As of September 30, 2008, we also had a $300,000 promissory note outstanding and payable at an interest rate of 4% per annum and payable on December 31, 2008.
Liquidity and Capital Resources
From inception until the third quarter of 2007, our primary sources of capital were proceeds from private placements of our common stock, loans from shareholders and bank lines of credit. We began to experience positive cash flow in the third quarter of 2007, which has allowed us to provide our own operating capital for our operations and reduced the need to access outside capital sources to support current operations. We currently require approximately $130,000 per month to fund our recurring operations. This amount would likely increase if we expand our sales and marketing efforts and continue to develop new products and services as are our plans. Our cash needs are primarily attributable to funding sales and marketing efforts, strengthening technical and helpdesk support, expanding our development capabilities, and building administrative infrastructure, including costs and professional fees associated with being a public company. We intend to meet our immediate capital needs from cash flow provided from operations. We believe that we have sufficient funding to cover our cash needs for the next 12 months, although there can be no assurance in this regard.
As of September 30, 2008, we had cash and cash equivalents of $77,485. The largest uses of our funds are funding general and administrative expenses and salaries and related expenses. As of September 30, 2008, we had total current liabilities of $961,488 and total current assets of $1,125,094, with our current assets exceeding our current liabilities by $163,606.
Net cash used by operating activities was $458,461 for the nine months ended September 30, 2008, compared to net cash provided by operating activities of $73,154 for the nine months ended September 30, 2007. The increase in cash used by operating activities in comparing the nine months ended September 30, 2008 to the nine months ended September 30, 2007 can be attributed primarily to 2008 having a net loss of $96,565 compared to 2007 having a net income of $338,125.
We have two outstanding loans with Frost National Bank (“Frost”). On February 13, 2008, we established a $300,000 revolving line of credit with Frost that originally scheduled to mature on February 13, 2008. However, on or about March 4, 2008, we converted this revolving line of credit into a term note with an original principal amount of approximately $241,932. This term note is due and payable in 36 level monthly payments. The interest rate on the outstanding balance of this term note is a floating rate of prime plus 1%. This term note is secured by our accounts receivable. The outstanding principal balance on this term note as of September 30, 2008 was $204,143.
On or about March 4, 2008, we established a new $300,000 revolving line of credit with Frost that is scheduled to mature on February 13, 2010, at which time a balloon payment comprised of all outstanding principal and accrued interest must be paid. The interest rate on the outstanding balance of the revolving line of credit is a floating rate of prime plus 1%, and a payment of all accrued interest is due monthly throughout the term of the line of credit. This revolving line of credit is secured by our accounts receivable. The outstanding principal balance on this line of credit as of September 30, 2208 was $300,000.
As of September 30, 2008, we also had a $434,355 promissory note outstanding and payable at a floating rate of interest of prime plus 1%. The note is related to the purchase of Occupational Testing, Inc.
As of September 30, 2008, we also had a $300,000 promissory note outstanding and payable at an interest rate of 4% per annum and payable on December 31, 2008.
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