Notes Payable and Capital Leases

12 Months Ended

Dec. 31, 2011

Debt Disclosure [Abstract]

Debt and Capital Leases Disclosures [Text Block]

8. Notes Payable and Capital Leases   

Long term debt consists of:

		Dec. 31, 2011		Dec. 31, 2010
Term Loan with Barrington Bank, payable in monthly installments of $11,000 amortized over 7 years, interest at 6.25%, balance due May 2016, which uses balloon production and related equipment as collateral.	$	779,000	$	-
Term Loan with Harris, payable in monthly installments of $58,333 plus interest at prime (3.25%) plus a premium rate (based on loan covenants) of 0.50% (3.75%) at December 31, 2010 (amortized over 10 months), balance due January 31, 2011.		-		117,000
Mortgage Loan with Harris, payable in monthly installments of $7,778 plus interest at prime (3.25%) plus a premium rate (based on loan covenants) of 0.75% (4.00%) and 0.50% (3.75%) at December 31, 2011 and 2010, respectively (amortized over 25 years), balance due April 30, 2013.		2,178,000		2,271,000
Equipment Loan with Harris, payable in monthly installments of $22,323 beginning May 2012 plus interest at prime (3.25%) plus a premium rate (based on loan covenants) of 0.75% (4.00%) at December 31, 2011, (amortized over 60 months), balance due April 30, 2013.  (2010) Equipment Loan with Harris, payable in monthly installments of $8,333 beginning May 2011 plus interest at prime (3.25%) plus a premium rate (based on loan covenants) of 0.50% (3.75%) at December 31, 2010, (amortized over 60 months), balance due April 30, 2013.		1,339,000		500,000
Capital Lease with Yale Financial Services, payable in monthly installments of $574 (amortized over 5 years).		3,000		8,000
Subordinated Notes (Officers) due on demand, interest at 9% (see Notes 10, 14).		33,000		33,000
Subordinated Notes (Officers) due on demand, interest at 8% (see Notes 10, 14).		795,000		795,000
Subordinated Notes (Officers) due on demand, interest at prime (3.25%) plus 2% (5.25%) at December 31, 2011 and 2010, net of debt discount of $0 and $5,000 at December 31, 2011 and 2010, respectively (See Note 10).		597,000		592,000
Subordinated Notes (Officers) due 2013, interest at 8.5% (see Note 10).		104,000		351,000
Notes Payable (Affiliates) due 2015, interest at prime (3.25%) plus 0.25% (3.50%) at December 31, 2011 and 2010.		28,000		28,000
Notes Payable (Affiliates) due 2021, interest at 11.75%.		112,000		134,000
Total long-term debt		5,968,000		4,829,000
Less current portion		(1,797,000)		(1,692,000)
Total Long-term debt, net of current portion	$	4,171,000	$	3,137,000

On April 29, 2010, the Company entered into a Credit Agreement and associated documents with Harris N.A. (“Harris”) under which Harris agreed to extend to the Company a credit facility in the aggregate amount of $14,417,000. The facility includes (i) a Revolving Credit providing for maximum advances to the Company, and letters of credit, based upon the level of availability measured by levels of eligible receivables and inventory of the Company of $9,000,000, (ii) an Equipment Loan of up to $2,500,000 providing for loans for the purchase of equipment, (iii) a Mortgage Loan of $2,333,350, and (iv) a Term Loan in the amount of $583,333. The amount we can borrow on the Revolving Credit includes 85% of eligible accounts and 60% of eligible inventory (up to a maximum of $9,000,000). The Mortgage Loan is amortized over a term of 25 years. The maturity date of the facility is April 30, 2013. As of December 31, 2011 the balance outstanding on the Revolving Line of credit with Harris was $7,144,000, which bears interest of 4%, leaving an available balance of $2,106,000.

On April 30, 2010, the loan transaction was closed and loan advances were made by Harris in the aggregate amount of $11,964,739 to pay off all loan balances and lease obligations of the Company with RBS Citizens, N.A. and RBS Asset Finance, Inc. The advances included $8,548,000 under the Revolving Credit and $500,000 under the Equipment Loan.

Certain terms of the loan agreement, as amended, include:

· Restrictive Covenants: The Loan Agreement includes several restrictive covenants under which we are prohibited from, or restricted in our ability to:

o Borrow money;

o Pay dividends and make distributions;

o Make certain investments;

o Use assets as security in other transactions;

o Create liens;

o Enter into affiliate transactions;

o Merge or consolidate; or

o Transfer and sell assets.

· Financial Covenants: The Loan Agreement includes a series of financial covenants we are required to meet including:

o We are required to maintain a tangible net worth (plus Subordinated Debt) in excess of $7,100,000 plus 50% of cumulative net income of the Company after January 1, 2010;

o We are required to maintain specified ratios of senior debt to EBITDA on an annual basis and determined quarterly; and,

o We are required to maintain a level of adjusted EBITDA to fixed charges on an annual basis determined quarterly of not less than 1.1 to 1. Adjusted EBITDA is EBITDA minus (i) taxes paid, (ii) dividends paid, (iii) payments for the purchase or redemption of stock, and (iv) unfunded capital expenditures.

As of December 31, 2011, the Company was in compliance with these covenants.

John H. Schwan and Stephen M. Merrick each, as officers, directors and principal shareholders of the Company have each personally guaranteed the obligations of the Company to Harris up to $1,750,000. In the agreement, the amount of the maximum liability to each decreases to $1,500,000 if the senior leverage ratio requirement is met. At December 31, 2011 and 2010, the Company had met this requirement (see Note 14).

Future minimum principal payments for amounts outstanding under these long-term debt agreements for each of the years ended December 31 are:

2012	$	1,797,000
2013		3,356,000
2014		118,000
2015		158,000
2016		396,000
Thereafter		143,000
Total	$	5,968,000