7. Notes Payable

At December 31, 2011 and 2010, notes payable and accrued interest consisted of:

	2011		2010

Current:
APH Note payable and accrued interest	$	-	$	1,208,800
Rasel Note payable and accrued interest		135,548		-
Cordelia Note payable and accrued interest		1,006,944		-

Total current notes payable and accrued interest	$	1,142,492	$	1,208,800

Long-term:
ATL Note payable and accrued interest		-		448,220
Rasel Note payable and accrued interest		-		130,548

Total long-term notes payable and accrued interest	$	-	$	578,768

A.P. Holdings Limited (“APH”)

Note payable (the “APH Note”) in consideration for the purchase of Triple 8, in the principal amount of $1,200,000, bearing interest at an annual rate of 6% and convertible into 6 million shares of common stock. Originally due on February 15, 2011.

Rasel LTD - Convertible Notes Payable

On October 6, 2009 the Company signed a note payable for $25,000 to Rasel (an affiliated entity of Moshe Schnapp, a former director and officer of the Company in 2010) due on October 6, 2010 bearing interest at 4% per annum. The proceeds were used to pay for half of an existing accounts payable for legal fees incurred at the Company’s inception. On October 20, 2009 the Company signed a note payable for $50,000 payable to Rasel due on October 20, 2010 bearing interest at 4% per annum. These proceeds were used to pay for startup costs, audit fees and future expenses. On January 22, 2010 the Company signed a note payable for $50,000 payable to Rasel due on October 30, 2011 bearing interest at 4% per annum. These proceeds were used for working capital and expenditures. On January 22, 2010 the Company signed an amendment to extend the maturity date of the promissory notes in the amount of $25,000 and $50,000 dated October 6, 2009 and October 20, 2009, respectively, to October 30, 2011. On March 2, 2011 the Company and Rasel agreed to extend the maturity of all notes to December 31, 2012 in consideration of adding a conversion feature to the notes with either a 5% discount to the market price or a fixed price of $0.60. The extension of maturity was agreed to be effective as of December 30, 2010.

The balance of the notes as of December 31, 2011 and 2010 was $135,548 and $130,548, respectively, which includes accrued interest in the amounts of $10,548 and $5,548 at December 31, 2011 and 2010, respectively.

AT Limited – Convertible Note and Accrued Interest

On July 8, 2010, the Company issued a convertible promissory note to A.T. Limited (“ATL”) in the principal amount of $500,000 (the “Forex Note”). The Forex Note bears interest at 10%, matures two years from the date of issuance and is convertible into the Company’s common stock, at ATL’s option, at a conversion price of $0.20 per share subject to adjustment. On the 21st trading day following each conversion, the number of shares of common stock issuable to ATL pursuant to the Forex Note is to be adjusted such that the aggregate number of shares of common stock issuable to ATL is equal to the amount converted divided by 75% of the average of the three lowest closing bid prices during the 20 trading days following delivery of the shares of common stock upon the initial conversion. Concurrent with the conversion of the Forex Note, ATL must make a payment to the Company reducing a pro rata amount owed to the Company under the ATL Note. Based on a fixed conversion price of $0.20, the Forex Note in the aggregate amount of $500,000, excluding interest, is convertible into 2,500,000 shares of the Company’s common stock. ATL has agreed to restrict their ability to convert the Forex Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.

In efforts to reduce debt and cure defaults, on November 1, 2011, the Company and the indebted parties entered into a Settlement Agreement (the “Agreement”) whereby without admitting any wrong doing on either part, settling all previous agreements and resolved any existing disputes. Under the terms of the Agreement, the Company agreed to issue ATL 45,000 shares of Series B Preferred Stock of the Company on a pro-rata basis. The Series B Preferred Stock has a stated value of $100 per share and is convertible into the Company’s common stock at a conversion price of $0.30 per share representing. Further, the Series B Preferred Stock votes on an as converted basis and carries standard anti-dilution rights. The issuance will represent issuance for cash consideration of approximately $5.14 for each share of Series B Preferred Stock and the total debt amount will be recorded as equity.

Following the issuance and delivery of the shares of Series B Preferred Stock to ATL, the Agreement resulted in the settlement of all debts, liabilities and obligations between the parties and that all balances between the Company and ATL will be offset, so no party has any balance with the other party.

The Company recognized a debt discount for the difference in the face value of a note issued and a note received from the same party. The original amount of the debt discount was $100,000 and was amortized over the life of the two year note until the November 1, 2011 settlement agreement. The amortization of the debt discount was $41,668 and $25,890 for 2011 and 2010, respectively, and was recorded as interest expense.

ATL’s note payable balance as of December 31, 2011 and 2010 was $0 and $448,220, which included accrued interest in the amount of $0 and $24,110, and debt discount of $0 and $75,890, respectively.

Cordelia (CDOO) note payable

As disclosed in Note 3, the Company entered into a settlement agreement to annul its purchase of Triple 8 stock and the Company issued a new promissory note to CDOO in the principal amount of $1,000,000. The CDOO note bears interest at the rate of ten percent (10%) per annum and is due and payable in full on November 30, 2012. The balance due at December 31, 2011 on the CDOO note is $1,006,944, which includes accrued interest in the amount of $6,944.