving Loan”) for the working capital needs related to the fulfillment and processing of certain orders. Under the Special Project Revolver, Pinnacle provided the Company with

one

or more revolving loans in a collective maximum principal amount of

$6.0

million. The Company could borrow, repay, and reborrow at any time or from time to time while the Special Project Revolving Loan was in effect.

The Special Project Revolving Loan accrued interest at LIBOR plus

4.0%.

The Special Project Revolving Loan was payable in monthly payments of interest only with principal and any outstanding interest due and payable at maturity. The Special Project Revolving Loan matured on

October 1, 2018,

according to the terms of the agreement.

The Company’s outstanding balance on the Special Project Revolving Loan never exceeded

$2.8

million during its term, and the final payment on the revolver was made in

July 2018

prior to its maturity on

October 1, 2018.

October 15, 2018,

the Company entered into a Fifth Loan Modification Agreement with Pinnacle to modify the Credit Agreement dated

April 26, 2016

entered into between the Company and Pinnacle and the term loans dated

April 26, 2016.

The Fifth Loan Modification Agreement extends the maturity date of the Revolving Loan to

April 30, 2020

and modifies

three

financial covenants for the Company. All other terms of the Revolving Loan remain unaltered and in effect.

The Revolving Loan continues to be secured by a perfected

first

lien security interest on all assets, including but

not

limited to, accounts, as-extracted collateral, chattel paper, commodity accounts, commodity contracts, deposit accounts, documents, equipment, fixtures, furniture, general intangibles, goods, instruments, inventory, investment property, letter of credit rights, payment intangibles, promissory notes, software and general tangible and intangible assets owned now or later acquired. The Revolving Loan is also cross-collateralized with the Company’s real property.

As of

October 31, 2018,

the Company had

$3.0

million of outstanding borrowings on its Revolving Loan and

$4.0

million in available credit. As of

October 31, 2017

the Company had

$5.7

million of outstanding borrowings on its Revolving Loan and

$1.3

million in available credit.

The aggregate maturities of long-term debt for each of the

five

years subsequent to

October 31, 2018

are:

$260,954

in fiscal year

2019,

$3,270,918

in fiscal year

2020,

$282,651

in fiscal year

2021,

$294,181

in fiscal year

2022

and

$306,180

in fiscal year

2023.