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Term and Credit Note Payable | 3 Months Ended
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Mar. 31, 2012
Notes to Financial Statements |
Note 6. Term and Credit Note Payable | The following table summarizes our notes payable balance as of:
Lender |  | Due Date |  | Interest Rate |  | March 31, 2012 (unaudited) |  |  | December 31, 2011 |
Bridge Bank – term note; paid in full on March 1, 2012 |  | February 2013 |  | Prime + 2 percentage points |  | $ | - |  |  | $ | 475,000 |
Bridge Bank – term note |  | February 2016 |  | Prime + 1 percentage points |  |  | 5,000,000 |  |  |  |  |
Bridge Bank – credit facility; paid in full on March 1, 2012 |  | February 2014 |  | Prime + 2 percentage points |  |  | - |  |  |  | 2,431,303 |
Totals |  |  |  |  |  |  | 5,000,000 |  |  |  | 2,906,303 |
Less:term and credit facility payable – current portion |  |  |  |  |  |  | (1,111,000 | ) |  |  | (452,000 | )
Term and credit facility – long-term |  |  |  |  |  | $ | 3,889,000 |  |  | $ | 2,454,303 |
Principal Payments Due Principal payments due are as follows as of March 31, 2012:
2012 |  | $ | 777,778 |
2013 |  |  | 1,333,333 |
2014 |  |  | 1,333,333 |
2015 |  |  | 1,333,333 |
2016 |  |  | 222,223 |
Total |  | $ | 5,000,000 |
On March 1, 2012, we entered into a new Business Financing Agreement with Bridge Bank. N.A. (“Bridge Bank”), for up to a $10 million revolving credit facility (the “Revolving Credit Line”) and a $5 million term loan (the “Term Loan”). The Revolving Credit Line replaced the Company’s then existing $8 million revolving credit facility. The new credit facility will be used primarily to satisfy the working capital needs of the Company following the closing of the merger with Vertro, Inc. described herein. As of March 31, 2012, there was approximately $4 million credit available on the revolving credit facility and $0 on the term loan. Subject to the terms of the new agreement, the Company is entitled to obtain advances against the Revolving Credit Line up to 80% of eligible accounts receivable balances, which are generally those balances owed by U.S. based customers that are less than 90 days from the date of invoice, plus $1 million up to the credit limit of $10 million. In addition, subject to the terms of the agreement, the Company is entitled to borrow up to $5 million under the Term Loan, which is repayable in 45 equal monthly installments beginning June 2012. The Revolving Credit Line portion of the credit facility expires on February 28, 2014, at which time all loan advances under the Revolving Credit Line become due and payable. The Term Loan expires in February 2016. Under the terms of the new agreement, we must maintain certain depository, operating and investment accounts at Bridge Bank; provide Bridge Bank a first priority perfected security interest in all of our accounts and personal property; provide various monthly, quarterly and annual reports; and limit additional indebtedness to $500,000 of purchase money including capital leases and an additional $500,000 of all other indebtedness. In addition, the Company must maintain through May 2012 an “operating profit” of net income plus interest and taxes plus non-cash expenses for amortization, depreciation, stock based compensation, discontinued operations, non-recurring non-cash items and certain closing costs associated with the Vertro transaction of not less than $200,000 for the immediate proceeding three month period; after May 2012 a Debt Service Coverage Ratio of at least 1.50 to 1.0 tested on the immediate proceeding three month period; and an Asset Coverage Ratio of not less than1.10 to 1 at all times until September 30, 2012 and 1.25 to 1.0 thereafter. Interest on the Revolving Credit Line is payable monthly at prime plus 0.5% (3.75% at March 31, 2012) plus a monthly maintenance fee of 0.125 percentage points on the average daily account balance. Interest on the Term Loan bears interest at prime plus 1% (4.25% at March 31, 2012). In connection with establishing the credit facility, the Company incurred fees payable to Bridge Bank of approximately $100,000. The agreement calls for a termination fee until the first anniversary and prepayment fee on the Term Loan until the first anniversary. On February 15, 2011, we entered into a two-year Business Financing Agreement (the “Agreement”) with Bridge Bank. This Agreement provided for a revolving credit facility of up to $8.0 million. The Bridge Bank credit facility allows us to borrow against 80% of eligible accounts receivable balances, which are generally those balances owed by U.S. based customers that are less than 90 days from the date of invoice. In addition, the Bridge Bank facility provided an additional term note payable of $475,000 to collateralize a stand-by letter of credit required by our corporate headquarters lease. The $475,000 of proceeds from the term note payable is included in restricted cash as of March 31, 2012. At the closing of the Agreement several fees were paid including a facility fee (0.25% of the maximum credit limit), a due diligence fee of $800, a fee-in-lieu-of-warrant of $21,250 and a non-formula facility fee of $4,750. A maintenance fee of 0.125% of the average daily balance and the finance charge (Prime Rate plus 200 bonus points) was due monthly. At March 1, 2012, the Agreement terminated and was replaced with the Business Financing Agreement described above. As of March 31, 2012, there was $0 outstanding under the revolving credit facility and the remaining balance of the fees paid at the February 2011 closing, $100,743, were written off. On June 2, 2011, we entered into a Business Financing Modification Agreement with Bridge Bank effective May 25, 2011 pursuant to which $1.0 million of the revolving line of credit was converted to a nonformula sublimit of availability that would mature in 240 days. In order to secure this additional availability, Mr. Charles D. Morgan, a member of our board of directors, provided a backup letter of credit to Bridge Bank in the amount of $1.0 million. In connection therewith, we entered into a Reimbursement and Security Agreement with Mr. Morgan pursuant to which we granted him a second position security interest in and to our assets and agreed to reimburse him should Bridge Bank be required to draw against the backup letter of credit provided by him. We drew down on this additional availability and used it for our working capital needs. It was fully repaid on June 23, 2011. At March 31, 2012, we were in compliance with all terms of the Bridge Bank credit facility.

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