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 $16,000,000 that expires on June 15, 2022. The credit arrangement also has a $5,000,000 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 new 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 one-month LIBOR + 2.00% (approximately 3.25% at September 30, 2017) while our real estate term notes bear interest at one-month LIBOR + 2.25% (approximately 3.50% at September 30, 2017). The combined weighted-average interest rate related to our new line of credit agreement and terminated credit agreement was 3.68% and 3.57% for the three and nine months ended September 30, 2017, respectively. We had borrowings on our line of credit of $8,481,396 and $7,315,262 outstanding as of September 30, 2017 and December 31, 2016, respectively. There are no acceleration clauses under the credit agreement that would accelerate the maturity of our outstanding borrowings.

The Bank of America credit agreement provides for, among other things, a fixed charge coverage ratio of not less than (i) 1.00 to 1.00 for the trailing four fiscal quarters most recently ended. As of September 30, 2017, we were in compliance with this covenant.

The availability under the line is subject to borrowing base requirements, and advances are at the discretion of the lender. At September 30, 2017, we had unused availability under our line of credit of $4,462,000 supported by our borrowing base. The line is 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 $1,000,000 and $1,300,000. The $1,000,000 promissory note has a four-year term, bearing interest at 4.0% per annum, requiring monthly principal and interest payments of $22,579 and is subject to offsets if certain revenue levels are not met. The $1,300,000 promissory note has a four-year term and bears interest at 4.0% per annum, requiring monthly principal and interest payments of $29,353 and is not subject to offset.

Long-term debt at September 30, 2017 and December 31, 2016 consisted of the following:

	September 30,			December 31,
	2017			2016
Term note payable - Bank of America
Real estate term note bearing interest at one-month LIBOR + 2.25% maturing June 15, 2022 with monthly payments of approximately $41,000 plus interest secured by substantially all assets.	$	4,875,527		$	—

Term notes payable - Wells Fargo Bank, N.A.
Real estate term notes bearing interest at three month LIBOR + 2.75% maturing March 31, 2027, and December 31, 2027 with combined monthly payments of approximately $19,000 plus interest, secured by substantially all assets.	—			2,415,428

Equipment notes bearing interest at three month LIBOR + 2.75% maturing May 2018 with a combined monthly payments of approximately $46,000 plus interest, secured by substantially all assets.	—			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.	457,210			643,585

Devicix Acquistion Note 2 payable to DeLange Holdings bears interest rate of 4.0% per annum, maturing July 1, 2019.	594,373			836,661

	5,927,110			6,585,298
Discount on Devicix Notes Payable	(72,688		)	(102,424		)
Debt issuance Costs	(251,841		)	(25,896		)

Total long-term debt	5,602,581			6,456,978
Current maturities of long-term debt	(990,755		)	(1,565,347		)

Long-term debt - net of current maturities	$	4,611,826		$	4,891,631

Capital Leases

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. The lease qualifies as a capital lease and is accounted for accordingly. As of September 30, 2017, the property held under the capital lease was $971,628 and as of December 31, 2016, the Company held no capital leases. For the three and nine months ended September 30, 2017 and 2016, the Company had no amortization expense related to the leased assets as it was not in operational use as of September 30, 2017. The principal borrowing amount of the capital lease is $1,095,768.

Approximate future minimum lease payments under non-cancelable capital leases subsequent to September 30, 2017 are as follows:

Years Ending
December 31,	Amount
Remainder of 2017	$	16,620
2018	198,574
2019	208,733
2020	219,412
2021	230,638
Thereafter	221,791

Total	$	1,095,768