SHORT TERM DEBT, NET OF DEBT DISCOUNT

9 Months Ended

Sep. 30, 2013

Short-Term Debt, Other Disclosures [Abstract]

SHORT TERM DEBT, NET OF DEBT DISCOUNT

8. SHORT TERM DEBT, NET OF DEBT DISCOUNT

In the first nine months of 2013, the Company realized gross proceeds of $555,000 in new cash. Repayment in the amount of $30,000 was made in January 2013. Proceeds from the sale of its 15.0% twelve month Unsecured Convertible Notes, in the aggregate original principal amount of $525,000 (the “Notes”) to accredited investors (the “Investors”).  Interest on the outstanding principal balance of the Notes is payable upon maturity of the note. The outstanding principal balance of the Notes and all accrued but unpaid interest thereon may be converted at any time at the option of each Investors into shares of Common Stock at the Conversion Price of $.20 per share.  The Company may prepay the Notes at any time without penalty to the Investors.

Unsecured Notes, net debt discount, consist of the following:

	September 30,		December 31,
	2013		2012
Unsecured Convertible Notes	$	1,450,333	$	1,319,376
Debt discount		(103,465)		(135,417)
		1,346,868		1,183,959
Less long term portion		63,889		1,144,375
Short term portion	$	1,282,979	$	39,584

The Company issued 656,250 shares of common stock for origination fees during the nine months ended September 30, 2013 and recorded a debt discount of $76,305.

Gain on Troubled Debt Restructuring

The Company entered into restructuring agreements with an accredited investor. Due to the Company’s inability to repay debt, the debtholder chose to grant concessions to the Company. In accordance with ASC 470 “Debt” the Company treated the following transaction as troubled debt restructuring.

At December 31, 2012, the Company had Unit Notes issued to the accredited investor in November 2009 with an outstanding balance of $67,021, which were in default and due on demand. In April 2013, the Company reached an agreement with the investor to convert this debt into Series G Preferred in full settlement of the note plus interest. The Series G preferred are convertible into 250 shares of common stock. At the date of conversion the debt payable and accrued interest was $102,166. The debt and accrued interest of $102,166 was converted into 2,044 shares of Series G preferred valued at $102,200 which exceeded the fair market value by $46,978. The difference resulted in a gain on troubled debt restructuring of $46,978 has been included in the Statement of Operations in the nine months ended September 30, 2013. The gain incurred with debt restructuring approximates $0.00 per share.

The Secured Promissory Unit Note issued in November 2009 with the principal amount outstanding of $85,726 and accrued interest of $51,876 as of September 30, 2013 is in default due to non-payment. The Secured Promissory Unit Note in the original amount of $85,726 and interest accrued thereon was originally repayable in five quarterly installments beginning 18 months after issue.