Note 10 – Equipment Loan

Our equipment loan comprises the following:

(in thousands)	December 31,
	2013		2012

Short-term		73		69
Long-term		69		148
	$	142	$	217

In September 2008, we entered into a Loan Agreement and Security Agreement with the Commonwealth of Pennsylvania, Department of Community and Economic Development (Department), pursuant to which the Department made a loan to us from the Machinery and Equipment Loan Fund in the amount of $500,000 (MELF Loan) to fund the purchase and installation of new machinery and equipment and the upgrade of existing machinery and equipment at our analytical and development laboratory in Warrington, Pennsylvania. Principal and interest on the MELF Loan is payable in equal monthly installments over a period of seven years. Interest on the principal amount accrues at a fixed rate of five percent (5.0%) per annum. We may prepay the MELF Loan at any time without penalty.

In addition to customary terms and conditions, the MELF Loan requires us to meet certain job retention and job creation goals in Pennsylvania within a three-year period (Jobs Covenant). If we fail to comply with the Jobs Covenant, the Department, in its discretion, may change the interest rate on the Promissory Note to a fixed rate equal to two percentage points above the current prime rate for the remainder of the term. As of September 30, 2011, the end of the three-year Jobs Covenant period, due to our efforts to conserve resources while we focused on securing approval for SURFAXIN, we had not complied with the Jobs Covenant. In response to a request that we filed with the Department in November 2013 for a waiver, the Department granted us an extension through December 31, 2014 to come into compliance with the Jobs Covenant and has waived any interest adjustment until that date.

For the years ended December 31, 2013, 2012, and 2011, we incurred interest expense of $9,000, $13,000 and $20,000, respectively, on our outstanding equipment loan.