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Long-term Debt and Note Payable to Bank

The Company has credit facilities consisting of a real estate term loan, as amended and restated (the “Virginia Real Estate Loan”), a supplemental real estate term loan, as amended and restated (the “North Carolina Real Estate Loan”) and a revolving credit note.

December 21, 2016,

the Company entered into a Loan Modification Agreement (the “Agreement”) with Bank of North Carolina (“BNC”) to modify the Credit Agreement dated

April 26, 2016

entered into between the Company and BNC, the Revolving Credit Note dated

April 26, 2016

payable by the Company to BNC and the term loans dated

April 26, 2016

payable by the Company to BNC.

The Agreement with BNC lowered the interest rate of the Virginia Real Estate Loan and the North Carolina Real Estate Loan to

3.75%

effective

January 1, 2017

and resulted in lower monthly installment payments.

April 27, 2017,

the Company entered into a Third Loan Modification Agreement with BNC to modify the Credit Agreement dated

April 26, 2016

entered into between the Company and BNC and the term loans dated

April 26, 2016.

The Third Loan Modification Agreement revised the interest rates of the term loans and the applicable repayment installments and extended the maturity date. The fixed interest rate of each of the

two

term loans was revised to

3.95%

from

3.75%,

and the maturity date of the term loans was extended to

May 1, 2024.

All other terms of the term loans remain unaltered and remain in full force and effect.

The real estate loans continue to be secured by a

first

priority lien on all of the Company’s personal property and assets, all money, goods, machinery, equipment, fixtures, inventory, accounts, chattel paper, letter of credit rights, deposit accounts, commercial tort claims, documents, instruments, investment property and general intangibles now owned or hereafter acquired by the Company and wherever located, as well as a

first

lien deed of trust on the Company’s real property.

Long-term debt as of

April 30, 2017

and

October 31, 2016

consists of the following:

	April 30,		October 31,
	2017		2016
Virginia Real Estate Loan ($6.5 million original principal) payable in monthly installments of $31,812, including interest (at 3.95%), with final payment of $3,644,211 due May 1, 2024	$	5,055,036	$	5,165,785
North Carolina Real Estate Loan ($2.24 million original principal) payable in monthly installments of $10,963, including interest (at 3.95%), with final payment of $1,255,850 due May 1, 2024		1,742,043		1,780,209
Total long-term debt		6,797,079		6,945,994
Less current installments		251,216		294,214
Long-term debt, excluding current installments	$	6,545,863	$	6,651,780

The Revolving Credit Note (“Revolver”) with BNC provides the Company with a

$7.0

million revolving line of credit (“Revolving Loan”) for the working capital needs of the Company. Under the Agreement and Revolver, BNC provides the Company with

one

or more revolving loans in a collective maximum principal amount of

$7.0

million. The Company

may

borrow, repay, and reborrow at any time or from time to time while the Revolving Loan is in effect.

The Agreement with BNC resulted in the lowering of the applicable margin in the Revolving Credit Note and established a floor on the interest rate for the Revolving Credit Note such that the rate will never be less than

2.50%

per annum. The Revolving Loan accrues interest at LIBOR plus

2.50%

(resulting in a

3.48%

rate at

April 30, 2017).

The Revolving Loan is payable in monthly payments of interest only with principal and any outstanding interest due and payable at maturity.

February 28, 2017,

the Company entered into a Second Loan Modification Agreement (the “Modification Agreement”) extending the maturity date of the Revolver to

March 31, 2019,

and removing certain previously existing provisions of the Revolving Loan that required reductions in availability originally contemplated to occur on

February 28, 2017

and

2018.

As a result, the collective maximum principal amount of the Revolving Loan will remain at

$7.0

million. All other terms of the Revolving Loan remain unaltered and remain in full force and effect. Within the revolving loan limit of the Revolving Loan and the Modification Agreement, the Company

may

borrow, repay, and reborrow, at any time or from time to time until

March 31, 2019.

The Revolving Loan continues to be secured by a perfected

first

lien security interest on all assets, including but

not

limited to, accounts, as-extracted collateral, chattel paper, commodity accounts, commodity contracts, deposit accounts, documents, equipment, fixtures, furniture, general intangibles, goods, instruments, inventory, investment property, letter of credit rights, payment intangibles, promissory notes, software and general tangible and intangible assets owned now or later acquired. The Revolving Loan is also cross-collateralized with the Company’s real property.

As of

April 30, 2017,

the Company had

$4.9

million of outstanding borrowings on its Revolving Loan and

$2.1

million in available credit. As of

October 31, 2016,

the Company had outstanding borrowings of

$5.0

million on its former revolving credit facility and

$2.0

million in available credit.