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 Intercontinental Exchange Benchmark Administration Ltd. London Interbank Offered Rate (“ICE LIBOR”). The line of credit will next expire on May 31, 2017. The draws against the line are limited by varying percentages of the Company’s eligible accounts receivable. The draw limit at December 31, 2016 was $650,597. 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, 2016 was 3.744%. At December 31, 2015, the effective rate was 3.40%.

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 a minimum tangible net worth and producing a number of periodic financial reports for the benefit of the bank. As of December 31, 2016, the Company was in default of the minimum tangible net worth covenant. The bank issued a waiver of the default through the expiration of the current term of the line of credit. There was no outstanding balance on the line of credit at December 31, 2016 or 2015.