Notes Payable	9 Months Ended
Sep. 30, 2011
Notes Payable	6. Notes Payable During October 2009, the Company issued to each of four individuals $50,000 principal amount of subordinated convertible promissory notes (the “October 2009 Notes”) aggregating $200,000. The individuals included the Company’s Chief Executive Officer and Chairman of the Board, another director, one of the Company’s greater than 5% stockholders and an accredited investor. The $50,000 principal amount of October 2009 Notes issued to the Chief Executive Officer and Chairman of the Board represented $25,000 of new funds received and a rollover of a $25,000 loan made by him to the Company on September 10, 2009. The October 2009 Notes bore interest of 4% per annum and were payable on demand on the earlier of (i) the date on which the Company publicly announced a joint venture or strategic relationship, the execution of a license, or similar agreement with a third-party with respect to the Company’s technology and (ii) the date on which the Company filed with the SEC its annual report on Form 10-K, which included audited financial statements for the year ended December 31, 2009, such date referred to as the target date. The holders were entitled to convert the outstanding principal amount of the October 2009 Notes and accrued and unpaid interest thereon into shares of the Company’s common stock at any time commencing on the fifth trading day immediately following the target date at the conversion price in effect on such date. The conversion price was the greater of (i) the average of the closing sale price of the Company’s common stock for the five trading days immediately following the target date and (ii) $0.05 per share. The Company was entitled to prepay the October 2009 Notes on 20 days’ prior written notice to the holders. The Company had agreed to include the shares of common stock issuable upon conversion of the October 2009 Notes in any applicable registration statement filed by the Company with the SEC covering its equity securities. On April 8, 2010, pursuant to the terms of the October 2009 Notes, the conversion price of the October 2009 Notes was set at $0.05. Also, on April 8, 2010, each of the holders elected to convert all of the then outstanding principal and interest on such October 2009 Notes, totaling $203,697, which resulted in the issuance to them of an aggregate of 4,073,943 shares of the Company’s common stock. The conversion of the October 2009 Notes resulted in the October 2009 Notes being satisfied in full. On April 12, 2010, the Company issued to each of four individuals $20,000 principal amount of promissory notes (a total of $80,000 principal amount) (the “April 2010 Notes”). The investors included the Company’s Chief Executive Officer and Chairman of the Board, a director of the Company who is also a beneficial owner of more than 10% of the Company’s outstanding common stock, another beneficial owner of more than 10% of the Company's outstanding common stock and one of the Company’s greater than 5% stockholders. These April 2010 Notes bore interest at 4% per annum. Principal and accrued interest on the April 2010 Notes were payable on April 12, 2015; provided, however that the April 2010 Notes became due and payable immediately upon the Company’s consummation of an equity financing resulting in net proceeds to the Company in excess of $2,500,000. On August 12, 2010, the Company's Chief Executive Officer made an interest free loan to the Company in the amount of $20,000 pursuant to a demand promissory note. On September 7, 2010, the Company borrowed a total of $50,000 ($25,000 each) from a director of the Company who is also a beneficial owner of more than 10% of the Company's outstanding common stock and one of the Company’s greater than 10% stockholders. These loans were made pursuant to a demand promissory note and are non-interest bearing. On April 19, 2011, the Company and four individuals (the "Note Holders") entered into an exchange agreement pursuant to which the Company received $230,000 in additional funds from the Note Holders and the Note Holders agreed to cancel all the outstanding notes previously issued to them, aggregating $150,000 in exchange for new promissory notes and warrants. Each individual received a new promissory note (the "New Notes"), the principal amount of each New Note is $95,000 (an aggregate principal amount of $380,000) and a warrant (each a "Warrant" and collectively the "Warrants") to purchase 463,415 shares of the common stock of the Company. The New Notes accrue interest at a rate of six percent per annum, which interest shall be paid quarterly until April 19, 2014, at which time the outstanding principal amount, with interest accrued thereon, shall be due and payable. The New Notes shall become due and payable upon customary events of default or if the Company consummates an equity financing resulting in net proceeds of $4,000,000 or more to the Company. The four individual holders of the Warrants issued in connection with the New Notes in the aggregate have the right to purchase 1,853,660 shares of common stock at $0.41 per share exercisable for a period of five years. The aggregate fair value of the Warrants issued, amounted to $742,391, which was determined using the Black Scholes option pricing model at $0.40 per warrant utilizing the following assumptions: expected volatility of 201.15%, risk free interest rate of 2.09%, expected term of five years and a market price of $0.41. The Company estimated the fair value of the Warrants using the Black Scholes option pricing model. In accordance to ASC 470-20 "Debt with Conversion and Other Options", the Company allocated a portion of the proceeds from the New Notes to the Warrants. The relative fair value of the Warrants, which amounted to $251,346, was recorded as a discount to the New Notes. This amount is being accreted to interest expense over the contracted term of the New Notes. As of September 30, 2011, the carrying value of the New Notes was $166,264. Contractual interest expense under the New Notes amounted to $37,610, which was recorded as a component of interest expense in the accompanying statements of operations for the nine months ended September 30, 2011.

