6. Term and Credit Note Payable

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

6. Term and Credit Note Payable

Note 6 - Term and Credit Note Payable

The following table summarizes our notes payable balance as of:

Lender	Due Date	Interest Rate	June 30,  2012			December 31, 2011
			(Unaudited)
Bridge Bank - term note; paid in full on March 1, 2012	February 2013	Prime + 2 percentage points	$	-		$	475,000
Bridge Bank - term note	February 2016	Prime + 1 percentage points	4,888,889
Bridge Bank - credit facility; paid in full on March 1, 2012	February 2013	Prime + 2 percentage points	-			2,431,303
Bridge Bank - credit facility	February 2014	Prime + 0.5 percentage points	3,000,000
Totals			7,888,889			2,906,303
Less: term and credit facility payable - current portion			(1,333,333		)	(452,000		)
Term and credit facility - long-term			$	6,555,556		$	2,454,303

Principal Payments Due

Principal payments due are as follows as of June 30, 2012:

2012	$	666,667
2013		1,333,333
2014		1,333,333
2015		1,333,333
2016		222,223
Total	$	4,888,889

On March 1, 2012, we entered into a new Business Financing Agreement with Bridge Bank. N.A. (“Bridge Bank”), for up to a $10 million revolving credit facility (the “Revolving Credit Line”) and a $5 million term loan (the “Term Loan”).  The Revolving Credit Line replaced our then existing $8 million revolving credit facility. The new credit facility will be used primarily to satisfy our working capital needs following the closing of the merger with Vertro described herein.  As of June 30, 2012, there was approximately $1.4 million credit available on the revolving credit facility and $0 on the term loan. Subject to the terms of the new agreement, we are entitled to obtain advances against the Revolving Credit Line up to 80% of eligible accounts receivable balances, which are generally those balances owed by U.S. based customers that are less than 90 days from the date of invoice, plus $1 million up to the credit limit of $10 million.  In addition, subject to the terms of the agreement, we are entitled to borrow up to $5 million under the Term Loan, which is repayable in 45 equal monthly installments beginning June 2012. The Revolving Credit Line portion of the credit facility expires on February 28, 2014, at which time all loan advances under the Revolving Credit Line become due and payable. The Term Loan expires in February 2016. Under the terms of the new agreement, we must maintain certain depository, operating and investment accounts at Bridge Bank; provide Bridge Bank a first priority perfected security interest in all of our accounts and personal property; provide various monthly, quarterly and annual reports; and limit additional indebtedness to $500,000 of purchase money including capital leases and an additional $500,000 of all other indebtedness.  We were required to maintain through May 2012 an “operating profit” of net income plus interest and taxes plus non-cash expenses for amortization, depreciation, stock based compensation, discontinued operations, non-recurring non-cash items and certain closing costs associated with the Vertro transaction of not less than $200,000 for the immediate preceding three month period; after May 2012 a Debt Service Coverage Ratio of at least 1.50 to 1.0 tested on the immediate preceding three month period; and an Asset Coverage Ratio of not less than 1.10 to 1 at all times until September 30, 2012 and 1.25 to 1.0 thereafter.  Interest on the Revolving Credit Line is payable monthly at prime plus 0.5% (3.75% at June 30, 2012) plus a monthly maintenance fee of 0.125 percentage points on the average daily account balance.  Interest on the Term Loan bears interest at prime plus 1% (4.25% at June 30, 2012).  In connection with establishing the credit facility, the Company incurred fees payable to Bridge Bank of approximately $100,000. The agreement calls for a termination fee until the first anniversary and prepayment fee on the Term Loan until the first anniversary.

On June 29, 2012 we entered into the First Business Financing with Bridge Bank which changed the minimum Asset Coverage Ratio to 0.75 to 1.00 for June 2012 through August 2012, then 0.80 to 1.00 for September 2012, 0.85 to 1.00 for October 2012 and to 1.00 to 1.00 for November 2012 and thereafter. It also changed the minimum Operating Profit to $200,000 for June 2012, then $500,000 for July 2012, $1,000,000 for August 2012 and to $1,500,000 for September 2012 and thereafter. Also changed was the minimum Debt Service ratio to 1.5 to 1.0 beginning October 2012 and thereafter. Further, the First Business Financing Modification Agreement waived the event of default caused by the non-compliance of the minimum Debt Coverage ratio in April and May 2012.

As of June 30, 2012, we were in compliance with all terms of the amended Bridge Bank credit facility.