Note 15. Derivative Liability

6 Months Ended

Jun. 30, 2011

Derivatives and Fair Value [Text Block]

Note 15. Derivative Liability

At June 30, 2011, the Company had convertible notes with a face value of $1,159,954 that contain an embedded derivative due to their conversion features not being considered fixed or determinable. In addition to these convertible notes all other debt and equity instruments convertible to common stock at the discretion of the holder were considered as a part of the derivative liability due to the tainted equity environment. These instruments consisted of convertible preferred stock valued at fair value and recorded as a part of the derivative liability.

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The following shows the changes in the derivative liability measured on a recurring basis for the six months ended June 30, 2011:

Derivative liability at December 31, 2010	$	810,539
Derivative liability from issuance of convertible notes payable (recorded as discount on debt)		251,886
Derivative liability from issuance of convertible notes payable (recorded as loss)		44,940
Gain on derivative liability		63,365
Settlement of portion of derivative liability		(526,530	)
Derivative liability at June 30, 2011	$	644,200

The following tabular presentation reflects the components of derivative financial instruments on the Company’s balance sheet at June 30, 2011 and December 31, 2010:

Derivative Liabilities	June 30, 2011		December 31, 2010
Embedded conversion feature	$	383,974	$	256,749
Other derivative instruments		260,226		553,790
Totals	$	644,200	$	810,539

The fair values of certain other derivative financial instruments (tainted equity) that existed at the time of the initial Debenture Financing were re-classed from stockholders’ equity to liabilities when, in connection with the Debenture Financing, the Company no longer controlled its ability to share-settle these instruments.