LONG-TERM DEBT

Long-term debt at June 30, 2012 and December 31, 2011 consisted of the following:



	June 30, 2012		December 31, 2011
Senior Notes Payable, Interest at 14%, payable quarterly beginning on October 30, 2010, secured by the royalty contract on blood collection devices, guaranteed by MedPro Safety Products, Inc. on behalf of MedPro Investments, LLC, the issuer	$	30,000,000	$	30,000,000
	$	30,000,000	$	30,000,000
Less: current portion	2,996,193		—
Long-term portion	$	27,003,807	$	30,000,000

The Company issued $30,000,000 of Senior Secured 14% Notes due 2016 in two tranches on September 1, 2010 and October 1, 2010. Gross proceeds from the issuance of the Notes were reduced by $2,206,858 of issuance expenses, $4,500,000 of funds held in reserve to pay interest during the ramp up of royalty income, and $7,870,000 held in a reserve payable to the Company upon the receipt of FDA clearance for the Wing device. The Company used the net proceeds of the issuance of the Notes to pay off all of its outstanding bank debt in September 2010. The FDA cleared the Wing device in November 2010, and the Company received the $7,870,000 plus interest on January 30, 2011.

The interest reserve is used to supplement royalty revenues received under the GBO agreement. Royalty revenues are deposited into a collection account held in trust and are supplemented from the interest reserve as necessary to complete the scheduled payments on the Notes. The balance in the interest reserve account at June 30, 2012 and December 31, 2011 was $874,059 and $1,206,371, respectively. The current period ending balance is less than the total amount of payments due in the next year. Accordingly, the Company has classified the entire balance of the restricted cash account as a current asset. However, because royalties increase as minimum product purchases increase over the term of the GBO agreement, the full amount of the interest reserve account is not expected to be used to pay the entire interest payments on the Notes during the next seven months. The interest reserve will be fully consumed on the payment due on the Senior Notes on January 30, 2013. Payments of principal and interest to the Noteholders are guaranteed by the Company.

Interest payments are subject to adjustment should our proceeds exceed minimum payments specified in the GBO agreement.

The Notes indenture limits the debt the Company can incur while the Notes are outstanding to an additional $7,500,000 of new senior debt and $15,000,000 of unsecured debt.

The following table summarizes the maturities of long-term debt:



12 month periods ended December 31,	Maturities
2012	$	—
2013	5,606.029
2014	7,957.317
2015	13,254.329
2016	3,182.325

Total	$	30,000,000

Royalty collections through October 30, 2016 are allocated to the payment of principal and interest on the Notes. Once principal is paid down to $1,000,000, additional interest is paid to the Note holders based on cash flow under the contract. The final $1,000,000 of principal is paid with the last payment on the Notes. Any Note payments made in 2016 are reduced by the

marketing assistance payments due to our customer under the minimum volume contract. The Company is also entitled to receive a servicing fee of $5,000 per quarter, plus out of pocket expenses, subject to quarterly limitations.