LONG-TERM DEBT

12 Months Ended

Dec. 31, 2011

Debt Disclosure [Abstract]

Long-term Debt [Text Block]

NOTE E – LONG-TERM DEBT

Long-term debt consisted of the following:

	December 31, 2011			December 31, 2010
First Niagara: Mortgage payable in equal monthly installments of $14,437 including interest at 8.25% through March 1, 2013 (“Maturity”) with a final lump sum payment representing the entire unpaid balance of principal, plus accrued interest at Maturity, collateralized by the building, land and personal property	$	725,000		$	850,000
RICOH: Capital lease payable in equal monthly installment of $390 including interest at 14.11% through May 1, 2012		3,000			6,000
MARLIN: Capital lease payable in equal monthly installment of $147 including interest at 14.46% through September 1, 2013		2,000			4,000
Debenture financing(1): $750,000 in principal amount of Series A Debentures; interest at 10% per annum, payable semi-annually in August and February of each year with first payment due February 1, 2009; maturity date of August 1, 2012		750,000			750,000
		1,480,000			1,610,000
Less current portion		(872,000	)		(130,000	)
Non-current portion	$	608,000		$	1,480,000

(1) The Series A Debentures were reclassified from a non-current liability to a current liability in the third quarter of Fiscal 2011 given their maturity date of August 1, 2012.

At December 31, 2011, the following are the maturities of long-term debt for each of the next five years:

2012	$	872,000
2013		608,000
2014		0
2015		0
2016		0
	$	1,480,000

FIRST NIAGARA: MORTGAGE CONSOLIDATION LOAN

On December 17, 2009, we closed on a refinancing and consolidation of our existing real estate mortgage and term note with First Niagara (the “Mortgage Consolidation Loan”). The Mortgage Consolidation Loan was secured by our facility in Kinderhook, New York as well as various pieces of machinery and equipment. We had to comply with a covenant to maintain Liquidity of at least $50,000 (defined as any combination of cash, marketable securities or borrowing availability under one or more credit facilities other than the Mortgage Consolidation Loan), and we maintained compliance with this covenant through the term of the Mortgage Consolidation Loan.

The annual interest rate of the Mortgage Consolidation Loan was fixed at 8.75%. The monthly payment of principal and interest was $16,125. Accrued interest was paid at closing totaling $7,000. In addition, we were required to make a $25,000 principal payment at the time of closing on the prior existing Term Note. We incurred approximately $28,000 in costs associated with the Mortgage Consolidation Loan, which were included in prepaid expenses and other current assets, and were amortized over the term of the Mortgage Consolidation Loan. For the year ended December 31, 2011 and the year ended December 31, 2010, we amortized $2,000 and $24,000 of these costs, respectively. Payments commenced on the Mortgage Consolidation Loan on February 1, 2010, and the loan matured on January 1, 2011.

On February 23, 2011, we amended and extended the Mortgage Consolidation Loan. The amended Mortgage Consolidation Loan has a maturity date of March 1, 2013, and has a 6-year (72 month) amortization. The monthly payment of principal and interest is $14,437. The principal amount of the amended Mortgage Consolidation Loan is $815,000 with a fixed interest rate of 8.25%. Payments commenced on the amended Mortgage Consolidation Loan on March 1, 2011. We were required to make a $15,000 principal payment at the time of closing of the amended Mortgage Consolidation Loan. We also incurred approximately $2,000 in costs associated with this amendment, which were legal costs incurred by First Niagara and passed on to the Company. The amended Mortgage Consolidation continues to be secured by our facility in Kinderhook, New York as well as various pieces of machinery and equipment. All other terms of the Mortgage Consolidation Loan remain unchanged. The balance on the Mortgage Consolidation Loan was $725,000 and $850,000 for the years ended December 31, 2011 and December 31, 2010, respectively. Interest expense recognized was $66,000 and $80,000 for Fiscal 2011 and Fiscal 2010, respectively.

RICOH

In May 2007, the Company purchased a copier through an equipment lease with RICOH in the amount of $17,000. The term of the lease is five years with an interest rate of 14.11%. Future minimum lease payments are $2,000 in 2012.

MARLIN

In October 2010, the Company purchased a copier through an equipment lease with Marlin Leasing in the amount of $4,000. The term of the lease is three years with an interest rate of 14.46%. Future minimum lease payments are $2,000 in 2012 and $1,000 in 2013.

DEBENTURE FINANCING 

In August 2008, we completed an offering of Series A Debentures and received gross proceeds of $750,000. The net proceeds of the offering of Series A Debentures were $631,000 after $54,000 of placement agent fees and expenses, legal and accounting fees of $63,000 and $2,000 of state filing fees.

The Series A Debentures accrue interest at a rate of 10% per annum (payable by the Company semi-annually) and mature on August 1, 2012. As placement agent, Cantone Research, Inc. (“Cantone”) received a Placement Agent fee of $52,500, or 7% of the gross principal amount of Series A Debentures sold. In addition, we issued Cantone a four-year warrant to purchase 30,450 shares of the Company’s common stock at an exercise price of $0.37 per share (the closing price of the Company’s common shares on the date of closing) and a four-year warrant to purchase 44,550 shares of the Company’s common stock at an exercise price of $0.40 per share (the closing price of the Company’s common stock on the Series A Debentures Completion Date). All warrants issued to Cantone were immediately exercisable upon issuance. We registered the common shares underlying the Series A Debentures in a Registration Statement on Form S-3 filed with the SEC on April 15, 2009 and amended on May 5, 2009. On June 10, 2009, the SEC issued a notice of effectiveness related to this Form S-3, as amended. 

The Company incurred $131,000 in expenses related to the offering, including $12,000 in expense related to warrants issued to the placement agent. The Company amortized $32,000 in expense related to these debt issuance costs in Fiscal 2011 and Fiscal 2010. The Company has also accrued interest expense related to the Series A Debentures of $31,000 in Fiscal 2011 and Fiscal 2010.