8. Long-Term Debt

6 Months Ended

Jun. 30, 2012

Debt Disclosure [Abstract]

8. Long-Term Debt

Long-term debt consists of:

	June 30, 2012						December 31, 2011
			Less						Less
	Total		Current		Long-Term		Total		Current		Long-Term
	Debt		Maturities		Debt		Debt		Maturities		Debt
	(unaudited)
Notes payable	$	747,000	$	-	$	747,000	$	747,000	$	-	$	747,000
Line of credit		250,000		250,000		-		300,000		300,000		-
	$	997,000	$	250,000	$	747,000	$	1,047,000	$	300,000	$	747,000

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 2009/2010 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 the six months ended June 30, 2012 and 2011 was approximately $35,000 and $85,000, respectively. Interest expense includes related party borrowings for the six months ended June 30, 2012 and 2011 of approximately $18,000 and $45,000, respectively. Interest expense on the 2009/2010 Notes for the three months ended June 30, 2012 and 2011 was approximately $18,000 and $39,000, respectively. Interest expense includes related party borrowings for the three months ended June 30, 2012 and 2011 of approximately $9,000 and $21,000, respectively.

Related party balances as of June 30, 2012 and December 31, 2011 under the 2009/2010 Notes are as follows:

Barry Goldstein IRA (Mr. Goldstein is Chairman of the Board, President and
Chief Executive Officer, and principal stockholder of the Company)	$	90,000
Jay Haft, a director of the Company		30,000
A member of the family of Michael Feinsod, a director of the Company		60,000
Mr. Yedid, a director of KICO, and members of his family		156,000
A member of the family of Floyd Tupper, a director of KICO		42,000
Total related party balances	$	378,000

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 interest rate on the amount outstanding as of June 30, 2012 was 3.75%. There are no other fees in connection with this credit line.