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Note 4 - Line of Credit
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9 Months Ended |
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Jun. 30, 2011
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| Line of Credit Facility, Description |
NOTE
4 – Line of
Credit
On
August 1, 2011, the Company entered into a Second Amended and
Restated Loan Agreement (the “Loan Agreement”)
with Heartland Bank (the “Bank”) to extend the
term of the Company’s revolving line of credit to
August 1, 2012 and revise the structure of the revolving line
of credit. The previous structure consisted of a revolving
note for up to $1,000,000 with borrowings limited to 50% of
eligible accounts receivable and a revolving note for up to
$1,000,000 with borrowings limited to the amount of a
supporting letter of credit issued by The World Bank or
another issuer of equivalent credit quality approved by the
Bank. The new structure consists of a single
revolving note for up to $2,000,000 with the Bank, with
borrowings limited to a borrowing base determined based on
70% or 80% of eligible accounts receivable plus 50% of
eligible inventory. Significant restrictive covenants in the
Loan Agreement include prohibitions on any merger,
consolidation or sale of all or a substantial portion of the
Company’s assets and limits on the payment of dividends
or the repurchase of shares. The Loan Agreement does not
contain any financial covenants that require compliance with
ratios or amounts. Dividends and share repurchases
are permitted as long as after giving effect to the dividend
or share repurchase the Company has a ratio of
total liabilities to total stockholders’ equity of no
more than 1:1. The revolving note with
the Bank will expire August 1, 2012. Borrowings on
the revolving note bear interest at a rate of the base rate
plus 0.5%. The note is collateralized by substantially all of
the assets of the Company. No amounts were outstanding under
the previous revolving notes at June 30, 2011, and September
30, 2010.
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