NOTE 7 - DEBT

The following table presents the Company's debt as of:

	June 30,		December 31,
(Dollars in thousands)	2011		2010
Lines of credit	$	335	$	-

Notes payable	$	39,000	$	39,000

Lines of credit

In February 2011, Cosmed entered into a $3.0 million line of credit with a third-party lender to fund its operations. The line of credit is secured by all of Cosmed's assets. Advances are based on a percentage of eligible trade receivables and inventory. The line of credit is due on demand and bears interest at the Prime rate plus 2.25% with a floor rate of 6.00% per annum. Interest is due monthly in arrears on the first day of the month. At June 30, 2011, $0.3 million was outstanding on the line of credit. Under the terms of the line of credit, Cosmed is required to maintain certain financial covenants. At June 30, 2011, Cosmed was not in compliance with certain financial covenants and further advances on the line of credit are not available. Subsequent to June 30, 2011, Signature is providing financing to Cosmed for working capital purposes.

Total interest expense on lines of credit was $28 thousand and zero for the three months ended June 30, 2011 and 2010, respectively. Total interest expense on lines of credit was $39 thousand and zero for the six months ended June 30, 2011 and 2010, respectively.

Notes payable

In June and July 2010, as partial settlement of the Company's then outstanding 9.0% Trust Originated Preferred Securities (the “TOPrS”) bankruptcy claims, the former holders of the TOPrS received $45 million in cash, subject to charging liens of the indenture trustee, 21 million shares of Signature's common stock, and were issued an aggregate of $39 million in notes payable, due December 2016 (“Notes Payable”) and bearing interest at a rate of 9.0% per annum. The Notes Payable were issued on July 16, 2010.

The indenture, dated June 11, 2010 (the “Notes Payable Indenture”), contains covenants that limit the ability of the Company and certain subsidiaries, subject to certain exceptions and qualifications, to (i) pay dividends or make distributions, repurchase equity securities, or make guarantee payments on the foregoing; (ii) make payments on debt securities that rank pari passu or junior to the Notes Payable; (iii) effect a change of control of the Company; or (iv) enter into transactions with insiders.

On May 17, 2011, Signature received a notice of default from Wells Fargo Bank, NA, serving in the capacity as indenture trustee to the Notes Payable (the “Notes Payable Trustee”), for not satisfying a covenant to file with the Notes Payable Trustee its periodic reports required to be filed under the Exchange Act with the SEC. With the filing of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and the simultaneous filings of the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010, June 30, 2010 and September 30, 2010, on July 5, 2011, Signature has cured the reporting delinquency set forth in the Notes Payable Trustee's notice of default.

Interest expense on Notes Payable was $0.9 million and $0.2 million for the three months ended June 30, 2011 and 2010, respectively. Interest expense on Notes Payable was $1.8 million and $0.2 million for the six months ended June 30, 2011 and 2010, respectively.