- CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE

9 Months Ended

Sep. 30, 2011

- CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE

NOTE 9 - CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE

Upon inception, the Company evaluates each financial instrument to determine whether it meets the definition of “conventional convertible” debt under paragraph 4 of EITF 00-19, which was ultimately superseded by ASC 470.

Convertible Notes Payable

The following table reflects the convertible notes payable, other than the one remeasured to fair value, which is discussed in Note 10, as of September 30, 2011 and December 31, 2010:

Issue Date	Maturity Date	September 30, 2011		December 31, 2010		Interest Rate			Conversion Rate
Convertible notes payable, in default:
August 28, 2009	November 1, 2009	$	4,300	$	4,300		10.00	%	$	0.0150
November 30, 2009	May 30, 2010		--		10,000		6.00	%	$	0.0050
April 7, 2010	November 7, 2010		65,450		70,000		6.00	%	$	0.0080
November 12, 2010	November 7, 2010		40,000		40,000		6.00	%	$	0.0080
			109,750		124,300
Convertible notes payable, in default – related parties:
January 9, 2009	January 9, 2010		10,000		10,000		10.00	%	$	0.0150
December 16, 2009	December 16, 2010		--		9,000		6.00	%	$	0.0050
January 25, 2010	January 25, 2011		6,000		6,000		6.00	%	$	0.0050
			16,000		25,000
		$	125,750	$	149,300

The convertible notes payable classified as “in default” are in default as of the date this quarterly report on Form 10-Q was ready for issue.

Notes Payable

The following table reflects the notes payable as of September 30, 2011 and December 31, 2010:

Issue Date	Maturity Date	September 30, 2011		December 31, 2010		Interest Rate
Notes payable:
April 27, 2011	April 27, 2012	$	5,000	$	--		6.00	%
Notes payable, in default – related parties:
February 24, 2010	February 24, 2011		7,500		7,500		6.00	%
Notes payable, in default:
February 22, 2010	August 22, 2010		--		20,000		3.00	%
February 23, 2011	March 23, 2011		20,000		--		7.00	%
June 16, 2011	July 3, 2011		15,000		--		6.00	%
June 17, 2011	July 3, 2011		5,000		--		6.00	%
June 23, 2011	August 23, 2011		25,000		--		6.00	%
			65,000		20,000
		$	77,500	$	27,500

NOTE 9 - CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE- continued

Stockholder Loans

The following table reflects the stockholder loans as of September 30, 2011 and December 31, 2010:  

Issue Date	Maturity Date	September 30, 2011		December 31, 2010		Interest Rate
Various	None stated	$	--	$	7,900		8.00	%
October 26, 2010	January 25, 2011		--		350		6.00	%
November 16, 2010	January 16, 2011		--		1,875		6.00	%
		$	--	$	10,125

At September 30, 2011 and December 31, 2010, combined accrued interest on the convertible notes payable, notes payable and stockholder loans was $14,607 and $9,038, respectively, and included in accounts payable and accrued liabilities on the accompanying balance sheets. Management intends to have discussions or has already had discussions with several of the promissory note holders who do not currently have convertible notes regarding amending their notes to make them convertible into shares of the Company’s common stock. Any such agreements to convert promissory notes into shares of the Company’s common stock would more than likely have a highly dilutive effect on current shareholders and such dilution may significantly negatively affect the trading price of the Company’s common stock.

Between July 13, 2011 and September 6, 2011, several promissory notes were modified to add a conversion option. These notes were converted into common stock immediately following the modifications. The following table details the promissory notes that were modified and subsequently converted:

Issue Date	Modification and Conversion Date	Face Value plus Accrued Interest		Shares Issued Upon Conversion		Extinguishment Loss
Notes payable:
May 10, 2011	July 13, 2011	$	5,050		631,555	$	5,054
April 28, 2011	July 14, 2011		50,592		10,118,368		101,184
May 19, 2011	July 19, 2011		5,049		631,150		2,525
May 25, 2011	July 26, 2011		5,049		631,150		2,525
June 6, 2011	August 12, 2011		5,055		1,010,988		5,055
February 22, 2010	August 13, 2011		20,600		6,200,000		47,600
May 26, 2011	September 6, 2011		20,224		4,044,744		46,515
		$	111,619		23,267,955	$	210,458

The following table details the convertible promissory notes that were converted between July 26, 2011 and August 26, 2011:

Issue Date	Modification and Conversion Date	Face Value plus Accrued Interest		Shares Issued Upon Conversion		Extinguishment Loss
Convertible notes payable:
December 16, 2009	July 26, 2011	$	9,540		1,908,000	$	13,355
February 15, 2011	August 16, 2011		22,267		2,945,370		10,132
November 30, 2009	August 26, 2011		11,071		2,767,670		30,444
Various	August 26, 2011		4,900		1,200,000		13,100
		$	47,778		8,821,040	$	67,031