10.

DEBT:

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 December 31, 2011) plus 1% and the prime rate of interest plus 1.5%, respectively. There were no outstanding borrowings under the line of credit as of December 31, 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 during 2011. In August 2011, the Company's primary lender extended the expiration date of the line of credit from August 15, 2011 to October 1, 2011 and during September 2011, the expiration date of the line of credit was extended to June 1, 2012, unless sooner terminated for an event of default including non-compliance with financial covenants.

The Company's long-term debt obligations are as follows:

December 31,	2011		2010

Term loan agreement, collateralized by all business assets of the Company. Payable in sixty (60) monthly payments of approximately $77,500. The loan bears interest equal to the prime rate of interest (3.25% at December 31, 2011) plus 1.5%. Matures March 2015.	$	3,026,000	$	3,957,000

Less: current portion		931,000		931,000
	$	2,095,000	$	3,026,000

Principal payments due on the Company's long-term debt are as follows:

Year ending December 31,
2012	$	931,000
2013		931,000
2014		931,000
2015		233,000

	$	3,026,000