NOTE 8. LONG-TERM DEBT

In June 2013, we renewed a 10% debenture totaling $50,000 that was originally due on June 30, 2013 at stated value with a maturity date of June 30, 2015 in exchange for 50,000 warrants at $.45 per share. Interest is payable quarterly and the full principal amount is due upon maturity. In June 2013, we also extended the maturity date of a note for $50,000 that was originally due March 9, 2015 for two additional years in exchange for warrants to purchase 50,000 shares at $.45 per share.

The weighted-average estimated fair value of the warrants issued was $0.21 per share using the Black-Sholes pricing model with the following assumptions:

Expected volatility	89.5	%
Risk-free interest rate	0.31	%
Expected life	2 years
Dividend yield	0	%

During the three and six months ended June 30, 2013 and 2012 we recorded $25,030 and $14,382 and $14,022 and $28,224 in interest expense, respectively, related to the amortization of warrants associated with long term debt.

In June 2013 we repaid debentures totaling $350,000 based on the stated contractual terms.