Notes Payable

12 Months Ended

Dec. 31, 2012

Notes Payable [Abstract]

NOTES PAYABLE

NOTE 5 — NOTES PAYABLE

Notes payable consists of the following as of December 31 (amounts in thousands):

	2012			2011
Note holders unrelated to the Company:
10% convertible promissory note due May 2013 (1)	$	50		$	50
7% and 10% convertible promissory notes due March 2013 (2)		150			150
Zero-coupon convertible promissory note due February 2013 (3)		230			230
24% promissory note due January 2012 (4)		—			90
14% promissory note due January 2013 (5)		100			200
14% senior promissory notes due April 2013 (6)		1,733			—
Other		21			21
	$	2,284		$	741
Related party notes:
24% convertible promissory notes issued with detachable warrants and no specified maturity date (7)		2,000			2,000
Less unamortized discount		(45	)		(71	)
Total Notes Payable	$	4,239		$	2,670

(1) This note came due and was renewed for an additional one-year term in May 2012. As consideration for the renewal of the note, warrants to purchase 25,000 shares of our common stock at $0.15 per share were issued. The warrants were vested upon issuance and have a three-year term.

(2) During 2012, each of these two notes came due and was renewed for additional one-year terms. For the renewal of one note, we issued a three-year warrant for the purchase of 25,000 shares of our common stock at an exercise price of $0.25.

(3) Represents a zero-coupon convertible promissory note issued in February 2010 for net proceeds of $200,000 in cash. The note came due and was renewed several times since origination. The noteholder may elect to convert all or a portion of the face value of the note into our common stock at $0.25 per share. The current note has a maturity date of May 31, 2013.

(4) This note was repaid in full in June and July 2012.

(5) Issued in December 2011, the note and any unpaid interest thereon may be converted at any time during its term into our common stock at $0.25 per share. At its original maturity in January 2012, we effectively reissued the note in the amount of $100,000 on similar terms. The reissued note matured April 30, 2012, but was renewed on a quarterly basis thereafter such that the current note is now due April 30, 2013.

(6) During 2010 and 2011 we issued 10% senior promissory notes maturing April 15, 2012, in exchange for certain of our the outstanding subordinated debentures that had previously matured on April 15, 2010, but were not repaid. In April 2012, the promissory notes were extended to mature on April 15, 2013, and the interest rate was increased to 14% payable semiannually. In conjunction with these notes, we also issued warrants to purchase an aggregate of approximately 7.0 million shares of our common stock at an exercise price of $0.25 per share. All of the warrants have five-year terms and are currently exercisable.

(7) This convertible promissory note dated June 4, 2010 to a major stockholder matured June 4, 2011, but was not repaid and is in default. Interest at 24%, payable quarterly, is also in arrears. The principal and accrued but unpaid interest may be converted at any time prior to maturity into our common stock at a conversion price of $0.25 per share. In conjunction with the loan, the noteholder received warrants to purchase an aggregate of 1,000,000 shares of our common stock at $0.25 per share. The warrants were vested upon issuance and have a five-year term. While waiting for a resolution of the arrearage with the noteholder, we continue to accrue interest at the rate of 24%. As of December 31, 2012, interest of approximately $1,259,000 was due and is included in other accrued expenses. For 2012 and 2011, we recognized approximately $480,000 and $648,000 of related party interest expense on this obligation.