RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2012

Notes to Financial Statements

Note 9 - RELATED PARTY TRANSACTIONS

As more fully described in Note 5, on November 14, 2008 the Company entered into a series of convertible promissory notes (the “Related-Party Convertible Notes”), aggregating $110,000 with certain officers and members of the Company’s Board of Directors. The Related-Party Convertible Notes bear interest at 7.0% per annum and were originally due February 14, 2009. The Company continues to seek a waiver from the holders of the Related-Party Convertible Notes.

In conjunction with the issuance of the Related-Party Convertible Notes, the Company issued an aggregate of 149,996 warrants to the note holders to purchase shares of common stock of the Company. The warrants have an exercise price $0.50 per share and may be exercised at any time from November 14, 2008 until November 14, 2013. All warrants were outstanding and exercisable as of September 30, 2012 and December 31, 2011.

During the nine months ended September 30, 2012, the Company repaid $45,000 in principal to certain holders of the Related Party Convertible Notes. 

During the nine months ended September 30, 2012, the Company entered into a series of professional service contracts with an entity that a member of the Company’s Board of Directors has an ownership interest in.  The aggregate contract value was $315,000 and the Company paid the professional services firm approximately $131,000 during the nine months ended September 30, 2012.