Short Term Convertible Notes Payable	12 Months Ended
Dec. 31, 2011
Notes to Financial Statements
Note 2. Short Term Convertible Notes Payable	(a) On November 23, 2005, the Company issued a $25,000 convertible note. The note bears interest at the rate of 5% per annum, is due and payable on November 23, 2006, and convertible into the Company’s common shares at $0.005 per share. The convertible note was issued with detachable warrants to purchase 500,000 shares of the Company’s common stock at $0.01 per share for five years. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Embedded Derivatives, and determined the note and conversion feature did not qualify as derivatives. The conversion feature did not qualify as a derivative because the note is convertible into a fixed number of shares and the Company had enough available common stock to issue in satisfaction of all common stock equivalents. In recording the transaction, the Company allocated the value of the proceeds to the convertible notes and the warrants based on their relative fair values. Fair value of the warrants was determined using the Black-Scholes valuation model. It was also determined that the convertible notes contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature and the value of the warrants were recorded as a discount to convertible notes and were amortized over the term of the notes using the straight-line method. As of December 31, 2011 and 2010, the debt discount from the warrants and the beneficial conversion feature has been fully amortized and the note is in default. During the year ended December 31, 2011, the Company no longer had enough available common stock to issue in satisfaction of all common stock equivalents. As a result, the Company reclassified the fair value of the conversion option as a derivative liability in accordance with ASC 815-15, Embedded Derivatives. (b) On March 9, 2006, the Company issued a $20,000 convertible note. The note bears interest at the rate of 5% per annum, is due and payable on March 9, 2007, and convertible into the Company’s common shares at the lower of 70% of the previous day’s market price (to a minimum of $0.003) or $0.025 per share. The convertible note was issued with detachable warrants to purchase 400,000 shares of the Company’s common stock at $0.025 per share for five years. In connection with the issuance of the convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Embedded Derivatives, and determined the note and conversion feature did not qualify as derivatives. The conversion feature did not qualify as a derivative because the minimum conversion price provides a determinate number of shares issuable upon conversion and the Company had enough available common stock to issue in satisfaction of all common stock equivalents. In recording the transaction, the Company allocated the value of the proceeds to the convertible notes and the warrants based on their relative fair values. Fair value of the warrants was determined using the Black-Scholes valuation model. It was also determined that the convertible notes contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature and the value of the warrants were recorded as a discount to convertible notes and were amortized over the term of the notes using the straight-line method. As of December 31, 2009, debt discount from the warrants and the beneficial conversion feature had been fully amortized. On April 23, 2010, the Company issued 400,000 shares upon the conversion of the note and $4,075 of interest. (c) On July 19, 2006, the Company issued a $10,000 convertible note. The note bears interest at the rate of 5% per annum, is due and payable on July 19, 2007, and convertible into the Company’s common shares at $0.005 per share. The convertible note was issued with detachable warrants to purchase 200,000 shares of the Company’s common stock at $0.01 per share for five years. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Embedded Derivatives, and determined the note and conversion feature did not qualify as derivatives. The conversion feature did not qualify as a derivative because the note is convertible into a fixed number of shares and the Company had enough available common stock to issue in satisfaction of all common stock equivalents. In recording the transaction, the Company allocated the value of the proceeds to the convertible notes and the warrants based on their relative fair values. Fair value of the warrants was determined using the Black-Scholes valuation model. It was also determined that the convertible notes contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature and the value of the warrants were recorded as a discount to convertible notes and were amortized over the term of the notes using the straight-line method. As of December 31, 2011 and 2010, debt discount from the warrants and the beneficial conversion feature have been fully amortized and the note is in default. During the year ended December 31, 2011, the Company no longer had enough available common stock to issue in satisfaction of all common stock equivalents. As a result, the Company reclassified the fair value of the conversion option as a derivative liability in accordance with ASC 815-15, Embedded Derivatives. (d) On May 26, 2006, the Company issued a $30,000 convertible note. The note bears interest at the rate of 5% per annum, is due and payable on October 31, 2007, and convertible into the Company’s common shares at $0.005 per share. The convertible note was issued with detachable warrants to purchase 600,000 shares of the Company’s common stock at $0.01 per share for five years. