Convertible Debenture Financing	6 Months Ended
Convertible Debenture Financing	Jun. 30, 2012
Convertible Debenture Financing [Abstract]
CONVERTIBLE DEBENTURE FINANCING	NOTE 8. CONVERTIBLE DEBENTURE FINANCING As of June 30, 2012 there was $246,000 of principal amount of our 5% to 8% convertible debentures due December 1, 2014 (the "Convertible Debentures”) still outstanding. Under the Convertible Debentures, we are obligated to pay interest semi-annually. The Convertible Debentures are convertible into shares of our common stock at a per share conversion price equal to 85% of the volume weighted average daily price for the Common Stock, as reported by Bloomberg L.P., for the ten (10) trading days prior to conversion not to be converted for less than $1.00 per share to $2.00 per share depending on the debenture. In March 2010, we borrowed $100,000 from an unaffiliated third party non-institutional lender and issued to the lender (i) a 9% secured promissory note in the principal amount of $100,000; and (ii) warrants to purchase 100,000 shares of our common stock at any time and from time to time through March 31, 2013 at $0.10 per share. The secured promissory note was scheduled to mature in December 2010. In December 2010, the maturity date of the note was extended to June 15, 2011, and then again to December 15, 2011. In May 2011, the note was amended to provide the holder thereof the right to convert into shares of common stock of the Company. This note was amended a third time in March 2012 to provide for the transfer of the payee under the note and to provide that the repayment obligations under the note would be personally guaranteed by our President, CEO and interim CFO Stephen J. Dresnick, MD. Since March 1, 2012, the payees under the Note have elected to convert $75,000 of the outstanding balance and accrued interest into 1,750,000 shares of common stock. The Company recorded the conversion in accordance with ASC 470-20-46 “Induced Conversions.” Under ASC 470-20-46 the fair value of the securities transferred in the transaction in excess of the fair value of consideration issuable in accordance with the original conversion terms is recognized as a loss. The fair value of the shares issued was $145,000 and accordingly the Company recognized $95,000 as a Loss on Debt Conversion. As of June 30, 2012, there was $36,250 of remaining principal. On March 21, 2012, The Company entered into a Securities Purchase Agreement (“SPA”) with Peak One Investments. whereby the Company may sell securities consisting of Secured Convertible Debentures with total principal of up to $600,000 and restricted shares of the Company’s common stock. Under the terms of the SPA, upon execution, and through the first anniversary of the date of execution, the Company may commence a mandatory sale of the debentures and common stock with written notice to the buyer no more than one time in a calendar month (the “Put” or “Funding”). The buyer has sole discretion as to whether the put will be honored. The SPA and related put obligation can be terminated by the buyer in the event of default or a material adverse event or through written notice if the termination date is not less than 90 days from the execution of the agreement. The Company is responsible for payment of legal and other closing fees totaling $22,500 over the first three fundings. All obligations under the agreement are securitized by a first priority interest in all of the assets of the Company. The Company is required to maintain a reserve of shares for issuance equal to 300% of the number of shares issuable upon conversion of debentures. In addition, if the closing price of the Company’s common stock is less than $0.10 per share for twenty consecutive trading days, the Company is required to seek shareholder approval for authorization of a reverse stock-split within 60 days. The total proceeds the Company may receive under the put is equal to 90% of the principal amount of the debentures to be issued. In addition, upon closing of a put, the Company is required to issue restricted shares of common stock with a total value equal to 15% of the principal of the debentures issued based on the closing bid price on the date of closing date of the put. The Company may only receive proceeds of between $22,500 and $45,000 (90% of stated principal of debentures between $25,000 and $50,000) for each put. On March 26, 2012, under the term of the SPA, we issued a 6% convertible note for principal of $50,000, net of the 10% discount and legal fees. The Note bears interest at the rate of 6% per annum. All interest and principal must be repaid by March 26, 2015. The Note is convertible into common stock, at the holder’s option, at a 40% discount to lowest closing bid price for the 20 days prior to the date of conversion. In the event we prepay the Note in full, we are required to pay off all principal, interest and any other amounts owing multiplied by (i) 135% if prepaid during the period commencing on the issuance date through 6 months thereafter and (ii) 140% if prepaid 6 months after the issuance date After the expiration of 180 days following the date of the Note, we have no right of prepayment. Per the terms of the SPA we issued to the Holder 9,493 shares of unregistered Common Stock upon sale of the debenture. The note contained a beneficial conversion feature which resulted in a discount upon issuance. The discount is amortized over the life of the notes on a straight line basis. The total discount resulting from the beneficial conversion feature, the issuance of common stock and the stated discount at origination was $50,000 upon issuance. The balance of the debenture at June 30, 2012, net of the discount was $4,167. The convertible debenture is convertible into common stock of the Company at variable conversion rates that provides a fixed return to the holder. Under the terms of the notes, the Company could be required to issue additional shares in the event of a default. Due to these provisions, the conversion feature is subject to derivative liability treatment under Section 815-40-15 of the FASB Accounting Standard Codification (“Section 815-40-15”) (formerly FASB Emerging Issues Task Force (“EITF”) 07-5). The notes have been measured at fair value using the Black Sholes model upon issuance and at the end of the year with gains or losses from the change in fair value of derivative liabilities recognized on the consolidated statement of operations. The conversion feature was recorded as a discount to the notes due to the beneficial conversion feature upon origination. The fair Value of the embedded derivative of these notes upon issuance was $63,961. The fair value at June 30, 2012 is $59,167.

Internal Fixation Systems, Inc. 10-Q