Convertible Notes

3 Months Ended

Jul. 31, 2012

Convertible Notes [Text Block]

8.	Convertible Notes
	a)	On December 28, 2011, the Company entered into a Convertible Promissory Note agreement for $47,500. Pursuant to the agreement, the loan is convertible into shares of common stock at a variable conversion price equal to the lower of 51% of the average of the lowest three closing bid prices for the common stock during the 10 trading days prior to the date of the conversion notice. The loan bears interest at 8% per year and the principal amount and any interest thereon are due on September 30, 2012.
		On May 4, 2012, the Company modified the conversion terms to an average of the two lowest closing bid prices for the common stock during the 100 trading days prior to the date of the conversion notice. Pursuant to ASC 470-50 “Debt: Modifications and Extinguishments” the Company determined that there was no extinguishment of debt and no gain or loss was recognized. Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a full discount to the note payable of $47,500. The carrying value of the convertible note will be accreted over the term of the convertible note up to the value of $47,500. At July 31, 2012, $17,629 of accretion expense had been recorded and the carrying value of the note is $17,629.
		The Company paid $2,500 of deferred finance costs relating to the issuance of the Note. At July 31, 2012, the Company had recorded amortization of $1,944 and the remaining $556 will be charged to operation over the life of the note.
	b)	On February 13, 2012, the Company entered into a Convertible Promissory Note agreement for $32,500. Pursuant to the agreement, the loan is convertible into shares of common stock at a variable conversion price equal to the lower of 51% of the average of the lowest three closing bid prices for the common stock during the 10 trading days prior to the date of the conversion notice. The loan bears interest at 8% per year and the principal amount and any interest thereon are due on November 15, 2012.
		On May 4, 2012, the Company modified the conversion terms to an average of the two lowest closing bid prices for the common stock during the 100 trading days prior to the date of the conversion notice. Pursuant to ASC 470-50 “Debt: Modifications and Extinguishments” the Company determined that there was no extinguishment of debt and no gain or loss was recognized. Pursuant to ASC 815, “Derivatives and Hedging,” the Company will recognize the fair value of the embedded conversion feature as a derivative liability when the Note becomes convertible on August 12, 2012.
		The Company paid $2,500 of deferred finance costs relating to the issuance of the Note. At July 31, 2012, the Company had recorded amortization of $1,249 and the remaining $1,251 will be charged to operation over the life of the note.

c)	On March 21, 2012, the Company entered into a Convertible Promissory Note agreement for $42,500. Pursuant to the agreement, the loan is convertible at a variable conversion price equal to the lower of 51% of the average of the lowest two closing bid prices for the common stock during the 100 trading days prior to the date of the conversion notice. The loan bears interest at 8% per year and the principal amount and any interest thereon are due on December 26, 2012. Pursuant to ASC 815, “Derivatives and Hedging,” the Company will recognize the fair value of the embedded conversion feature as a derivative liability when the Note becomes convertible on September 17, 2012.
	The Company paid $2,500 of deferred finance costs relating to the issuance of the Note. At July 31, 2012, the Company had recorded amortization of $833 and the remaining $1,667 will be charged to operation over the life of the note.
d)	On May 8, 2012, the Company entered into a Convertible Promissory Note agreement for $32,500. Pursuant to the agreement, the loan is convertible 180 days after issuance into shares of common stock at a variable conversion price equal to the lower of 51% of the average of the lowest three closing bid prices for the common stock during the 10 trading days prior to the date of the conversion notice. The loan bears interest at 8% per year and the principal amount and any interest thereon are due on February 11, 2013. Pursuant to ASC 815, “Derivatives and Hedging,” the Company will recognize the fair value of the embedded conversion feature as a derivative liability when the Note becomes convertible on November 4, 2012.
	The Company paid $2,500 of deferred finance costs relating to the issuance of the Note. At July 31, 2012, the Company had recorded amortization of $833 and the remaining $1,667 will be charged to operation over the life of the note.