Line of Credit and Long Term Debt

Commercial Loan Agreement Facility

The Company has an $8.0 million working capital line of credit facility with Cardinal Bank that matures on January 31, 2016. On October 23, 2015, Cardinal Bank extended the maturity date of the Company’s $8.0 million working line of credit through January 31, 2016. The amount available varies from month to month depending upon the amount of qualified customer accounts receivable which currently consists of up to 90% of qualified United States Federal Government receivables and up to 80% of United States domestic commercial and other non-federal government receivables, less any amounts outstanding on the Cardinal Bank term note. The credit facility with Cardinal Bank requires the Company to maintain (i) a tangible net worth of at least $4.5 million and (ii) a current ratio of at least 1.1:1.0. As of September 30, 2015, the Company was in compliance with all financial covenants.

The Company was advanced approximately $15.8 million and repaid approximately $13.8 million during the nine month period ended September 30, 2015. There was approximately $2.0 million outstanding against the Company’s credit facility at September 30, 2015.

Long-Term Debt

Long-term debt consisted of the following:

	SEPTEMBER 30,		DECEMBER 31,
	2015		2014
	(Unaudited)
Cardinal Bank mortgage dated December 17, 2010 (1)	$	455,236	$	468,163
Cardinal Bank term note dated December 31, 2011 (2)		1,087,212		1,710,319
Non-contingent subordinated unsecured promissory note dated December 31, 2011 (3)		-		333,334
Contingent subordinated unsecured loan note payable dated May 31, 2014 (4)		-		1,000,000

Total		1,542,448		3,511,816
Less: current portion		(879,181)		(2,184,016)

Long-term debt, net of current portion	$	663,267	$	1,327,800

(1) On December 17, 2010, the Company entered into a real estate purchase agreement to acquire an operations and call 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 $4.0 million 5-year term note with Cardinal Bank (“Cardinal Bank Term Note”) to fund a portion of the purchase price paid in connection with the asset purchase agreement with Avalon Global Solutions, Inc. (“AGS”) dated December 30, 2011. The term note bears interest at 4.5% 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 $1.0 million subordinated 3-year term non-contingent note (“term note”) with AGS to fund a portion of the purchase price paid in connection with the asset purchase agreement with AGS dated December 30, 2011. The note matured on April 15, 2015. The Company paid the third and final installment of $343,333 (including accrued interest of $10,000) on April 15, 2015.

(4) On May 1, 2014, the Company entered into a $1.0 million subordinated 1-year term unsecured Contingent Note with SCL to fund a portion of the purchase price paid in connection with the Share Sale and Purchase Agreement with SHL dated May 1, 2014. The Contingent Note was scheduled to mature on May 31, 2015. The Company paid the outstanding balance of $1,032,500 (including accrued interest of $32,500) on May 30, 2015.

Capital Lease Obligations

The Company has leased certain equipment and automobiles under capital lease arrangements that expire in 2017. Except for the assumption of certain capital lease arrangements in connection with the acquisition of SCL, there were no changes to existing lease arrangements during the nine month period ended September 30, 2015.