11. Long-Term Debt

12 Months Ended

Dec. 31, 2013

Notes to Financial Statements

11. Long-Term Debt

Long-term debt and capital lease obligations consist of:

	December 31, 2013						December 31, 2012
			Less						Less
	Total		Current		Long-Term		Total		Current		Long-Term
	Debt		Maturities		Debt		Debt		Maturities		Debt
Notes payable	$	-	$	-	$	-	$	747,000	$	-	$	747,000
Bank line of credit		-		-		-		450,000		450,000		-
	$	-	$	-	$	-	$	1,197,000	$	450,000	$	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 reduction in the interest rate and the extension of the maturity date did not significantly change the fair value of the 2009/2010 Notes. The remaining 2009/2010 Notes, as extended, were prepaid on December 13, 2013 without premium or penalty. Interest expense on the 2009/2010 Notes for years ended December 31 2013 and 2012 was approximately $69,000 and $71,000, respectively.

Related party balances as of December 31, 2013 and 2012, and principal prepayments as described above for the year ended December 31, 2013 under the 2009/2010 Notes are as follows: 

			Less
			Principal
	Balance		Prepayments		Balance
	December 31,		Year Ended		December 31,
	2012		December 31, 2013		2013
Barry Goldstein IRA (Mr. Goldstein is Chairman of the Board, President
and Chief Executive Officer, and principal stockholder of the Company)	$	90,000	$	90,000	$	—
Jay Haft, a director of the Company		30,000		30,000		—
A member of the family of Michael Feinsod, a director of the Company		60,000		60,000		—
Mr. Yedid and members of his family		156,000		156,000		—
A member of the family of Floyd Tupper, a director of KICO		42,000		42,000		—
Total related party transactions	$	378,000	$	378,000	$	—

Interest expense on related party borrowings for the years ended December 31, 2013 and 2012 was approximately $35,000 and $36,000, respectively.

Bank 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 (the “Credit Limit”). On January 25, 2013, the Credit Limit was increased to $600,000.  Advances extended under the Trustco Agreement will bear interest at a floating rate based on the Lender’s prime rate, which was 3.75% at December 31, 2013. 

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. The line of credit is subject to annual renewal at the discretion of the Lender. 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.

The line of credit is being used for general corporate purposes.

The weighted average interest rate on the amount outstanding during the years ended December 31, 2013 and 2012 was 3.75%. There are no other fees in connection with this credit line. Interest expense on the line of credit for years ended December 31 2013 and 2012 was approximately $7,000 and $10,000, respectively.