Convertible Notes Payable

12 Months Ended

Jul. 31, 2013

Convertible Notes Payable [Abstract]

8.	Convertible Notes Payable

The following debt is outstanding:

A Convertible Note Payable, with an original face value of $25,000, dated October 29, 2012, maturing April 29, 2013, accrues interest at 12%, having a debt discount of $25,000 amortized to interest with $0 unamortized, convertible at 50% discount to market, defined as the average of the three lowest trading prices during the ten trading day period prior to the conversion date (effective discount estimated at 80%). If converted at July 31, 2013, it would represent approximately 1,080,000 additional shares. Interest accrued to date is $2,260.

Convertible Note Payable	$	25,000
Less: Long-term portion		-
Current Portion	$	25,000

The Company evaluated the terms of these notes in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging and determined that the underlying common stock is indexed to the Company's common stock. The Company determined that the conversion feature met the definition of a liability and therefore the conversion options was bifurcated for accounting purposes and accounted for at fair value as a derivative liability. The Company has recognized a derivative liability at origination, in excess of the loan amount, of which $25,000 was recognized as a debt discount, which has been amortized over the life of the loan to interest expense. A charge to the statement of operations was made to provide for the remaining portion of the recognized derivative liability at origination. The Company has re-measured the derivative at year end, resulting in a liability of $9,666 as of July 31, 2013.

The derivative valuation was calculated using the Black-Scholes Model for the conversion feature. Assumptions to the calculation were as follows:

Weighted Average:
Dividend rate	0.00	%
Risk-free interest rate	.11	%
Expected lives (years)	0.493
Expected price volatility	76.9	%
Forfeiture Rate	0.00	%

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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