NOTE 6 – LINE OF CREDIT

PNC BANK NATIONAL ASSOCIATION

On July 14, 2014, the Company executed a three-year revolving credit facility (the “Revolving Line of Credit”) with PNC Bank, National Association (“PNC”) that replaced an existing line of credit agreement with Crestmark Bank. The Revolving Line of Credit has a three year term expiring on July 14, 2017. The outstanding loan balance cannot exceed $15,000,000 during peak selling season between August 1 and December 31 and is reduced to a maximum of $7,500,000 between January 1 and July 31. Usage under the Revolving Line of Credit shall not exceed the sum of the following (the “Borrowing Base”):

Up to 85% of the company’s eligible domestic and Canadian accounts receivable aged less than 60 days past due (not to exceed 90 days from invoice date, cross aged on the basis of 50% or more past due with certain specific accounts qualifying for up to 120 days from invoice date not to exceed 30 days from the due date; plus

Up to the lesser of (a) 50% of the cost of eligible inventory or (b) 75% of net orderly liquidation value percentage of eligible inventory (annual inventory appraisals required); minus

An all-time $500,000 block; minus

Applicable reserves including a dilution reserve equal to 125% of the Company’s advertising and return accrual reserves. Dilution reserve not to exceed availability generated from eligible accounts receivable.

The Revolving Line of Credit includes the following sub-limits:

Letters of Credit to be issued limited to $3,000,000.

Inventory availability limited to $4,000,000.

Mandatory pay-down to $1,000,000 (excluding letters of credit) for any 30 consecutive days between February 1 and April 30.

The Revolving Line of Credit must comply with the following quarterly financial covenants to avoid default:

Fixed charge coverage ratio test of 1.1:1 times measured on a rolling four quarter basis, defined as EBITDA less non-financed capital expenditures, cash dividends and distributions paid and cash taxes paid divided by the sum of interest and principal on all indebtedness.

Capital expenditures limited to $150,000 per year.

Interest on the Revolving Line of Credit is accrued at 2% per annum over PNC’s announced prime rate with an option for the Company to elect the 1, 2 or 3 month fully absorbed PNC LIBOR Rate plus 3.5% per annum with a default rate of 2% over the applicable rate. There is an unused facility fee equal to .375% per annum on the unused portion of the Revolving Line of Credit which will be calculated on the basis of a 360 day year for the actual number of days elapsed and will be payable quarterly in arrears. During the three month periods ended September 30, 2015 and 2014, the Company incurred interest expense of $42,478 and $61,065, respectively on amounts borrowed against the Revolving Line of Credit. During the six month periods ended September 30, 2015 and 2014, the Company incurred interest expense of $52,143 and $61,065, respectively on amounts borrowed against the Revolving Line of Credit. During the three month periods ended September 30, 2015 and 2014, the Company incurred an unused facility fee of $8,132 and $7,617, respectively on the unused portion of the Revolving Line of Credit. During the six month periods ended September 30, 2015 and 2014, the Company incurred an unused facility fee of $14,274 and $7,617, respectively on the unused portion of the Revolving Line of Credit.

The Revolving Line of Credit is secured by first priority security interests in all of the named borrowers’ tangible and intangible assets as well as first priority security interests of 100% of member or ownership interests of any of its domestic existing or newly formed subsidiaries and first priority lien on up to 65% of the borrowers’ domestic subsidiary’s existing or subsequently formed or acquired foreign subsidiaries. The Revolving Line of Credit is also secured by a related-party debt subordination agreement with Starlight Marketing Development, Ltd. in the amount of $2,500,000. Costs associated with securing the Revolving Line of Credit of approximately $222,000 were deferred and amortized over the term of the agreement. During the three month periods ended September 30, 2015 and 2014, the Company incurred amortization expense of $18,520 and $15,433, respectively. During the six month periods ended September 30, 2015 and 2014, the Company incurred amortization expense of $37,039 and $15,433, respectively.

As a condition of the Revolving Line of Credit, a portion of the Company’s related-party debt with Ram Light Management, Ltd.in the amount of $1,100,000 was converted to a note payable with Ram Light Management, Ltd. (“Ram Light Note”). The Ram Light Note bears interest at 6% per annum with quarterly payments of $150,000 (including principal and interest) payable beginning December 31, 2014. Scheduled principal and interest payments of $150,000 will only be permitted upon receipt of the Company’s current quarterly compliance certificate; the Company having met the mandatory pay-down of the Revolving Line of Credit to $1,000,000 and average excess availability for the prior 30 days (after subtraction of third party trade payables 30 days or more past due) of no less than $1,000,000 after giving effect to the payment. The Company did not meet the above requirements for the first three scheduled payments, however, the company did meet the requirements as of September 30, 2015 and accordingly made the $150,000 payment due on September 30, 2015. For the three months ended September 30, 2015 and 2014 the company accrued interest expense on the Ram Light Note in the amount of $17,544 and $12,964, respectively. For the six months ended September 30, 2015 and 2014 the company accrued interest expense on the Ram Light Note in the amount of $34,828 and $12,964, respectively.