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Bank Financing Arrangements
9 Months Ended
Sep. 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 revolving credit line agreement is for a two year period ending February 27, 2016. 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%. 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 September 30, 2015, the annual interest rate was 4.75% per annum and the effective rate (interest plus all applicable fees) on actual cash advanced was 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. At September 30, 2015, the Company only borrowed under the domestic line for $413,212 and had additional unused borrowing capacity of approximately $1,069,000 on its bank lines of credit.

 

Total interest expense on the amounts drawn under the Company’s bank credit lines in effect during the three and nine months ended September 30, 2015, was $6,373 and $35,562, respectively. Interest expense on the amounts drawn during the three and nine months ended September 30, 2014 was $16,082 and $55,092, respectively. Accrued interest related to the amounts outstanding under the Company’s bank lines of credit at September 30, 2015 and December 31, 2014 was $1,213 and $3,981, respectively.