5. Revolving Line of Credit

12 Months Ended

Dec. 31, 2013

Revolving Line Of Credit

5. Revolving Line of Credit

On December 20, 2005, the Company entered into a revolving line of credit agreement with TD Bank providing for demand or short-term borrowings up to $1,000,000.  The credit agreement includes an interest rate indexed to 3.00% above the British Bankers’ Association London Interbank Offered Rate (BBA LIBOR).  The line of credit was renewed on November 26, 2013, and expires on December 1, 2014.  Draws against the line are limited by varying percentages of the Company’s eligible accounts receivable.  The bank is granted a security interest in all company assets if there are borrowings under the line of credit.  Interest on outstanding balances is payable monthly.  The effective rate at December 31, 2013, was 3.16%.  At December 31, 2012, the effective rate was 3.21%.

The bank has a first priority security interest in the Company’s receivables and a direct assignment of its U.S. federal government contracts.  Under the line of credit agreement, the Company is bound by certain covenants, including maintaining positive net income as tested on an annual basis and producing a number of periodic financial reports for the benefit of the bank.  As of December 31, 2013, the Company was not in compliance with the positive net income covenant. There was no outstanding balance on the line of credit at December 31, 2013 or 2012.