Notes Payable and Capital Lease Obligations

6 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Notes Payable and Capital Lease Obligations

Notes payable and capital lease obligations consist of:

	June 30, 2011						December 31, 2010
				Less						Less
		Total		Current		Long-Term		Total		Current		Long-Term
		Debt		Maturities		Debt		Debt		Maturities		Debt
				(unaudited)
Capital lease obligation	$	—	$	—	$	—	$	10,997	$	10,997	$	—
Notes payable(includes payable to related
parties of $378,000 at June 30, 2011 and $785,000 at December 31, 2010)
		747,000		—		747,000		1,450,000		1,450,000		—
	$	747,000	$	—	$	747,000	$	1,460,997	$	1,460,997	$	—

Notes Payable

From June 2009 through January 2010, the Company borrowed $1,450,000 (including $785,000 from related parties as disclosed below) and issued promissory notes in such aggregate principal amount (the “2009 Notes”).  The 2009 Notes provide for interest at the rate of 12.625% per annum through the maturity date of July 10, 2011. During the quarter the ended June 30, 2011, the Company prepaid $703,000 (including $407,000 to related parties) of the principal amount of the 2009 Notes. In June 2011, the remaining note holders agreed to extend the maturity date for a period of three years from July 10, 2011 to July 10 2014, and effective July 11, 2011, reduce the interest rate from 12.625% to 9.5% per annum. The remaining 2009 Notes, as extended, can be prepaid without premium or penalty.

Interest expense on the 2009 Notes for the six months ended and three months ended June 30, 2011 was approximately $85,000 and $39,000, respectively. Interest expense on the 2009 Notes for the six months ended and three months ended June 30, 2010 was approximately $87,000 and $46,000, respectively.

Related party balances as of June 30, 2011 and principal prepayments for the six months ended June 30, 2011 under the 2009 Notes are as follows:

	Balance				Balance
	December 31,		Principal		June 30,
	2010		Prepayments		2011
Barry Goldstein IRA	$	150,000	$	60,000	$	90,000
A limited liability company owned by Mr. Goldstein, along with Sam Yedid
and Steven Shapiro (who are both directors of KICO)		120,000		120,000		—
Jay Haft, a director of the Company		50,000		20,000		30,000
A member of the family of Michael Feinsod, a director of the Company		100,000		40,000		60,000
Mr. Yedid and members of his family		295,000		139,000		156,000
A member of the family of Floyd Tupper, a director of KICO		70,000		28,000		42,000
Total realted party transations	$	785,000	$	407,000	$	378,000

Interest expense on related party borrowings for the six months and three months ended June 30, 2011 was approximately $45,000 and $21,000, respectively. Interest expense on related party borrowings for the six months and three months ended June 30, 2010 was approximately $87,000 and $46,000, respectively.