At various times, starting July 1, 2010, the Company has raised funds through the issuance of unsecured convertible promissory notes for terms ranging from six months to two years.

Summary
Principal amount of convertible notes issued	$	290,080
Amounts repaid		(89,500)
Amounts converted		(18,000)
Balance of principal amount, March 31, 2012	$	182,580

As at March 31, 2012 and December 31, 2011, respectively, the Company had accrued $38,023 and $35,608 of interest on the notes, which will be repaid, or converted into common stock on maturity. Based on the share price of $.02 at March 31, 2012, the Company would require 5,480,683 shares of common stock to convert the notes then outstanding.

The Company recognizes the underlying value of embedded derivatives in accordance with ASC 815-15-25-1. The value of the option for noteholders to convert their notes into shares of common stock is calculated and credited as a derivative liability for the duration of the notes, while an offsetting amount is classified as a discount to the principal value of the notes. The derivative value added to the discount reserve and derivative value was $0 and $15,522 during the three months ended March 31, 2012 and 2011, respectively. The value of the debt discount is amortized as interest expense on a straight line basis over the life of the notes. During the three months ended March 31, 2012 and 2011, the Company amortized $10,656 and $920, respectively, as debt discount expense. The principal amount and net discount on the convertible notes are shown in the following table.

		March 31, 2012		December 31, 2011
Principal amount of convertible notes	$	182,580	$	220,080
Note discount, net of amortization		(31,160)		(41,816)
Net value of notes	$	151,420	$	178,264

At March 31, 2012, the Company valued the derivative liability and determined that the carrying value was in excess of the market value by $16,227 and, accordingly, reduced the derivative liability by this amount, with an offset to additional paid-in capital.

The Company also has an unsecured term note for $25,000, due April 12, 2012. The interest rate on this note is 8% pa and interest expense of $2,767 was accrued as at March 31, 2012.