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Bank Financing Arrangements
6 Months Ended
Jun. 30, 2015
Debt Disclosure [Abstract]  
Bank Financing Arrangements

NOTE 6 — Bank Financing Arrangements

 

On February 27, 2014, the Company entered into a new credit facility agreement with Bridge Bank (the “Bank”). The credit facility was activated and transfer of the credit facility from the Company’s former bank was completed on March 7, 2014. The initial revolving credit line agreement was for a two year period ending February 27, 2016. On March 23, 2015, the Company signed a Business Financing Modification Agreement by and between the Company and the Bank to extend the expiration date of the revolving credit line agreement for the domestic (U.S. based) portion of the line from February 27, 2016 to February 27, 2017. All other terms and the expiration date of the international portion of the revolving credit line agreement remain unchanged. Under the terms of the credit facility agreement with the Bank, the Company may borrow up to $2.5 million, of which up to $1.5 million is based on qualified receivables from domestic customers and up to $1.0 million is based on qualified receivables from international customers. The Company’s total borrowings under the line may not exceed 50% of the sum of cash plus qualified receivables. Advances against the domestic and international lines are calculated at 70% of qualified receivables. Borrowings under the lines bear an annual interest rate equal to the Bank’s prime rate (minimum of 3.25%) plus 1.5%. The annual interest rate in effect is 4.75% per annum. There is also a collateral handling fee of 0.2% per month of the financed receivables outstanding. The applicable interest and fees are calculated based on the actual amounts borrowed. At June 30, 2015, the effective rate (interest plus all applicable fees) on actual cash advanced is 7.15% per annum. The borrowings under the credit facility are secured by a first priority security interest in the assets of the Company. All advances are at the Bank’s discretion and the Bank is not obligated to make advances. The agreement may be terminated by the Company or by the Bank at any time. The outstanding amounts borrowed under the domestic line at June 30, 2015 were $815,891, and the full amounts of accounts receivable provided as collateral were $1,160,000. There were no amounts borrowed under the international line at June 30, 2015.

 

Total interest expense on the amounts drawn under the Company’s bank credit lines in effect during the three and six months ended June 30, 2015, was $14,621 and $29,190, respectively. Interest expense on the amounts drawn during the three and six months ended June 30, 2014 was $14,981 and $39,010, respectively. Accrued interest related to the amounts outstanding under the Company’s bank lines of credit at June 30, 2015 and December 31, 2014 was $3,820 and $3,981, respectively.