DERIVATIVE LIABILITIES

6 Months Ended

Jun. 30, 2011

DERIVATIVE LIABILITIES [Abstract]

DERIVATIVE LIABILITIES

The Company’s warrants and its Convertible 8% Senior Secured Notes issued in 2008, 2009 and 2010 have reset provisions to the exercise price and conversion price if the Company issues equity or other derivatives at a price less than the exercise price set forth in such warrants and notes. This ratchet provision results in a derivative liability in our financial statements.

Our derivative liabilities increased to $14,062,359 at June 30, 2011 from $13,528,355 at December 31, 2010. The change in fair value during the six months ended June 30, 2011 is $965,154 and the loss on derivative is ($411,192).

The following tabular presentation reflects the components of derivative financial instruments on the Company’s balance sheet at June 30, 2011 and December 31, 2010:

	June 30, 2011	December 31, 2010
Common stock warrants	10,944,988		9,041,049
Embedded conversion features –part of note discount	3,117,371		4,487,306
Total	$14,062,359		$3,528,355

	June 30, 2011	December 31, 2010
Beginning Balance	13,528,355	10,285,578
Bifurcated Amount	3,386,697	6,560,569
new Change in Derivative Liability	(553,962)	(1,927,911)
Change in Derivative Liability due to conversion of Note Payables and Warrants	(2,298,731)	(1,389,881)
Total	$ 14,062,359	$ 13,528,355