Financing Arrangements

9 Months Ended

Sep. 30, 2011

Financing Arrangements [Abstract]

Financing Arrangements

(NOTE 2) – Financing Arrangements:

During March 2010, the Company entered into a $3,000,000 line of credit with a commercial lender secured by all the assets of the Company.  In addition, the Company refinanced its existing term loans with the same commercial lender with a five-year $4,655,000 term loan facility that matures March 2015. The aggregate amount of principal outstanding under the line of credit cannot exceed a borrowing base of eligible accounts receivable and inventory, as defined. The line of credit and term loan bear interest equal to the prime rate of interest (3.25% at September 30, 2011) plus 1% and the prime rate of interest plus 1.5%, respectively. The unpaid balance on the term loan was $3,258,000 at September 30, 2011. There were no outstanding borrowings under the line of credit as of September 30, 2011.

The Company was not in compliance with one of its financial covenants as of December 31, 2010. In March 2011, the Company and its lender agreed to(i) waive the covenant default; (ii) replace a financial covenant ratio for the first two quarters of 2011 with a new covenant related to the Company's operating profitability; (iii) modify the definition of a financial covenant; (iv) institute a new covenant related to the Company's liquidity; and (v) extend the expiration date of the Company's line of credit to August 15, 2011. The lender, in consideration of such waiver and amendment, assessed a waiver fee of $10,000 plus legal fees but did not change the interest rate on the Company's line of credit or term debt.

The Company was in compliance with all of its financial covenants for the first three quarterly reporting periods in 2011. During September 2011, the expiration date on the line of credit was extended from October 1, 2011 to June 1, 2012, unless sooner terminated for an event of default including non-compliance with financial covenants.