Notes Payable and Capital Lease Obligations

9 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Notes Payable and Capital Lease Obligations

Notes Payable and Capital Lease Obligations

	September 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 September 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 nine months ended and three months ended September 30, 2011 was approximately $108,000 and $24,000, respectively. Interest expense on the 2009 Notes for the nine months ended and three months ended September 30, 2010 was approximately $133,000 and $46,000, respectively.

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

	Balance	Less	Balance
	December 31,	Principal	September 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 related party transactions	$       785,000	$       407,000	$       378,000

Interest expense on related party borrowings for the nine months and three months ended September 30, 2011 was approximately $57,000 and $12,000, respectively. Interest expense on related party borrowings for the nine months and three months ended September 30, 2010 was approximately $71,000 and $24,000, respectively.