11. Loans payable to officers and a director

6 Months Ended

Jun. 30, 2011

11.	Loans payable to officers and a director

The Loans Payable to Officers and a Director represents a loan from the Company’s President and a member of the board of directors and amounted to the following:

	June 30,		December 31,
	2011		2010
	(Unaudited)
President and director, interest at 9.5%	$	5,925	$	391,993
An officer, non-interest bearing		69,409		127,421
An officer, interest at 5.0% if not repaid on timely basis		110,000		231,525
A director, interest at 10.0%		-		45,000
	$	185,334	$	795,939

These loans are unsecured, due on demand, have no priority or subordination features, do not bear any restrictive covenants and contain no acceleration provisions. Interest expense on loans to officers and a director for the three months ended June 30, 2011 and 2010 was $0 and $6,934, respectively. Interest expense on loans to officers and a director for the six months ended June 30, 2011 and 2010 was $12,421 and $6,934, respectively. During the quarter ended June 30, 2011, $45,000 was paid to the director to pay down the principal balance of a loan made to the Company in 2005, $463,712 was paid to the Company’s President and Director to pay down a series of revolving loans made to the Company over the past few years, and $77,176 was paid to an officer pursuant to an employment agreement.

In connection with the employment agreement for its Senior Vice President and Chief Operating Officer, the Company assumed a promissory note of $231,525 formerly owed to him by PEI and agreed to pay the promissory note with $121,525 payable to him upon the closing of the acquisition of PEI by the Company, $55,000 due 90 days after the closing of the acquisition, and $55,000 due 180 days after the closing of the acquisition. Any unpaid amounts after 180 days following the closing of the acquisition will bear interest at 5%. In June 2011, upon closing the acquisition of PEI, the Company paid the first installment of $121,525.