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FINANCING ARRANGEMENTS | 12 Months Ended
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Dec. 31, 2017
FINANCING ARRANGEMENTS |
FINANCING ARRANGEMENTS | NOTE 3. FINANCING ARRANGEMENTS We have a credit agreement with Bank of America which was entered into on June 15, 2017 and provides for a line of credit arrangement of $16 million that expires on June 15, 2022. The credit arrangement also has a $5 million real estate term note outstanding with a maturity date of June 15, 2022. The Bank of America credit agreement replaces our previous credit agreement with Wells Fargo Bank which terminated on June 20, 2017 and resulted in a loss on the extinguishment of debt of $174,834 primarily related to legal and terminations fees. Under the Bank of America credit agreement, both the line of credit and real estate term notes are subject to variations in the LIBOR rate. Our line of credit bears interest at the combined weighted-average interest rate of 3.74% as of December 31, 2017. We had borrowings on our line of credit of $8,502,853 and $7,315,262 outstanding as of December 31, 2017 and 2016, respectively. There are no subjective acceleration clauses under the credit agreement that would accelerate the maturity of our outstanding borrowings. The line of credit and real estate term notes with Bank of America contain certain covenants which, among other things, require us to adhere to regular reporting requirements, abide by annual shareholder dividend limitations, maintain certain financial performance, and limit the amount of annual capital expenditures. The availability under our line is subject to borrowing base requirements, and advances are at the discretion of the lender. The line of credit is secured by substantially all of our assets. The Bank of America credit agreement provides for, among other things, a fixed charge coverage ratio of not less than (i) 1.0 to 1.0 for each period of four fiscal quarters, commencing with the period of four fiscal quarters ending December 31, 2018. The availability under the line is subject to borrowing base requirements, and advances are at the discretion of the lender. At December 31, 2017 and 2016, we had unused availability under our line of credit of $4,231,000 and $5,710,602, respectively, supported by our borrowing base. The line is secured by substantially all of our assets. Our credit agreement with Wells Fargo Bank, which terminated on June 20, 2017, as amended, provided for a line of credit arrangement of $15.0 million through May 31, 2018, of which $7,315,262 was outstanding at December 31, 2016. The credit arrangement also had a $3.5 million of real estate term notes with a maturity in 2027, an equipment loan for $2.7 million and a term loan facility of up to $1.0 million for capital expenditures, both with maturity dates of May 31, 2018. As of December 31, 2016, there was $684,000 outstanding against the $1.0 million capital term note. Under the credit agreement, both the line of credit and real estate term notes were subject to variations in the LIBOR rate, of which interest rates were 3.25%-3.75% at December 31, 2016. The line of credit required a lock box arrangement; however there were no subjective acceleration clauses that would accelerate the maturity of our outstanding borrowings. As amended, the Wells Fargo credit agreement contained certain covenants which, among other things, required us to adhere to regular reporting requirements, abide by annual shareholder dividend limitations, maintain certain financial performance, limit the amount of annual capital expenditures and fixed charge coverage ratio requirement. The availability under the Wells Fargo Bank line was subject to borrowing base requirements. At December 31, 2016, we have net unused availability under our line of credit of approximately $5.7 million. The line was secured by substantially all of our assets. As part of the July 1, 2015 Devicix acquisition we entered into two unsecured subordinated promissory notes payable to the seller in the principal amounts of $1.0 million and $1.3 million. The $1.0 million promissory note has a four-year term, bearing interest at 4% per annum, requiring monthly principal and interest payments of $22,579 and is subject to offsets if certain revenue levels are not met. The $1.3 million promissory note has a four-year term and bears interest at 4% per annum, requiring monthly principal and interest payments of $29,353 and is not subject to offset. Long-term debt balances at December 31, 2017 and 2016 consisted of the following:
