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Line of Credit and Long Term Debt | 9 Months Ended
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Sep. 30, 2013
Line of Credit and Long Term Debt [Abstract] |
Line of Credit and Long Term Debt |
7. | Line of Credit and Long Term Debt
Commercial Loan Agreement Facility The Company has an $8,000,000 working capital line of credit facility with Cardinal Bank. The amount available varies from month to month depending upon the amount of qualified customer accounts receivable which currently consists of up to 90% of qualified federal receivables and up to 80% of qualified commercial receivables, less any amounts outstanding on the Cardinal Bank term note. There were no changes in the terms of the credit facility during the three or nine month periods ended September 30, 2013. The Company was advanced and repaid approximately $481,000 during the nine month period ended September 30, 2013. There was no outstanding balance on the credit facility at September 30, 2013. Long-Term Debt Long-term debt consisted of the following:
|  | SEPTEMBER 30, |  |  | DECEMBER 31, |
|  | 2013 |  |  | 2012 |
|  | (Unaudited) |
Cardinal Bank Mortgage Dated December 17, 2010 (1) |  | $ | 488,491 |  |  | $ | 499,938 |
Cardinal Bank Term Note Dated December 31, 2011 (2) |  |  | 2,702,804 |  |  |  | 3,271,535 |
Contingent Obligation Subordinated Seller Financed Promissory Note Dated December 31, 2011 (3) |  |  | - |  |  |  | 1,250,000 |
Non-Contingent Obligation Subordinated Seller Financed Promissory Note Dated December 31, 2011 (4) |  |  | 666,667 |  |  |  | 1,000,000 |
Total |  |  | 3,857,962 |  |  |  | 6,021,473 |
Less: current portion |  |  | (199,033 | ) |  |  | (1,102,741 | )
Long-term debt, net of current portion |  | $ | 3,658,929 |  |  | $ | 4,918,732 |
(1) On December 17, 2010, the Company entered into a real estate purchase agreement to acquire iSYS's call center facility in Columbus, Ohio for approximately $677,000. In connection with the real estate purchase agreement the Company entered into a $528,000 ten-year mortgage with Cardinal Bank to fund the unpaid portion of the purchase price. The mortgage loan bears interest at 6.0% with monthly principal and interest payments of approximately $3,800, and matures on December 17, 2020. The mortgage loan principal and interest payments are based on a twenty-year amortization with the unpaid balance due at maturity. The mortgage loan is secured by the real estate. (2) On December 31, 2011, the Company entered into a $4,000,000 5-year term note with Cardinal Bank ("Cardinal Bank Term Note") to fund a portion of the purchase price paid in connection with the asset purchase agreement with Avalon Global Solutions, Inc. ("AGS") dated December 30, 2011. The term note bears interest at 4.50% with monthly principal and interest payments of approximately $74,694, and matures on December 30, 2016. The term note is secured under a corporate security agreement. (3) On December 31, 2011, the Company entered into a subordinated 3-year term contingent promissory note ("contingent obligation") with a face value of $3.0 million with AGS to fund a portion of the purchase price paid in connection with the asset purchase agreement dated December 30, 2011. The Company carries this contingent obligation at fair value on the condensed consolidated balance sheet at September 30, 2013 and December 31, 2012 at approximately $0 and $1,250,000, respectively. See Note 3 for additional discussion about changes in fair value. (4) On December 31, 2011, the Company entered into a $1.0 million subordinated 3-year term non-contingent note ("term note") with AGS to fund a portion of the purchase price paid in connection with the asset purchase agreement with AGS dated December 30, 2011. The term note bears interest at 3.0% with estimated remaining annual principal payments of $333,333 and $333,334 payable on April 15, 2014 and 2015, respectively, and matures on April 15, 2015. The Company paid the first installment due on April 15, 2013. The term note is subordinated to the Cardinal Bank Term Note. Future estimated remaining repayments on long-term debt are as follows for fiscal years ending December 31 (unaudited):
2013 |  | $ | 199,033 |
2014 |  |  | 1,148,590 |
2015 |  |  | 1,186,310 |
2016 |  |  | 893,773 |
2017 |  |  | 20,187 |
Thereafter |  |  | 410,069 |
Total |  | $ | 3,857,962 |
The Company is required to maintain certain financial covenants in connection with its Cardinal Bank Term Note. These financial covenants include maintaining (i) a debt service ratio of at least 1.2:1.0, (ii) a tangible net worth of at least $4.5 million at December 31, 2013 and (iii) a current ratio of at least 1.1:1.0. As of September 30, 2013, the Company was in compliance with these financial covenants. The Company has reinvested earnings and available capital to pay for its strategy to develop a national MMS sales force and functionalize the business. The Company believes that as a result of this reinvestment and the reduction in earnings that it is probable that the Company may not meet its debt service ratio as of December 31, 2013. The Company will seek to obtain a waiver of non-compliance and/or modify its loan covenants. The Company continues to pay its debt obligations as they become due and comply with the other terms of this loan agreement. The Company has leased certain equipment under capital lease arrangements which expire in 2016. Future minimum payments remaining under these lease agreements are as follows for fiscal years ending December 31 (unaudited):
2013 |  | $ | 13,540 |
2014 |  |  | 51,464 |
2015 |  |  | 51,364 |
2016 |  |  | 9,315 |
Thereafter |  |  | - |
Total |  |  | 125,683 |
Less portion representing interest |  |  | (12,416 | )
Present value of minimum lease payments under capital lease agreements |  |  | 113,267 |
Less current portion |  |  | (10,552 | )
Capital lease obligations, net of current portion |  | $ | 102,715 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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