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Line of Credit and Long Term Debt | 12 Months Ended
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Dec. 31, 2013
Line of Credit and Long Term Debt [Abstract] |
Line of Credit and Long Term Debt |
| 9. | Line of Credit and Long Term Debt
Commercial Loan Agreement Facility On December 30, 2011, the Company entered into a new Commercial Loan Agreement (collectively referred to as the "Cardinal Loans") to obtain a $4.0 million term loan (the "$4.0 Million Term Loan") and to increase the revolving line of credit for net working capital from $5.0 million to $8.0 million (the "$8.0 Million Revolver"). On December 21, 2012, the Company entered into a First Modification to Cardinal Loans that (i) extended the repayment date of the revolving credit facility from June 30, 2013 to June 30, 2014; (ii) modified our target net worth requirement from $5.5 million to $4.0 million as of December 31, 2012 and revised target net worth requirement from $5.5 million to $4.5 million as of December 31, 2013 (representing a reduction from the prior-existing $5.5 million target); and (iii) eliminated the Funded Debt to EBITDA covenant. Under the terms of the Cardinal Loans, the lender has the ability to require the Company to immediately settle a portion or all of any outstanding loan balances in event of non-compliance with the terms of the loan agreement. Advances made under the $4.0 Million Term Loan bear interest at 4.5% with monthly principal and interest payments of $74,694 and matures on December 30, 2016. Term loan advances were used to fund a portion of the purchase consideration paid in connection with the AGS business combination that closed on December 31, 2011. Advances made under the $8.0 Million Revolver bear interest at a variable rate equal to the prime rate plus 0.5% and matures on June 30, 2014. For the year ended December 31, 2013 there were advances of approximately $2.0 million and repayments of approximately $1.1 million. For the year ended December 31, 2012 there were advances and repayments of approximately $3.0 million, respectively. The commercial revolving line of credit capacity is based on eligible government and commercial accounts receivable (including unbilled accounts receivable) which are defined as customer balances aged less than 90 days. Long-Term Debt Long-term debt consisted of the following:
|  | DECEMBER 31, |
|  | 2013 |  |  | 2012 |
Cardinal Bank Mortgage Dated December 17, 2010 (1) |  | $ | 484,532 |  |  | $ | 499,938 |
Cardinal Bank Term Note Dated December 31, 2011 (2) |  |  | 2,508,748 |  |  |  | 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 |  |  | 3,659,947 |  |  |  | 6,021,473 |
Less: current portion |  |  | (1,150,455 | ) |  |  | (1,102,741 | )
Long-term debt, net of current portion |  | $ | 2,509,492 |  |  | $ | 4,918,732 |
(1) On December 17, 2010, the Company entered into a real estate purchase agreement to acquire an operations 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 million 5-year term note with Cardinal Bank 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 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 consolidated balance sheet. AGP floor and ceiling targets were not meet in fiscal 2012 which entitled the Company to reduce the face value of the contingent obligation by $0.9 million to a fair value of $1.25 million. AGS can earn up to $1.5 million in fiscal 2013 with the attainment of AGP of $6,752,000. The Company revised its fourth quarter 2013 forecasted AGP to reflect lower projected revenue growth from slower implementation of recently sold services. The Company believes these factors made it remote that the 2013 AGP target of $6,752,000 would be reached and accordingly revised the fair value of its contingent obligation to a zero at December 31, 2013. This contingent obligation is subordinated to the senior bank financing. (4) On December 31, 2011, the Company entered into a $1 million subordinated 3-year term non-contingent promissory note ("term note" or "non-contingent obligation") with AGS to fund a portion of the purchase price paid in connection with the asset purchase agreement with Avalon Global Solutions, Inc. 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 notes are subordinated to the senior bank financing. Future repayments on long-term debt are as follows for fiscal years ending December 31:
2014 |  | $ | 1,150,455 |
2015 |  |  | 1,186,309 |
2016 |  |  | 892,443 |
2017 |  |  | 20,187 |
2018 |  |  | 21,432 |
Thereafter |  |  | 389,121 |
Total |  | $ | 3,659,947 |
Debt Covenant Compliance The credit facility requires the Company to maintain certain financial covenants, including 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 December 31, 2013, the Company was not in full compliance with these financial covenants and obtained a waiver from its financial institution as of December 31, 2013. The Company obtained from its lender a waiver of non-compliance with regard to its financial covenants as of December 31, 2013. On March 3, 2014, the Company completed a public offering which immediately brought the Company into compliance with its tangible net worth and current ratio financial covenants. See Note 15 for additional information regarding the Company's recent public offering. Capital Lease Obligations The Company has leased certain equipment under capital lease arrangements which expire in 2016. For the year ended December 31, 2013 the Company did not enter into any capital lease agreements. For the year ended December 31, 2012 the Company entered into an equipment capital lease agreement with a net present value of approximately $176,200. For the year ended December 31, 2012 there were disposals of certain expired equipment leases with a gross value and accumulated depreciation of approximately $130,700, respectively. The following sets forth the Company's future obligations under capital lease agreement for fiscal years ending December 31:
2013 |  | $ | 51,364 |
2014 |  |  | 51,464 |
2015 |  |  | 9,243 |
2016 |  |  | - |
Thereafter |  |  | - |
Total |  |  | 112,071 |
Less portion representing interest |  |  | (9,827 | )
Present value of minimum lease payments under capital lease agreements |  |  | 102,244 |
Less current portion |  |  | (45,125 | )
Capital lease obligations, net of current portion |  | $ | 57,119 |

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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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