NOTES PAYABLE AND CAPITAL LEASE OBLIGATION

6 Months Ended

Jun. 30, 2011

NOTES PAYABLE AND CAPITAL LEASE OBLIGATION [Abstract]

NOTES PAYABLE AND CAPITAL LEASE OBLIGATION

(5) NOTES PAYABLE AND CAPITAL LEASE OBLIGATION

Notes payable and capital lease obligation at June 30, 2011 and December 31, 2010 consisted of the following:

	June 30, 2011			December 31, 2010
Short-term notes	$	-		$	100,000
Capital lease obligation		7,238			8,247
Total notes payable and capital lease obligation		7,238			108,247
Less current portion of notes payable and capital lease obligation, net of discounts		(2,177	)		(102,071	)
Notes payable and capital lease obligation, net of current portion	$	5,061		$	6,176

Short-term Notes- In September 2010, the Company issued $250,000 of short-term notes, maturing in 90 days.  In lieu of interest, the note holders were issued 2,000 unregistered shares of the Company's Common Stock, $0.01 par value ("Common Stock"), for every $10,000 of principal loaned. A total of 50,000 shares with a fair value of $48,500 were issued in September 2010 pursuant to these short-term notes. The fair value of the stock was amortized over the 90-day term. One short-term note in the amount of $100,000 was extended for one month on December 23, 2010 in exchange for 5,000 shares of Common Stock issued in January 2011 with a fair value of $10,500. In January, 2011, the Company repaid $75,000 in cash on the extended note and the remaining $25,000 was used to purchase Common Stock and warrants to purchase Common Stock (see Note 9). Interest expense on the extended note during the six months ended June 30, 2011 was approximately $6,200.

See also Note 8 regarding the 8% Senior Promissory Note issued on January 5, 2011 and extinguished on February 8, 2011 in connection with the Series D Convertible Preferred Stock financing.

Capital Lease Obligation - In 2009, the Company entered into a five year lease of an office copier. The value of the equipment capitalized was approximately $11,000. The lease payments of $234 per month, payable in arrears, reflect a 10% interest rate. Accumulated depreciation on the leased copier as of June 30, 2011 was approximately $4,000. During the three months ended June 30, 2011 and 2010, interest expense related to the capital lease obligation was approximately $200 and $250, respectively.  During the six months ended June 30, 2011 and 2010, interest expense related to the capital lease obligation was approximately $400 and $500, respectively.