Long-Term Notes Payable

12 Months Ended

Dec. 31, 2011

The long-term notes payable at December 31, 2011 are due to “accredited investors”, bear interest at 7% per annum, are unsecured, and are due on December 31, 2014.

As of December 31, 2010, the aggregate of long-term debt was $3,000,000.

On December 15, 2011, the board of directors authorized the Company to offer a maximum of 60 units of a new series of 7% non-convertible Promissory Notes in the amount of $6,000,000 due December 31, 2014 and to exchange the 7% non-convertible notes payable due December 31, 2012 with the new 7% non-convertible notes payable due December 31, 2014.

Each Unit of the new series of 7% non-convertible notes payable consists of one 7% non-convertible three-year promissory note of the Company, due December 31, 2014 in the amount of $100,000, and 10,000 detachable warrants. Each warrant gives the holder the right to purchase 1 (one) share of Biocoral, Inc. common stock at a price of $12 per share exercisable at any time during the term of the Units.

On December 31, 2011, the Company reached an agreement with holders of the $3,000,000 of convertible notes due December 31, 2012 to exchange such debt for the new 7% non-convertible notes due December 31, 2014. The new 7% non-convertible promissory notes payable issued on December 31, 2011 totaled $4,000,000.

Each of the notes was issued with detachable warrants to purchase one share of the Company’s common stock. A total of 400,000 warrants were issued under these exchanges. The warrants were valued using the Black-Scholes model with the following assumptions: Risk free interest rate of 0.36%, contractual life of 1095 days, exercise price of $12.00 per share, market price of $12.00 per share and volatility factor of 58.37%. The resulting fair value of $1,872,520 for the warrants was added to additional paid in capital and reflected as a debt discount of the notes payable. The $1,872,520 debt discount will be amortized as interest expense over the three year term of the notes payable.

The aggregate maturities of long-term debt at December 31, 2011 are as follows:

December 31,
2012	$	-
2013		-
2014		4,000,000
2015		-
2016		-
Total		4,000,000
Unamortized discount		(1,872,520	)
Net	$	2,127,480

At December 31, 2011, the noncurrent portion of notes payable was $2,127,480, net of a discount of $1,872,520. At December 31, 2010, the noncurrent portion of notes payable was $3,000,000.

BIOCORAL INC 10-K