CONVERTIBLE PROMISSORY NOTES

6 Months Ended

Jun. 30, 2012

CONVERTIBLE PROMISSORY NOTES [Abstract]

NOTE 2 - CONVERTIBLE PROMISSORY NOTES

Convertible Promissory Note and Related Consulting Agreement

On January 1, 2010, the Company entered into a 24-month consulting agreement (the "Consulting Agreement") with a Consultant for business development services. In connection with the consulting agreement, the Company agreed to pay the Consultant an aggregate of $80,000 which payment is evidenced by a convertible promissory note (the "Convertible Note") in the amount of $80,000. The Consulting Agreement terminated on December 31, 2011. The convertible promissory note is unsecured and was due on the earlier of a) the date the Company raised $80,000 in a private placement of its common stock or entry into alternative loan agreements or b) January 1, 2012. This Convertible Note did not accrue any interest during the term of this Note, and until 5 business days after the Maturity Date stated above. Since the Convertible Note was not paid in full by the end of the fifth day following the Maturity Date, the Convertible Note now bears interest at the rate of 15% per annum, which interest began accruing after such fifth day following the Maturity Date, until the Note is paid in full. Interest is computed on the basis of a 360-day year. The Convertible Note (and any accrued and unpaid interest) is convertible into shares of the Company's common stock from time to time, at the sole option of the Payee until such Note is paid in full, upon 5 days written notice from the Payee to the Company of the Payee's desire to convert the Convertible Note into shares of common stock at the rate of one share of the Company's common stock for each $0.001 owed to Payee pursuant to the Convertible Note.

In connection with this Consulting Agreement, the Company recorded a prepaid expense of $80,000 which was amortized over the contract term. Accordingly, for the six months ended June 30, 2012 and 2011, the Company recorded professional fees of $0 and $20,000, respectively. Additionally, pursuant to ASC 470-20 and related topics, the Company evaluated whether a beneficial conversion feature exists by comparing the conversion price of the Convertible Note with the fair value of the common stock at the commitment date. In connection with the Convertible Note, the Company recorded a beneficial conversion since the conversion price was less than the fair market value of the common stock. The total beneficial conversion feature included in the $80,000 Convertible Note payable resulted in an initial debt discount of $80,000 to be amortized over the term of the notes with a credit to additional paid-in capital. For the six months ended June 30, 2012 and 2011, the Company recorded interest expense for the amortization of the debt discount of $0 and $20,000, respectively. As of the date of this report this loan was in default.

Convertible Promissory Notes

During 2010, the Company entered into convertible promissory note agreements with 4 individuals and one third party company for an aggregate amount of $108,182. These convertible note are unsecured, bear interest at 9.0% per annum and are payable on demand. The Holders shall have the right, exercisable at any time from and after the date of issuance of these convertible promissory notes until the respective note is fully paid, to convert the entire outstanding and unpaid principal of these notes, in whole or in part, upon delivery of a notice of conversion into the Company's common stock
at the conversion price which shall be the average of the lowest three trading prices for the Company's common stock during the 20 trading day period ending one trading day prior to the conversion date, subject to adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Company's common stock. These arrangements represent a fixed monetary conversion value of $108,182 based on the variable share quantity to be issued.

On April 15, 2010, the Company entered into a convertible promissory note agreement with the above Consultant for $7,310. This convertible note is unsecured, bears interest at 9.0% per annum and is payable on demand.
The Holder shall has the right, exercisable at any time from and after the date of issuance of this convertible promissory note until the note is fully paid, to convert the entire outstanding and unpaid principal of this note, in whole or in part, upon delivery of a notice of conversion into the Company's common stock
at the conversion price which shall be the average of the lowest three (3) trading prices for the Company's common stock during the 20 trading day period ending one trading day prior to the conversion date, subject to adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Company's common stock. This arrangement represents a fixed monetary conversion value of $7,310 based on the variable share quantity to be issued.

On December 9, 2011, the Company entered into a convertible promissory note agreement with an individual for $12,000. This convertible note is unsecured, bears interest at 9.0% per annum and is payable on demand. The Holder shall have the right, exercisable at any time from and after the date of issuance of this convertible promissory note until this note is fully paid, to convert the entire outstanding and unpaid principal of this note, in whole or in part, upon delivery of a notice of conversion into the Company's common stock at the conversion price which shall be the average of the lowest three (3) trading prices for the Company's common stock during the 20 trading day period ending one trading day prior to the conversion date, subject to adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Company's common stock. This arrangement represents a fixed monetary conversion value of $12,000 based on the variable share quantity to be issued.

In January and February 2012, the Company entered into 4 convertible promissory note agreements with 2 third party companies for an aggregate amount of $55,022. These convertible notes are unsecured, bear interest at 9.0% per annum and are payable on demand. The Holder shall have the right, exercisable at any time from and after the date of issuance of these convertible promissory notes until the notes are fully paid, to convert the entire outstanding and unpaid principal of these note, in whole or in part, upon delivery of a notice of conversion into the Company's common stock at the conversion price which shall be the average of the lowest three (3) trading prices for the Company's common stock during the 20 trading day period ending one trading day prior to the conversion date, subject to adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Company's common stock. These arrangements represent a fixed monetary conversion value of $55,022 based on the variable share quantity to be issued.

In October 2012, in order to properly memorialize certain demand loans received and previously disclosed, effective on March 9, 2012 and on June 21, 2012, the Company entered into two convertible promissory note agreements with a third parties company in the amount of $15,000 and $25,000, respectively. These convertible notes are unsecured, bear interest at 9.0% per annum and are payable on or before December 31, 2012. The Holders shall have the right, exercisable at any time from and after the date of issuance of these convertible promissory notes until the notes are fully paid, to convert the entire outstanding and unpaid principal of these note, in whole or in part, upon delivery of a notice of conversion into the Company's common stock at the conversion price which shall be 90% of the average of the lowest three (3) closing prices for the Company's common stock during the 20 trading day period ending one trading day prior to the conversion date. Pursuant to ASB Topic 470-20-525 (Debt with conversion and other options), since the promissory notes had a fixed conversion rate of 90% of the stock price, the Company determined it had a fixed maximum amount that can be settled for the debt. Accordingly, the Company accrued a put premium amount of $4,445 in this period since the debt is convertible at a fixed monetary amount of $44,445 and for the six months ended June 30, 2012, the Company recorded interest expense for the premium of $4,445.

At June 30, 2012 and December 31, 2011, convertible promissory notes consisted of the following:

	June 30,		December 31,
	2012		2011
Convertible notes	$	302,514	$	207,492
Fixed monetary conversion put premium		4,445		-
Convertible notes	$	306,959	$	207,492

WHITEMARK HOMES INC 10-Q