8. Notes Payable

Our notes payable consisted of the following at:


	June 30, 2013	December 31, 2012
Short-term note payable with interest at 12% per annum, currently in default	$ 10,000	$ 10,000
Short-term note payable with interest at 18% per annum, due on demand	5,000	5,000
Convertible note payable with interest at 18% per annum, convertible into shares of common stock at a price of $0.70 per share, currently in default	50,000	50,000
Convertible note payable with interest at 8% per annum, convertible along with accrued interest into shares of common stock at a price equal to 50% of the market price on the date of conversion, currently in default	5,000	5,000
Convertible note payable with interest at 8% per annum, convertible into shares of common stock at a price equal to $0.02 per share, currently in default	65,000	65,000
Convertible note payable to an institutional investor, dated October 16, 2012, with interest at 8% per annum, convertible after first 180 days into common stock at a price equal to 58% of the average of the lowest 5 trading days during the 10 day trading period ending the trading day prior to conversion date, due July 18, 2013	23,000	53,000
Convertible note payable to an institutional investor, dated November 29, 2012, with interest at 8% per annum, convertible after first 180 days into common stock at a price equal to 58% of the average of the lowest 5 trading days during the 10 day trading period ending the trading day prior to conversion date, due September 3, 2013	37,500	37,500
Convertible note payable to an institutional investor, dated February 5, 2013, with interest at 8% per annum, convertible after first 180 days into common stock at a price equal to 58% of the average of the lowest 5 trading days during the 10 day trading period ending the trading day prior to conversion date, due November 5, 2013	47,500	-
Other short-term notes payable with interest ranging from 12% to 18% per annum	7,500	7,500
Beneficial conversion factor on convertible note payable	5,877	5,000
Discount on convertible notes payable to institutional investor	(31,851)	(70,691)

	$ 224,526	$ 167,309

We have the right to prepay the convertible notes payable to the institutional investor along with accrued interest payable during the first 180 days following the date of each respective note. During that time, the amount of prepayment during the first 60 days is 130% of the outstanding amounts owed, with the amount of prepayment increasing each subsequent 30 days to 135%, 140%, 145% and 150% of the outstanding amounts owed. After the expiration of 180 days following the date of the notes, we have no right of prepayment.

For each of the convertible notes payable to the institutional investor, we have recorded debt issuance costs, a debt discount related to the estimated value of the derivative for the conversion feature of the note, and a derivative liability at the inception of the note. We amortize the debt discount to interest expense over the life of each respective note on a straight-line basis. The total discount on these convertible notes payable was $31,851 and $70,691 at June 30, 2013 and 2012, respectively.

We have recorded a liability for the beneficial conversion factor attributed to the $5,000 note payable which is convertible into shares of our common stock at a price equal to 50% of the market price, and recognized this amount as interest expense. The liability was $5,877 and $5,000 at June 30, 2013 and December 31, 2012, respectively

At June 30, 2013 and December 31, 2012, accrued interest payable on notes payable was $55,404 and $38,907, respectively.