Convertible Promissory Notes Related Parties

6 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Convertible Promissory Notes Related Parties

Note 4 – Convertible Promissory Notes Related Parties

On July 25, 2011, the Company exchanged 50% of the accrued salary due each officer (see Note 5) into convertible notes payable.  The amounts exchanged were $83,750 and $21,000 respectively.  Additionally, the officers exchanged 100% of their previously issued promissory notes for convertible notes totaling $63,500 and $35,192 respectively.  Total newly issued convertible notes amount to $147,250 and $56,192 respectively. The exchange was accounted for as a debt extinguishment and new issuance of debt due to the addition of the conversion feature in accordance with ASC 470. The beneficial conversion feature was evaluated and the Company recorded a debt discount for the beneficial conversion value of $203,442, however, the notes were due on demand so this was immediately charged to interest expense with a credit to APIC as embedded conversion based effective interest.  The new terms of the convertible debt are as follows: interest at 12%, unsecured, due on demand and convertible into shares at a fixed price of $0.04.  The total outstanding convertible promissory note balance as of March 31, 2012 was $203,442. Accrued interest due under these notes was $50,455 at March 31, 2012 and is included in accrued expenses related parties in the accompanying unaudited consolidated balance sheet.