CONVERTIBLE DEBENTURES PAYABLE

6 Months Ended

Jun. 30, 2011

Convertible Debentures Payable

Note 7.CONVERTIBLE DEBENTURES PAYABLE

On June 30, 2011, the Company had issued $790,000 of convertible debentures (“debentures”), with interest rates from 6% to 20% per annum.  The holders of each debenture may convert the debentures into shares of the Company’s common stock, convertible at $1.00 per share at any time prior to the maturity date.  During the period, one debenture holder received an investment bonus of 2 million shares of the Company common stock, as consideration for making the investment in the debentures.  Maturity date is the earlier of: (i) six months from the signing of each debenture; or (ii) the date on which project financing is obtained; or (iii) the date of receipt of significant equity investment.

In accordance with the provisions of ASC Topic 470-20, the Company recognizes the value of any embedded beneficial conversion feature in connection with the convertible notes. The fair value of the embedded beneficial conversion feature is estimated to be the difference between the issue date fair value and face amount of the debt with the fair value of the debt being determined on a relative fair value basis, based on the underlying estimated fair value of the common shares issuable on conversion. The embedded beneficial conversion feature would be recorded as a credit to additional paid-in capital. The resulting debt discount is accreted over the term of the notes using the effective interest amortization method. , The Company determined that no debt discount exists. The Company has recorded accrued interest of $40,288 (2010 - $Nil) on the debenture debt through June 30, 2011.