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Notes Payable

6 Months Ended

Jun. 30, 2011

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 is being amortized on a straight line basis, which approximates the effective interest method. Total interest expense of $2,500 and $5,000 was recorded in the three and six month periods ended June 30, 2011 and $7,500 and $15,000 in the three and six month periods ended June 30, 2010, respectively.

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

	As of
	June 30,			December 31,
	2011			2010
Gross	$	200,000		$	200,000
Deferred debt discount		(1,667	)		(6,667	)
Net	$	198,333		$	193,333

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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