|  | December 31, |  | December 31, |
|  | 2017 |  | 2016 |
Term note payable - Bank of America |  |  |  |  |
Real estate term note bearing interest at one-month LIBOR + 2.25% (4.5% as of December 31, 2017) maturing June 15, 2022 with monthly payments of approximately $41,000 plus interest secured by substantially all assets. |  | $ | 4,751,054 |  | $ | — |
Term notes payable - Wells Fargo Bank, N.A. |  |  |  |  |
Real estate term notes bearing interest at three month LIBOR + 2.75% paid in full in 2017 via refinancing with Bank of America |  | — |  | 2,415,428 |
Equipment notes bearing interest at three month LIBOR + 2.75% paid in full in 2017 via refinancing with Bank of America |  | — |  | 2,489,624 |
Industrial revenue bond payable to the City of Blue Earth, Minnesota which bears a variable interest rate had a maturity date on June 1, 2021, with principal of $80,000 payable annually on June 1. Bond redeemed on August 15, 2017. |  | — |  | 200,000 |
Devicix Acquistion Note 1 payable to DeLange Holdings bears interest rate of 4.0% per annum, maturing July 1, 2019. |  | 393,834 |  | 643,585 |
Devicix Acquistion Note 2 payable to DeLange Holdings bears interest rate of 4.0% per annum, maturing July 1, 2019. |  | 511,984 |  | 836,661 |
|  | 5,656,872 |  | 6,585,298 |
Discount on Devicix Notes Payable |  | (62,776 | ) | (102,424 | )
Debt issuance Costs |  | (238,468 | ) | (25,896 | )
Total long-term debt |  | 5,355,628 |  | 6,456,978 |
Current maturities of long-term debt |  | (1,002,586 | ) | (1,565,347 | )
Long-term debt - net of current maturities |  | $ | 4,353,042 |  | $ | 4,891,631 |
Future maturity requirements for long-term debt outstanding as of December 31, 2017, are as follows:
Years Ending December 31, |  | Amount |
2018 |  | $ | 1,095,722 |
2019 |  | 805,880 |
2020 |  | 497,892 |
2021 |  | 497,892 |
2022 |  | 497,892 |
Future |  | 2,261,594 |
|  | $ | 5,656,872 |
During the third quarter of fiscal year 2017, the Company entered into a five-year lease of equipment used in the normal course of business with a principal borrowing amount of $1,095,768. The lease qualifies as a capital lease and is accounted for accordingly, based on an effective interest rate of 4.97%. As of December 31, 2017, the property held under the capital lease was $1,102,607 and as of December 31, 2016, the Company held no capital leases. The Company entered into a second lease in September 2017, with a four year, six-month term used in the normal course of business with a principal borrowing amount of $502,023. The lease qualifies as a capital lease and is accounted for accordingly, based on an effective interest rate of 6.22%. As of December 31, 2017, the property held under the capital lease was $421,138 and as of December 31, 2016, the Company held no capital leases. As of December 31, 2017, the Company had no depreciation expense related to the leased assets as it was not in operational use and related implementation costs were not complete. At December 31, 2017, the current maturities of capital leases are $295,372. For the year ended December 31, 2017 the Company had $9,370 interest expense related to the leased assets. Approximate future minimum lease payments under non-cancelable capital leases subsequent to December 31, 2017 are as follows:
Years Ending |  |  |
December 31, |  | Amount |
2018 |  | $ | 386,657 |
2019 |  | 393,960 |
2020 |  | 393,960 |
2021 |  | 393,960 |
2022 |  | 255,331 |
Total noncancelable future lease commitments |  | $ | 1,823,868 |
Less: interest |  | (226,077 | )
Present value of obligations under capital leases |  | $ | 1,597,791 |
Depreciation on capital leases is recorded as depreciation expense in our results of operations. The above table includes the future minimum lease payments related to a portion of the second lease listed above in the amount of $80,885, that has not been received as of December 31, 2017, that is expected to be received in 2018.

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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 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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