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, “Embedded Derivatives”, and determined the note and conversion feature did not qualify as derivatives. The conversion feature did not qualify as a derivative because the note is convertible into a fixed number of shares and the Company had enough available common stock to issue in satisfaction of all common stock equivalents. In recording the transaction, the Company allocated the value of the proceeds to the convertible notes and the warrants based on their relative fair values. Fair value of the warrants was determined using the Black-Scholes valuation model. It was also determined that the convertible notes contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature and the value of the warrants were recorded as a discount to convertible notes and were amortized over the term of the notes using the straight-line method. As of December 31, 2011 and 2010, debt discount from the warrants and the beneficial conversion feature have been fully amortized and the note is in default. During the year ended December 31, 2011, the Company no longer had enough available common stock to issue in satisfaction of all common stock equivalents. As a result, the Company reclassified the fair value of the conversion option as a derivative liability in accordance with ASC 815-15, Embedded Derivatives. (e) On May 21, 2008, the Company issued a $200,000 convertible note. The note bears interest at the rate of 18% per annum, is due and payable on May 21, 2009, and convertible into the Company’s common shares at $0.02 per share. The convertible note was issued with detachable warrants to purchase 4,000,000 shares of the Company’s common stock at $0.02 per share for five years. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Embedded Derivatives, and determined the note and conversion feature did not qualify as derivatives. The conversion feature did not qualify as a derivative because the note is convertible into a fixed number of shares and the Company had enough available common stock to issue in satisfaction of all common stock equivalents. In recording the transaction, the Company allocated the value of the proceeds to the convertible notes and the warrants based on their relative fair values. Fair value of the warrants was determined using the Black-Scholes valuation model. It was also determined that the convertible notes contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature and the value of the warrants were recorded as a discount to convertible notes and were amortized over the term of the notes using the straight-line method. As of December 31, 2009, debt discount from the warrants and the beneficial conversion feature have been fully amortized and the note is in default. During 2010, the note was modified to reduce the conversion price from $0.02 per share to $0.005 per share. The Company analyzed the modification as prescribed by ASC 470-50 to determine whether it was substantial. Based on the analysis, the Company determined that the modification was substantial and thus resulted in an extinguishment of the existing loan. Consequently, the old debt, along with any unamortized discount, is removed and the new debt is recorded at its fair value. The Company evaluated the conversion option in the amended note for derivative treatment under ASC 815-15, Embedded Derivatives, and determined the note and conversion feature did not qualify as derivatives. The conversion feature did not qualify as a derivative because the note is convertible into a fixed number of shares and the Company had enough available common stock to issue in satisfaction of all common stock equivalents. Additionally it was determined that the amended note contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature, $4,000, was expensed immediately because the maturity date of the loan had passed. On April 23, 2010, the Company issued 53,600,000 shares upon the conversion of $200,000 of principal and $68,000 of interest. (f) On April 7, 2009, the Company issued a $100,000 convertible note. The note bears interest at the rate of 12% per annum, is due and payable on April 7, 2011, and convertible into the Company’s common shares at $0.01 per share. The convertible note was issued with detachable warrants to purchase 2,000,000 shares of the Company’s common stock at $0.01 per share for five years. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Embedded Derivatives, and determined the note and conversion feature did not qualify as derivatives. The conversion feature did not qualify as a derivative because the note is convertible into a fixed number of shares and the Company had enough available common stock to issue in satisfaction of all common stock equivalents. In recording the transaction, the Company allocated the value of the proceeds to the convertible notes and the warrants based on their relative fair values. Fair value of the warrants was determined using the Black-Scholes valuation model. It was also determined that the convertible notes contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature and the value of the warrants were recorded as a discount to convertible notes and were amortized over the term of the notes using the straight-line method. During 2009, the note was modified to reduce the conversion price from $0.01 per share to $0.005 per share. The Company analyzed the modification as prescribed by ASC 470-50 to determine whether it was substantial. Based on the analysis, the Company determined that the modification was substantial and thus resulted in an extinguishment of the existing loan. Consequently, the old debt, along with any unamortized discount, is removed and the new debt is recorded at its fair value. Unamortized discount of $6,250 was recognized as a loss on extinguishment. The Company evaluated the conversion option in the amended note for derivative treatment under ASC 815-15, Embedded Derivatives, and determined the note and conversion feature did not qualify as derivatives. The conversion feature did not qualify as a derivative because the note is convertible into a fixed number of shares and the Company had enough available common stock to issue in satisfaction of all common stock equivalents. Additionally it was determined that the amended note contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature, $100,000, was recorded as a discount to convertible notes and was amortized over the term of the note using the straight-line method. On April 6, 2010, the Company issued 22,393,200 shares upon the conversion of the $100,000 note and accrued interest of $11,966. The then-unamortized discount of $80,000 was written off on the conversion date. (g) On November 6, 2009, the Company issued a $50,000 convertible note. The note bears interest at the rate of 12% per annum, is due and payable on November 6, 2011, and convertible into the Company’s common shares at $0.01 per share. The convertible note was issued with detachable warrants to purchase 1,000,000 shares of the Company’s common stock at $0.01 per share for five years. