NOTE 7

CONVERTIBLE NOTE AND DERIVATIVE LIABILITY

During the quarter ended June 30, 2011, the Company issued a $50,000 convertible note. The note was issued with interest at 10% per annum, due within one year and converts at a discount of 25% of the closing bid for the Company’s common stock on the date of conversion. As of June 30, 2011 the note was convertible into 4,444,444 shares of common stock. As required by ASC 470-20 the Company has recorded a liability for the beneficial conversion feature in the amount of $16,667 based on the discount to market available at the time of conversion. The discount will be amortized over the life of the loan to interest expense. During the quarter ended June 30, 2011 the company amortized $913 to interest expense. In addition, a derivative liability of $64,828 was calculated using the Black Scholes pricing model using one year to maturity and assuming a risk free rate of 0.19% and a volatility of 429%. The derivative liability will be revalued at the end of each reporting period.