v2.4.0.8

7) Convertible Debentures

3 Months Ended

Mar. 31, 2013

Notes

7) Convertible Debentures

 7)        CONVERTIBLE DEBENTURES

On January 24, 2013, the Company borrowed $100,000 from an unrelated party pursuant to convertible debenture agreements.  The debentures bear interest at 8.0% per annum and have a term of one year, maturing on January 24, 2014. The loan agreement provides for the right of the holder to convert the loan principal and interest into shares of common stock at a stated conversion price of the average of the three lowest daily trades in the previous 20 days with a 50% discount.

As of March 31, 2013 and 2012 convertible debentures consist of the following:

			March 31, 2013		December 31, 2012
Convertible Debentures		$	968,000	$	868,000
Less current portion			56,100		38,000
Less debt discount			521,600		467,200
Long term Convertible Debentures, net of current portion and debt discount		$	390,300	$	362,800

The Company accounted for the issuance of the convertible debenture in accordance with ASC 815” Derivatives and Hedging.”  The debenture is convertible into an indeterminate number of shares for which the Company cannot determine if it has sufficient authorized shares to settle the transaction with.  Accordingly, the embedded conversion option is a derivative liability and is marked to market through earnings at the end of each reporting period. 

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- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 505

-SubTopic 10

-Section 50

-Paragraph 3

-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644



Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Regulation S-X (SX)

-Number 210

-Section 02

-Paragraph 19, 20, 22

-Article 5



Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 210

-SubTopic 10

-Section S99

-Paragraph 1

-Subparagraph (SX 210.5-02.19,20,22)

-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

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