Long-Term Debt

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements

Note 12. Long-Term Debt

Long-term debt and capital lease obligations consist of:

	December 31, 2011						December 31, 2010
			Less						Less
	Total		Current		Long-Term		Total		Current			Long-Term
	Debt		Maturities		Debt		Debt		Maturities			Debt
Notes payable	$	747,000	$	-	$	747,000	$	1,450,000	$	1,450,000	$	-
Line of credit		300,000		300,000		-		-		-		-
Capital lease obligation		-		-		-		10,997		10,997		-
	$	1,047,000	$	300,000	$	747,000	$	1,460,997	$	1,460,997	$	-

Notes Payable

From June 2009 through March 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 “2009/2010 Notes”). The 2009/2010 Notes provided 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 2009/2010 Notes, as extended, can be prepaid without premium or penalty. The reduction in the interest rate and the extension of the maturity date did not significantly change the fair value of the 2009/2010 Notes.

Interest expense on the 2009/2010 Notes for years ended December 31 2011 and 2010 was approximately $120,000 and $179,000, respectively.

Related party balances as of December 31, 2011 and principal prepayments for the year ended December 31, 2011 under the 2009/2010 Notes are as follows:

	Balance		Less		Balance
	December 31,		Principal		December 31,
	2010		Prepayments		2011
Barry Goldstein IRA (Mr. Goldstein is Chairman of the Board, President and
Chief Executive Officer, and principal stockholder of the Company)	$	150,000	$	60,000	$	90,000
Kidstone LLC, a limited liability company owned by Mr. Goldstein, along with
Steven Shapiro (a director of KICO), and a family member of Sam Yedid
(a director 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 years ended December 31, 2011 and 2010 was approximately $64,000 and $98,000, respectively.

Line of credit

On December 27, 2011, Kingstone executed a Promissory Note pursuant to a line of credit (together, the “Trustco Agreement”) with Trustco Bank (“Lender”). Under the Trustco Agreement, Kingstone may receive advances from Lender not to exceed an unpaid principal balance of $500,000. Advances extended under the Trustco Agreement will bear interest at a floating rate based on the Lender’s prime rate.

Interest only payments are due monthly. The principal balance is payable on demand, and must be reduced to zero for a minimum of thirty consecutive days during each year of the term of the Trustco Agreement. Lender may set off any depository accounts maintained by Kingstone that are held by Lender. Payment of amounts due pursuant to the Trustco Agreement is secured by all of Kingstone’s cash and deposit accounts, receivables, inventory and fixed assets, and is guaranteed by Kingstone’s subsidiary, Payments, Inc.

There were no closing costs or fees paid in connection with the Trustco Agreement. Kingstone received an initial advance of $300,000 on December 27, 2011. The line of credit is being used for general corporate purposes.

The weighted average interest rate on the amount outstanding as of December 31, 2011 was 3.75%. There are no other fees in connection with this credit line.