SHAREHOLDER LOAN

6 Months Ended

Jun. 30, 2012

5.	SHAREHOLDER LOANS

In December 2011, four directors each loaned the Company $25,000. The notes were 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 agreed to apply ten percent (10%) of the net proceeds from patent settlement license fees to the reduction of principal. In January and February, 2012, three directors loaned the Company a total of $220,000 on short term promissory notes bearing interest of 12% per annum. The total shareholder loans totaling $320,000 were rolled over to the 2012 convertible debentures in February, 2012.

In January, 2012, the Company repaid a December 2011 director loan of $65,000.

In March, 2012, one director loaned the Company $50,000 on a short term promissory note bearing interest of 12% per annum. The note was repaid on March 30, 2012, including $257 in accrued interest.

In May and June, 2012, four directors loaned a total of $449,300. The notes were 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 September 30, 2012.

The total accrued interest on shareholder loans at June 30, 2012 is $10,542.