CONVERTIBLE DEBENTURES PAYABLE

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements

Note 7 - CONVERTIBLE DEBENTURES PAYABLE

At December 31, 2011, the Company had no convertible debentures payable, as all had been converted to capital stock of the Company during the fourth quarter of 2011, as follows:

(a)	On October 10, 2011, the Company issued a total of 8,340,000 shares of Series A Convertible Preferred Stock, par value $0.0001, to the parties referred below, all directors of the Company, in exchange for the purchase and cancellation of certain convertible debentures and other outstanding obligations of DEDC, a subsidiary of the Company, with the same parties, in the total amount of the total amount of $1,268,000:
	(1)	A total of 2,425,000 shares at $0.20 per share and 2,000,000 at $0.0001 to Charles R. Cronin;
	(2)	A total of 2,025,000 shares at $0.20 per share to James Michael Whitfield;
	(3)	A total of 1,665,000 shares at $0.20 per share to Harvey Dale Cheek; and
	(4)	A total of 225,000 shares at $0.20 per share to Dr. Earl Beaver.

On December 30, 2011, the Company executed Amendment No.1 to the Exchange Agreement dated October 10, 2011 (the “Original Agreement”) with James Michael Whitfield (“Whitfield”), in which the principal amount of $405,000 of debt owed to Whitfield (the “Original Debenture Amount”), was adjusted to $283,565 (the “Adjusted Debenture Amount”), to reflect total payments of $121,435 made to Whitfield during the 2011, for an adjusted issued total of 1,417,824 shares of Series A Convertible Preferred Stock at $0.0001 per share.

As a result of Amendment No.1, the total amount of the debt cancelled was adjusted to $1,146,565, in exchange for a total issuance of 7,732,824 shares of Series A convertible preferred stock; and

(b)   On December 29, 2011, the Company issued a total of 1,494,909 shares of restricted common stock of the Company to remaining debenture holders, in exchange for a transfer to the Company of debentures issued by DEDC, a subsidiary of the Company, in the aggregate amount of $271,800. The fair value of the share compensation totaled $179,389, or an average of $0.12 per share.

The following summarizes issuance of convertible debt during the year, all of which were converted to capital stock, as outlined above:

(a)   During the period from June 30, 2010 (Inception) through December 31, 2010, the Company issued convertible debentures aggregating $123,000, maturing in December 2011, bearing interest at 20% per annum. During the year ended December 31, 2011, the Company issued additional convertible debentures aggregating $208,800, maturing between January 2012 and April 2012, bearing interest at 20% per annum. These debentures were then settled by issuance of 1,494,909 shares of restricted common stock, as discussed above.

(b)   The Company issued convertible debenture debt for $425,000 in February 2011 to a director and shareholder, maturing in February 2012, bearing interest at 6% per annum. During 2011, this debenture holder and shareholder received an investment bonus of 6 million shares (post-forward stock split) of the Company’s common stock, as consideration for making this investment. This stock issuance was charged to additional paid-in capital.

The holders of each convertible debenture, above, had the right to 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.  Maturity date had been set as 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.