CONVERTIBLE NOTES PAYABLE

6 Months Ended

Jun. 30, 2012

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

NOTE 7—CONVERTIBLE NOTES PAYABLE

Convertible Notes Payable is comprised of:

	June 30,		December 31,
	2012		2011
Convertible Promissory Notes	$	485,000	$	589,920
Convertible Debentures		349,975		355,000
	$	834,975	$	944,920
Less: unamortized debt discount		79,112		101,460
Net carrying value	$	755863	$	843,460

The Company had convertible promissory notes outstanding at June 30, 2012 and December 31, 2011 in the amount of $485,000 and $589,920, respectively. These notes bear interest at rates ranging from 8% to 21% per annum and mature within the next twelve months. Under the convertibility terms of the convertible promissory notes, the principal, plus accrued interest can be converted immediately upon maturity, at the option of the holder, either in whole, or in part, into fully paid common shares of the Company. 

The Company had convertible debentures outstanding at June 30, 2012 and December 31, 2011 in the amount of $349,975. The debentures bear interest at rates ranging from 8% to 12% per annum. Under the convertibility terms of the debenture, the principal, plus accrued interest can be converted immediately, at the option of the holder, either in whole, or in part, into fully paid common shares of the Company.

The convertible promissory notes and the convertible debenture contain a beneficial conversion feature which allows the holder of the note to convert the note into common shares of the Company at a price less than market. This beneficial conversion amount is recorded as a discount to the principal amount of the note and is amortized to interest expense utilizing the straight-line method over the term of the related note as the results are not materially different from those which would result from the interest method.

As of June 30, 2012 and December 31, 2011, $79,112 and $101,460, respectively, in unamortized discount remained associated with convertible notes outstanding. As of June 30, 2012, deferred financing costs net of amortization of $1,963 remains related to obtaining convertible notes executed. The deferred financing fees are amortized to interest expense over the term of the related convertible note agreement. 

In January 2012, the Company entered into a debt settlement agreement with two convertible promissorynoteholdersrelating to $177,420 in principal amounts owed to thenoteholders, excluding accrued interest. This note balance along with accrued interest was outstanding and due to thenoteholdersas of December 31, 2011 and the Company did not have sufficient shares of common stock to satisfy the conversion terms of the notes at that time. The debt settlement agreement executed in January 2012 allows the Company to satisfy its obligations through the issuance of common stock with an aggregate value at the time of issuance of $260,000 ($130,000 pernoteholder) in order to satisfy the convertible promissory note obligations. The settlement agreement allows the Company to issue to eachnoteholder10,000,000 shares of common stock on the 15th day of each month. The value of the issuance of these shares less a 50% discount to the market price of the common stock when issued reduces the $260,000 debt settlement obligation. For the six months ended June 30, 2012, the Company issued 43,000,000 shares of common stock to thenoteholderswhich resulted in a $34,000 reduction in the debt settlement obligation. The remaining $183,000 debt settlement obligation is recorded as of June 30, 2012 on the condensed consolidated balance sheet. The debt settlement agreement resulted in a loss on settlement of $34,000 which is recorded as interest expense in the condensed consolidated statements of operations and comprehensive loss for the three month period ended June 30, 2012. The Company expects that the remaining debt settlement obligation will be satisfied through the issuance of common shares within twelve months of June 30, 2012 and therefore has classified the remaining obligation as a current liability. The Company does have the option at any time to prepay the remaining settlement obligation in cash.