Notes Payable

3 Months Ended

Mar. 31, 2012

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

6. Notes Payable

Convertible Notes Payable to Related Parties

Al Rajhi converted the note payable with a principal balance of $2,523,201 into 4,426,670 shares of common stock on February 9, 2012.

The Company received proceeds of $1,500,000 in connection with issuing a convertible note to Toucan Partners on February 9, 2012. Warrants to purchase 4,687,500 shares of common stock at an exercise price of $0.57 for five years were issued in connection with the note. The note is unsecured, but will become secured if the Company enters into any secured financing or if there is an event of default, as defined. The note is payable on demand with 14 days written notice and carried an original issue discount of 10% and a one time interest charge of 10%. The conversion price of the note is 95% of the average five day closing price of the Company's common stock for ten days prior to conversion. The relative fair value of the warrants and beneficial conversion feature (based on the effective conversion price of the note payable) amounted to $761,240 and $792,055, respectively. The debt discount associated with the warrants and beneficial conversion feature was immediately written off to interest expense.

The Company received proceeds of $1,255,000 in connection with issuing unsecured convertible notes to Toucan Partners on dates between January 3, 2012 and March 6, 2012. Warrants to purchase 4,470,938 shares of common stock at an exercise price of $0.57 and terms between three and five years were issued in connection with the notes. The notes are payable on demand with between 7 and 14 days written notice and carried an original issue discount of 10% and a one-time interest charge of 10%. The conversion prices of the notes are 95% of the average five day closing price of the Company's common stock for twenty days prior to conversion. The relative fair value of the warrants and beneficial conversion feature (based on the effective conversion price of the notes payable) amounted to $616,315 and $673,632, respectively. The debt discount associated with the warrants and beneficial conversion feature was immediately written off to interest expense.

The Company received proceeds of $200,000 in connection with issuing an unsecured convertible note to an officer of the Company on January 3, 2012. Warrants to purchase 712,500 shares of common stock at an exercise price of $0.57 for three years were issued in connection with the note. The note is payable on demand with 7 days written notice and carried an original issue discount of 10% and a one time interest charge of 10%. The conversion price of the note is 95% of the average five day closing price of the Company's common stock for 20 days prior to conversion. The relative fair value of the warrants and beneficial conversion feature (based on the effective conversion price of the note payable) amounted to $94,653 and $101,650, respectively. The debt discount associated with the warrants and beneficial conversion feature was immediately written off to interest expense.

Convertible Notes Payable

The Company received proceeds of $500,000 in connection with issuing a 9% unsecured convertible note on January 24, 2012. The note is payable on January 24, 2013 and carried an original issue discount of $220,000. The conversion price of the note ranges from between 80% and 85% of the average five day closing price of the Company's common stock for 10 days prior to conversion. The debt discount related to the beneficial conversion feature amounted to $173,859 and will be amortized over the term of the note.

The holders of notes payable with an aggregate principal balance of $1,175,195 converted notes payable into 5,014,773 shares of common stock during the three months ended March 31, 2012.

Notes payable consist of the following at December 31, 2011 and March 31, 2012 (in thousands):

	2011		2012
Notes payable - current
12% unsecured originally due July 2011	$	935	$	935
6% unsecured  due May 16, 2012 (net of discount of $236 in 2011 and $79 in 2012)		1,764		1,921
12% unsecured originally due March 2011		450		450
	$	3,149	$	3,306
Notes payable related parties - current
12% unsecured due June 2012 (net of discount of $21 in 2011 and $10 in 2012)	$	2,056	$	2,067
Convertible notes payable, net - current
6% unsecured originally due March 2011	$	110	$	110
6% unsecured due between March 2011 and February 2012 (net of discount of $34 in 2011 and $0 in 2012)		2,566		2,409
6% unsecured due between April 2011 and February 2012  (net of discount of $0 in 2011 and $55 in 2012)		100		50
11% unsecured due December 2011 (net of discount of $38 in 2011 and $38 in 2012)		50		50
10% unsecured convertible note due November 2012 (net of discount of $1,833 in 2011 and $1,333 in 2012)		1,167		1,667
6% unsecured due June 2012 (net of discount of $182 in 2011 and $310 in 2012)		839		984
	$	4,832	$	5,270
Convertible Notes payable related party, net - current
12% unsecured due June 2012 (net of discount of $93 in 2011)	$	2,430	$	-
6% due July 2011 and November 2011 and on demand (net of discount of $92 in 2011 and $69 in 2012)		1,158		4,672
	$	3,588	$	4,672
Long term notes payable
6% unsecured note due October 2012		200		200
	$	200	$	200
Long term convertible notes, net
4% unsecured  due November 15, 2013 (net of discount of $42 in 2011 and $36 in 2012)	$	402	$	408
4% unsecured due June 30, 2013 (net of discount of $9 in 2011)		67		-
11% unsecured convertible note due December 2013 (net of discount of $321 in 2011 and $98 in 2012)		964		488
	$	1,433	$	896
Total notes payable, net	$	15,258	$	16,411