Note 9 - Convertible Notes Payable

12 Months Ended

Dec. 31, 2012

NOTE 9: CONVERTIBLE NOTES PAYABLE

The following table summarizes the convertible debt outstanding as of December 31, 2012.

							Principal						Discount		Carrying Amount		Carrying Amount
							at				Total		at		at		Short Term				Long Term
Date of Issuance	Maturity Date	Interest Rate			Original Principal		December 31, 2012		Allocated Discount		Discount Amortized		December 31, 2012		December 31, 2012		Related		Non Related		Related		Non Related
8/1/1999	6/30/2004		10	%	$	862,500	$	75,000	$	-0-	$	-0-	$	-0-	$	75,000	$	-0-	$	75,000	$	-0-	$	-0-
8/29/2008	1/1/2015		10	%		150,000		150,000		135,600		135,600		-0-		150,000		-0-		-0-		150,000		-0-
8/29/2008	1/1/2016		10	%		2,120,000		1,770,000		1,916,480		1,916,480		-0-		1,770,000		-0-		-0-		1,770,000		-0-
12/16/2008	12/16/2013		12	%		160,000		160,000		44,024		44,024		-0-		160,000		160,000		-0-		-0-		-0-
1216/2008	1/1/2014		12	%		200,000		200,000		55,030		55,030		-0-		200,000		-0-		-0-		-0-		200,000
12/16/2008	1/1/2015		12	%		100,000		100,000		27,515		27,515		-0-		100,000		-0-		-0-		-0-		100,000
12/16/2008	1/1/2016		12	%		4,615,000		4,520,000		1,243,681		1,243,681		-0-		4,520,000		-0-		-0-		4,505,000		15,000
9/30/2009	1/1/2016		12	%		1,400,000		1,200,000		526,400		526,400		-0-		1,200,000		-0-		-0-		1,100,000		100,000
12/31/2009	1/1/2016		12	%		1,490,000		1,490,000		935,720		935,720		-0-		1,490,000		-0-		-0-		1,440,000		50,000

Total					$	11,097,500	$	9,665,000	$	4,884,450	$	4,884,450	$	-0-	$	9,665,000	$	160,000	$	75,000	$	8,965,000	$	465,000

The following table summarizes the convertible debt outstanding as of December 31, 2011.

							Principal						Discount		Carrying Amount		Carrying Amount
							at				Total		at		at		Short Term				Long Term
Date of Issuance	Maturity Date	Interest Rate			Original Principal		December 31, 2011		Allocated Discount		Discount Amortized		December 31, 2011		December 31, 2011		Related		Non Related		Related		Non Related
8/1/1999	6/30/2004		10	%	$	862,500	$	75,000	$	-0-	$	-0-	$	-0-	$	75,000	$	-0-	$	75,000	$	-0-	$	-0-
8/29/2008	8/29/2013		10	%		2,270,000		1,920,000		2,052,080		2,052,080		-0-		1,920,000		-0-		-0-		1,920,000		-0-
12/16/2008	12/16/2013		12	%		5,075,000		4,980,000		1,370,250		1,370,250		-0-		4,980,000		-0-		-0-		4,980,000		-0-
9/30/2009	3/31/2013		12	%		1,400,000		1,200,000		526,400		526,400		-0-		1,200,000		-0-		-0-		1,100,000		100,000
12/31/2009	10/1/2013		12	%		1,490,000		1,490,000		935,720		935,720		-0-		1,490,000		-0-		-0-		1,440,000		50,000

Total					$	11,097,500	$	9,665,000	$	4,884,450	$	4,884,450	$	0	$	9,665,000	$	0	$	75,000	$	9,440,000	$	150,000

10% Convertible Notes

During 1999, the Company issued 10% Convertible Notes payable in the amount of $862,500 pursuant to a Confidential Private Placement Memorandum. There were costs of $119,625 associated with this offering. The net proceeds to the Company were $742,875. The notes bear interest at ten percent annually, payable semi-annually. The notes were convertible after maturity, which was June 30, 2004, into shares of common stock of the Company at $1.25 per share. We are in default in the payment of principal and interest. As of December 31, 2012, approximately $787,500 of the Convertible Notes had been repaid in cash or converted into 1,495,179 shares of common stock of the Company leaving an outstanding principal balance of $75,000. There was $102,248 of accrued interest at December 31, 2012.

Secured Convertible Debentures

On September 30, 2009, the Company sold an aggregate of $1,400,000 principal amount 12% Secured Convertible Debentures (the “Debentures”) and common stock purchase warrants (the “Warrants”) to purchase an aggregate of 5,600,000 shares of our common stock exercisable at a price of $0.25 per share for four years subsequent to the closing of the transaction to four accredited investors including our Chief Executive Officer. The Company received net proceeds of $1,400,000. The Debentures, which bear interest at 12% per annum, matured on March 30, 2011. The Debentures are convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.25 per share. On March 30, 2011, the Company repaid $200,000 of the outstanding principal amounts owed and extended $1,200,000 of the convertible notes until April 1, 2013, including $1,100,000 in convertible notes held by our Chief Executive Officer and Director, Cornelis F. Wit. The Company also extended the expiration date of the warrants associated with the September 2009 offering. On February 22, 2013, the Company extended $1,200,000 of the convertible notes until January 1, 2016, including $1,100,000 in convertible notes held by our Chief Executive Officer and Director, Cornelis F. Wit. The Company also extended the expiration date of the warrants associated with the September 2009 offering. The warrants are now exercisable until January 1, 2016 at an exercise price of $0.25 per share.

Convertible Debentures

On December 31, 2009, the Company sold an aggregate of $1,490,000 principal amount 12% Convertible Debentures (the “Debentures”) and common stock purchase warrants (the “Warrants”) to purchase an aggregate of 5,960,000 shares of our common stock exercisable at a price of $0.25 per share for four years subsequent to the closing of the transaction to three accredited investors including our Chief Executive Officer. The Company received net proceeds of $1,490,000. The Debentures, which bear interest at 12% per annum, matured on June 30, 2011. The Debentures are convertible at any time at the option of the holder into shares of our common stock based upon a conversion rate of $0.25 per share. On September 30, 2011, the Company extended all $1,490,000 of the convertible notes until October 1, 2013, including $1,440,000 in convertible notes held by our Chief Executive Officer and Director, Cornelis F. Wit. The Company also extended the expiration date of the warrants associated with the December 2009 offering. The warrants are now exercisable until December 31, 2015 at an exercise price of $0.25 per share. On February 22, 2013, the Company extended all $1,490,000 of the convertible notes until January 1, 2016, including $1,440,000 in convertible notes held by our Chief Executive Officer and Director, Cornelis F. Wit. The Company also extended the expiration date of the warrants associated with the December 2009 offering. The warrants are now exercisable until January 1, 2016 at an exercise price of $0.25 per share.

The payments required at maturity under the Company’s outstanding convertible debt at December 31, 2012 are as follows:

2013	$	235,000
2014		200,000
2015		250,000
2016		8,980,000
Total	$	9,665,000