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Note 8. Convertible Notes Payable.

6 Months Ended

Jun. 30, 2013

Note 8. Convertible Notes Payable.

The notes are convertible at the option of the holder up to the maturity date; any convertible debentures still outstanding as at their maturity date will automatically convert into common shares of the Company. Accordingly, these convertible notes payable are considered current liabilities by nature. The Company has adequate common shares in its treasury to cover the conversions if all notes are exercised.

The Company has the following convertible notes outstanding.

Note	Amount ($)	Issuance Date	Conversion Price (USD)	Number of Shares	Effect on Dilution	Maturity Date
1	4,754	July 30, 2011	$0.15	31,693	0.09%	July 30, 2013
2	4,754	July 30, 2011	$0.15	31,693	0.09%	July 30, 2013
3	4,754	July 30, 2011	$0.15	31,693	0.09%	July 30, 2013
4	10,000	July 30, 2011	$0.15	66,667	0.20%	July 30, 2013
5	9,508	July 30, 2011	$0.15	63,387	0.19%	July 30, 2013
6	8,557	July 30, 2011	$0.15	57,047	0.17%	July 30, 2013
7	2,139	July 30, 2011	$0.15	14,260	0.04%	July 30, 2013
8	47,540	October 26, 2011	$0.10	475,400	1.41%	October 26, 2013
9	95,080	October 31, 2011	$0.15	633,867	1.88%	October 31, 2013
10	66,556	November 24, 2011	$0.15	443,707	1.31%	November 24, 2013
11	14,262	November 30, 2011	$0.15	95,080	0.28%	November 30, 2013
12	14,262	November 30, 2011	$0.15	95,080	0.28%	November 30, 2013
13	22,439	November 30, 2011	$0.15	149,593	0.44%	November 30, 2013
14	25,160	December 31, 2011	$0.15	167,733	0.50%	December 31, 2013
15	19,016	December 31, 2011	$0.15	126,773	0.38%	December 31, 2013
16	9,508	December 31, 2011	$0.15	63,387	0.19%	December 31, 2013
17	21,393	December 31, 2011	$0.15	142,620	0.42%	December 31, 2013
18	42,786	December 31, 2011	$0.15	285,240	0.84%	December 31, 2013
19	47,540	December 31, 2011	$0.15	316,933	0.94%	December 31, 2013
20	19,016	December 31, 2011	$0.15	126,773	0.38%	December 31, 2013
21	14,262	December 31, 2011	$0.15	95,080	0.28%	December 31, 2013
22	50,000	January 15, 2012	$0.20	250,000	0.74%	January 15, 2014
23	9,508	January 24, 2012	$0.20	47,540	0.14%	January 24, 2014
24	7,131	January 26, 2012	$0.20	35,655	0.11%	January 26, 2014
25	28,524	January 31, 2012	$0.20	142,620	0.42%	January 31, 2014
26	9,508	February 10, 2012	$0.20	47,540	0.14%	February 10, 2014
27	98,360	April 18, 2012	$0.45	211,289	0.63%	April 18, 2014
28	49,180	May 31, 2012	$1.00	47,540	0.14%	May 31, 2014
29	108,500	April 2, 2013	n/a	n/a		December 20, 2013
	$859,077			4,295,891

*The actual number of shares issued if converted will vary depending on the exchange rate at time of conversion.

During the three month period ended June 30, 2013, the Company issued a $108,500 USD convertible promissory note for cash consideration. This note bears 8% annual interest and is due December 20, 2013. The Company has the option to prepay the whole principal amount plus interest plus an interest premium within 180 days of issue date. At conversion, the conversion price is calculated by taking 61% of the lowest three (3) trading prices during the ten day (10) trading period prior to conversion date.

During the six month period ended June 30, 2013, the Company issued 8,023,088 common shares from convertible notes payable at an average conversion rate of $0.12 per share.

On March 31, 2013, convertible debentures totaling $617,697 had matured and were to be converted to restricted shares. This conversion is dependent on the approval of the Company’s Board of Directors. As of the date of this filing, director approval has not been formally issued. The Board of Directors has indicated that it intends to pass the resolution. Since the convertible debentures include an automatic conversion on maturity feature, and to accurately reflect the maturity of the debt and conversion to shares as of June 30, 2013, the financial information presented in these consolidated interim financial statements has treated the debt of $617,697 as matured and converted into restricted shares totaling 4,010,699.