Notes and Other Obligations

3 Months Ended

Mar. 31, 2013

Notes and Other Obligations [Abstract]

Notes and Other Obligations

Note 4. Notes and Other Obligations:

Notes payable and other obligations consisted of the following:

	March 31, 2013 (Unaudited)		December 31, 2012
Mortgage notes	$	2,402,823	$	2,435,073
Termination obligation		200,509		397,588
Other short-term installment obligations		88,827		220,763
		2,692,159		3,053,424
Less current portion		1,945,383		2,290,292
	$	746,776	$	763,132

Mortgage notes:

The Company has a mortgage facility on its land and building. The mortgage is held by a commercial bank and includes approximately 35% that is guaranteed by the U. S. Small Business Administration (SBA). The loan is collateralized by the real property and is also personally guaranteed by a former officer of the Company. The interest rate on the bank portion is one percentage over the Wall Street Journal Prime Rate (minimum 7%), with 7% being the effective rate for 2013 and 2012, and the SBA portion bears interest at the rate of 5.86%. The commercial bank portion of the loan requires total monthly payments of approximately $14,200, which currently includes approximately $8,600 per month in contractual interest, through July 2013 when the then remaining principal balance is due which is estimated to be approximately $1.6 million. The SBA portion of the loan requires total monthly payments of approximately $9,200 through July 2023, which currently includes approximately $4,100 per month in contractual interest and fees.

Subsequent to March 31, 2013, the Company received a commitment from its current lender to refinance the commercial bank portion of the mortgage. Based on the letter of commitment received the Company's expectation is that the new loan will close as proposed prior to July 2013. The proposed terms include an amortization period of fifteen years, with a balloon maturity at five years and the interest rate fixed at 3.95%. The expected monthly payments will be approximately $11,700, including $5,200 in contractual interest.

Termination obligation:

In November 2011, the Company entered into a Termination Agreement with Novartis Animal Health, Inc. (the "Novartis Termination Agreement") to terminate the Novartis License Agreement (Note 7). Under the Novartis Termination Agreement, the termination obligation originally totaled $1,374,000, which was payable $150,000 upon signing the Novartis Termination Agreement and in six equal subsequent quarterly installments of $204,000 each. The Company discounted this obligation for financial reporting purposes to $1,303,000, using an assumed interest rate of 7% (which represents the rate management believes it could have borrowed at for similar financings). At March 31, 2013, the remaining outstanding termination obligation totaled approximately $201,000 which is due in June, 2013.

Future maturities:

The Company's total debt obligations require minimum annual principal payments of approximately $1,929,000 for the remainder of 2013, $65,000 in 2014, $68,000 in 2015, $71,000 in 2016 and $559,000 thereafter, through the terms of the applicable debt agreements.