Debt

Notes payable

At September 30, 2011 and December 31, 2010, notes payable consist of $117,000 and $261,000, respectively, of borrowings for the purchase of equipment. These notes bear interest at rates ranging from 8.0% to 9.5% per year and mature through August 2013. The notes are collateralized by the equipment purchased with net book values of $112,000 and $237,000, at September 30, 2011 and December 31, 2010, respectively.

The Company entered into a loan agreement with JPMorgan Chase Bank, NA on May 31, 2011. The agreement provides a revolving line of credit up to $1,000,000 against 80% of eligible assets (as defined) at a rate of Libor plus 2%. The line of credit is collateralized by the Company's accounts receivable, is for the term of 12 months, and provides for financial covenants. At September 30, 2011, the Company has not drawn any funds from the line of credit.

Capitalized lease obligations

The Company has equipment under a capital lease obligation expiring in 2014. The assets and liabilities under capital leases are recorded at the lower of the present values of the minimum lease payments or the fair values of the assets. The interest rate pertaining to this capital lease is 3.3%. At September 30, 2011, the gross and net book value of the related assets is approximately $42,000 and $32,000, respectively.

See notes to condensed consolidated financial statements.