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Note 4 - Line of Credit
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3 Months Ended |
|---|---|
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Mar. 31, 2012
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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”). The Loan
Agreement provides for maximum revolving credit borrowings of
$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 (4.50% at March 31,
2012) plus 0.5%. The note is collateralized by substantially
all of the assets of the Company. No amounts were outstanding
under the Loan Agreement at March 31, 2012 or September 30,
2011.
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