CONVERTIBLE NOTES PAYABLE

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements

NOTE 10- CONVERTIBLE NOTES PAYABLE

During the three months ended June 30, 2011, the Company issued promissory notes to certain investors resulting in gross proceeds to the Company of $105,000 (the “Q2 Notes”). The Q2 Notes accrue interest at the rate of 3% annually, and are due and payable on or before November 19, 2011. On November 19, 2011 these notes were reissued in principal plus $1,373 of accrued interest under the terms of the 2011 Notes described below.

Concurrently with this debt financing commitment, the lender agreed to surrender and cancel 2,069,000 warrants held by it, and in consideration therefore the Company issued the lender 2,069,000 shares of common stock valued at $62,070.

Between June 2011 and December 2011, the Company issued promissory notes to certain investors resulting in gross proceeds to the Company of $205,000 (the “2011 Notes”). The 2011 Notes accrue interest at a rate of 6% annually, and are due and payable on or before March 31, 2012. In the event of a default on the 2011 Notes, the interest rate increases to 12% annually. Pursuant to the terms of the 2011 Notes, the Company will issue will issue shares 50,000 shares of its common stock for $10,000 loaned to the Company. As of December 31, 2011, the Company has issued 1,031,967 shares of its common stock valued at $119,094.

In connection with the 2011 Notes, the Company has recorded debt discount and expenses of the beneficial conversion feature of $56,373 and $10,749, respectively. The Company will amortize these expenses over the life of the 2011 Notes. As of December 31, 2011, the Company recorded interest expense related to the debt discount of $21,905 and $3,777 related to the beneficial conversion feature.