SHAREHOLDER LOAN

12 Months Ended

Dec. 31, 2011

5.	SHAREHOLDER LOANS

On October 1, 2011, the Company rolled over two shareholder loans from a director into one promissory note for $104,000. The note was secured by the unencumbered 75% of patent settlement license fees secondary to the security interest of a financial institution and provided for accrued interest at 12% payable on maturity at December 31, 2011. The Company has agreed to apply ten percent (10%) of the net proceeds from patent settlement license fees to the reduction of principal. In November 2011, the principal was reduced by a total of $7,839. On November 28, 2011 the principal balance of $96,161 was rolled over to a promissory note with the same terms and a maturity date of December 31, 2012. In November and December 2011, the Company issued promissory notes to two other directors totaling $75,000 under the same terms and maturity date. On December 31, 2011, the $171,161 outstanding balance of the three promissory notes was converted to the Convertible Debentures Series 2011 and Series B Warrants.

In December 2011, four directors loaned the Company $25,000 each under the same terms and maturity date. The total shareholder loans of $100,000 were rolled over to the 2012 convertible debentures in February, 2012.

In December 2011, a director loaned the Company $65,000 with 12% interest payable upon maturity at January 2012.

The total accrued interest on shareholder loans at December 31, 2011 is $4,306.