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Craig A. Smith & Associate, Inc. and MPS31), LLC Notes to Financial Statements NOTE 5 — DEBT (CONTINUED Line of Credit In 2011 the Companies executed a $300,000 revolving Line of Credit Promissory Note Payable ("LOC") with JP Morgan Chase Bank. Interest on the line of credit is equal to the sum of the Prime Rate in effect from time to time plus 3.0 and 4.50 percentage points for December 31, 2015 and 2014, respectively. As of December 31, 2015 and 2014, the Companies' balance related to the LOC was $120,000 and $270,000 respectively. During the years ended December 31, 2015 and 2014 the Companies incurred $10,158 and $18,640 of interest expense respectively related to the LOC. The Companies' assets are pledged as collateral related to the line of credit with JP Morgan Chase Bank. NOTE 6- NOTE PAYABLE — OFFICERS & RELATED PARTIES In 2013 the Companies borrowed funds and executed Demand Promissory Notes Payable (Notes) with a related party totaling $185,000. Interest on the Notes is calculated at 5% per annum based on a year of 365 days. During the year ended December 31, 2014, the Companies borrowed an additional $15,000 and repaid $112,413 of these Notes. During the year ended December 31, 2014, the Companies incurred $8,405 of interest related to these Notes. The balances have been fully repaid in 2015, and no new related party borrowings were taken in 2015. NOTE 7 — COMMITMENTS AND CONTINGENCIES Lease Obligation Payable The Companies have thirteen active leases with Bank of the West (now Trinity Leasing) and Dell Financial Services. As of December 31, 2015 and 2014 the Companies had short term lease obligations of $41,887 and $31,744, respectively. As of December 31, 2015 and 2014 the Companies also had long term lease obligations of $56,319 and $58,616, respectively. These equipment leases that are non -cancelable and exceed one year. The future minimum annual lease payments are as follows: Year ended December 31, 2016 $ 41,887 2017 33,108 2018 17,174 2019 6,037 $ 98,206 Interest expense relating to the lease obligations payable was $6,299 and $4,333 for the years ended December 31, 2015 and 2014, respectively. Office Lease The Companies' current offices are located at 7777 Glades Road, Boca Raton, Florida. On March 29, 2013 the Companies signed a second amendment to its lease which extended the lease for five years with a commencement date of November 1, 2013 and a term date of October 31, 2018. The Companies base rent was reduced to $11,952 per month with an annual 3% escalation rate - 11- 61