Notes Payable

9 Months Ended

Sep. 30, 2011

6. Notes Payable

During October 2009, the Company issued to each of four individuals $50,000 principal amount of subordinated convertible promissory notes (the “October 2009 Notes”) aggregating $200,000. The individuals included the Company’s Chief Executive Officer and Chairman of the Board, another director, one of the Company’s greater than 5% stockholders and an accredited investor. The $50,000 principal amount of October 2009 Notes issued to the Chief Executive Officer and Chairman of the Board represented $25,000 of new funds received and a rollover of a $25,000 loan made by him to the Company on September 10, 2009. The October 2009 Notes bore interest of 4% per annum and were payable on demand on the earlier of (i) the date on which the Company publicly announced a joint venture or strategic relationship, the execution of a license, or similar agreement with a third-party with respect to the Company’s technology and (ii) the date on which the Company filed with the SEC its annual report on Form 10-K, which included audited financial statements for the year ended December 31, 2009, such date referred to as the target date. The holders were entitled to convert the outstanding principal amount of the October 2009 Notes and accrued and unpaid interest thereon into shares of the Company’s common stock at any time commencing on the fifth trading day immediately following the target date at the conversion price in effect on such date. The conversion price was the greater of (i) the average of the closing sale price of the Company’s common stock for the five trading days immediately following the target date and (ii) $0.05 per share.

The Company was entitled to prepay the October 2009 Notes on 20 days’ prior written notice to the holders. The Company had agreed to include the shares of common stock issuable upon conversion of the October 2009 Notes in any applicable registration statement filed by the Company with the SEC covering its equity securities.

On April 8, 2010, pursuant to the terms of the October 2009 Notes, the conversion price of the October 2009 Notes was set at $0.05. Also, on April 8, 2010, each of the holders elected to convert all of the then outstanding principal and interest on such October 2009 Notes, totaling $203,697, which resulted in the issuance to them of an aggregate of 4,073,943 shares of the Company’s common stock. The conversion of the October 2009 Notes resulted in the October 2009 Notes being satisfied in full.

On April 12, 2010, the Company issued to each of four individuals $20,000 principal amount of promissory notes (a total of $80,000 principal amount) (the “April 2010 Notes”). The investors included the Company’s Chief Executive Officer and Chairman of the Board, a director of the Company who is also a beneficial owner of more than 10% of the Company’s outstanding common stock, another beneficial owner of more than 10% of the Company's outstanding common stock and one of the Company’s greater than 5% stockholders. These April 2010 Notes bore interest at 4% per annum. Principal and accrued interest on the April 2010 Notes were payable on April 12, 2015; provided, however that the April 2010 Notes became due and payable immediately upon the Company’s consummation of an equity financing resulting in net proceeds to the Company in excess of $2,500,000.

On August 12, 2010, the Company's Chief Executive Officer made an interest free loan to the Company in the amount of $20,000 pursuant to a demand promissory note.

On September 7, 2010, the Company borrowed a total of $50,000 ($25,000 each) from a director of the Company who is also a beneficial owner of more than 10% of the Company's outstanding common stock and one of the Company’s greater than 10% stockholders. These loans were made pursuant to a demand promissory note and are non-interest bearing.

On April 19, 2011, the Company and four individuals (the "Note Holders") entered into an exchange agreement pursuant to which the Company received $230,000 in additional funds from the Note Holders and the Note Holders agreed to cancel all the outstanding notes previously issued to them, aggregating $150,000 in exchange for new promissory notes and warrants. Each individual received a new promissory note (the "New Notes"), the principal amount of each New Note is $95,000 (an aggregate principal amount of $380,000) and a warrant (each a "Warrant" and collectively the "Warrants") to purchase 463,415 shares of the common stock of the Company.

The New Notes accrue interest at a rate of six percent per annum, which interest shall be paid quarterly until April 19, 2014, at which time the outstanding principal amount, with interest accrued thereon, shall be due and payable. The New Notes shall become due and payable upon customary events of default or if the Company consummates an equity financing resulting in net proceeds of $4,000,000 or more to the Company.

The four individual holders of the Warrants issued in connection with the New Notes in the aggregate have the right to purchase 1,853,660 shares of common stock at $0.41 per share exercisable for a period of five years. The aggregate fair value of the Warrants issued, amounted to $742,391, which was determined using the Black Scholes option pricing model at $0.40 per warrant utilizing the following assumptions: expected volatility of 201.15%, risk free interest rate of 2.09%, expected term of five years and a market price of $0.41.

The Company estimated the fair value of the Warrants using the Black Scholes option pricing model. In accordance to ASC 470-20 "Debt with Conversion and Other Options", the Company allocated a portion of the proceeds from the New Notes to the Warrants. The relative fair value of the Warrants, which amounted to $251,346, was recorded as a discount to the New Notes. This amount is being accreted to interest expense over the contracted term of the New Notes.

As of September 30, 2011, the carrying value of the New Notes was $166,264. Contractual interest expense under the New Notes amounted to $37,610, which was recorded as a component of interest expense in the accompanying statements of operations for the nine months ended September 30, 2011.

SentiSearch, Inc. 10-Q