Note 3. Notes Payable

In connection with the Positive Access acquisition, the Company issued notes to the principals totaling $600,000, payable $400,000 at August 31, 2010 and $200,000 at August 31, 2011. The notes payable were initially recorded in the financial statements net of deferred debt discount of $40,000. The deferred debt discount was amortized on a straight line basis, which approximated the effective interest method. Total interest expense of $1,667 and $6,667 was recorded in the three and nine month periods ended September 30, 2011. Total interest expense of $5,833 and $20,833 was recorded in the quarter and nine month periods ended September 30, 2010, respectively. The notes were fully paid on August 31, 2011.

The notes are shown net of the deferred debt discount as follows:

	As of
	September 30,		December 31,
	2011		2010
Gross	$	-	$	200,000
Deferred debt discount		-		(6,667	)
Net	$	-	$	193,333