13. STOCK SETTLEMENT PROCESS

9 Months Ended

Sep. 30, 2011

Notes to Financial Statements

13. STOCK SETTLEMENT PROCESS

During 2006 the Company negotiated a loan from an individual in the amount of $100,000. Under the terms of the loan it was to be repaid in full within one year together with interest at the rate of 15% per annum. The Company was unble to pay the loan when due, and under the threat of litigation the note holder was given 3,500,000 shares of common stock. The stock was issued on January 28, 2010. At that time the principal, accrued interest, and legal fees amounted to $163,366. Under the terms of a court ordered stipulation agreement, if the note holder was unable to liquidate the stock in full payment of the stipulated amount then the Company would be obligated to issue more stock to him to make up for the shortage. As a part of the agreement the note holder is required to account for proceeds realized from the sales of stock. The note holder has yet to report any stock sales so this settlement is considered to be in process.