DERIVATIVE LIABILITIES

9 Months Ended

Sep. 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 decreased to $12,093,101 at September 30, 2011 from $13,528,355 at December 31, 2010. The change in fair value during the nine months ended September 30, 2011 is $2,926,866 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 September 30, 2011 and December 31, 2010:

	September 30, 2011	December 31, 2010
Common stock warrants	10,177,908		9,041,049
Embedded conversion features –part of note discount	1,915,193		4,487,306
Total	$                         12,093,101	$	13,528,355

	September 30, 2011	December 31, 2010
Beginning Balance	13,528,355	10,285,578
Bifurcated Amount	3,386,697	6,560,569
Change in Derivative Liability	( 2,515,674)	(1,927,911)
Change in Derivative Liability due to conversion of Note Payables and Warrants	(2,306,277)	(1,389,881)
Total	$ 12,093,101	$ 13,528,355