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Embedded Derivatives, and determined the note and conversion feature did not qualify as derivatives. The conversion feature did not qualify as a derivative because the note is convertible into a fixed number of shares and the Company had enough available common stock to issue in satisfaction of all common stock equivalents. In recording the transaction, the Company allocated the value of the proceeds to the convertible notes and the warrants based on their relative fair values. Fair value of the warrants was determined using the Black-Scholes valuation model. It was also determined that the convertible notes contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature and the value of the warrants were recorded as a discount to convertible notes and were amortized over the term of the notes using the straight-line method. As of December 31, 2011, the remaining debt discount from the warrants and the beneficial conversion feature is $Nil (2010 -$2,917) and the note is in default. On September 9, 2011, the Company issued 6,105,000 shares upon the conversion of $50,000 of principal and $11,050 of interest. (h) On March 3, 2010, the Company issued a $25,000 convertible note. The note bears interest at the rate of 12% per annum, is due and payable on March 3, 2012, and convertible into the Company’s common shares at $0.01 per share. The convertible note was issued with detachable warrants to purchase 500,000 shares of the Company’s common stock at $0.01 per share for five years. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Embedded Derivatives, and determined the note and conversion feature did not qualify as derivatives. The conversion feature did not qualify as a derivative because the note is convertible into a fixed number of shares and the Company had enough available common stock to issue in satisfaction of all common stock equivalents. In recording the transaction, the Company allocated the value of the proceeds to the convertible notes and the warrants based on their relative fair values. Fair value of the warrants was determined using the Black-Scholes valuation model. It was also determined that the convertible notes contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature and the value of the warrants were recorded as a discount to convertible notes and were amortized over the term of the notes using the straight-line method. As of December 31, 2010, the remaining debt discount from the warrants and the beneficial conversion feature was $5,833 and the note was in default. During the year ended December 31, 2011, the Company entered into an amendment which reduced the conversion price of the note to $0.0005 and the exercise price of the warrants to $0.005. On October 7, 2011, the Company issued 59,566,660 common shares upon the conversion of $25,000 of the note and $4,783 of interest at $0.0005 per share. The then-unamortized discount was written off on the conversion date. The conversion qualified for accounting as an induced conversion under ASC 470-20. The Company recognized an inducement expense equal to the fair value of common shares issued in excess of the fair value of securities issuable pursuant to the original conversion terms of $50,930. (i) On August 26, 2011, the Company issued a $27,500 convertible note and 550,000 warrants to purchase common shares at an exercise price of $0.002 per share. The note bears interest at 12% per annum, matures on August 26, 2013 and is convertible into common shares at $0.001 per share. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Embedded Derivatives, and determined the note and conversion feature did not qualify as derivatives. The conversion feature did not qualify as a derivative because the note is convertible into a fixed number of shares and the Company had enough available common stock to issue in satisfaction of all common stock equivalents. In recording the transaction, the Company allocated the value of the proceeds to the convertible notes and the warrants based on their relative fair values. Fair value of the warrants was determined using the Black-Scholes valuation model. It was also determined that the convertible notes contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature and the value of the warrants were recorded as a discount to convertible notes and were amortized over the term of the notes using the straight-line method. During the year ended December 31, 2011, the Company entered into an amendment to reduce the conversion price of the notes to $0.0005. On October 3, 2011, the Company issued 55,357,500 common shares upon the conversion of the $27,500 convertible note and $179 of interest at $0.0005 per share. The then-unamortized discount was written off on the conversion date. The conversion qualified for accounting as an induced conversion under ASC 470-20. The Company recognized an inducement expense equal to the fair value of common shares issued in excess of the fair value of securities issuable pursuant to the original conversion terms of $27,679. (j) On September 19, 2011, the Company issued a $12,500 convertible note and 250,000 warrants to purchase common shares at an exercise price of $0.002 per share. The note bears interest at 12% per annum, matures on September 19, 2013 and is convertible into common shares of the Company at $0.001 per share. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Embedded Derivatives, and determined the note and conversion feature did not qualify as derivatives. The conversion feature did not qualify as a derivative because the note is convertible into a fixed number of shares and the Company had enough available common stock to issue in satisfaction of all common stock equivalents. In recording the transaction, the Company allocated the value of the proceeds to the convertible notes and the warrants based on their relative fair values. Fair value of the warrants was determined using the Black-Scholes valuation model. It was also determined that the convertible notes contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature and the value of the warrants were recorded as a discount to convertible notes and were amortized over the term of the notes using the straight-line method. During the year ended December 31, 2011, the Company entered into an amendment to reduce the conversion price of the notes to $0.0005. On October 4, 2011, the Company issued 25,062,511 common shares upon the conversion of the $12,500 convertible note and $31 of interest at $0.0005 per share. The then-unamortized discount was written off on the conversion date. The conversion qualified for accounting as an induced conversion under ASC 470-20. The Company recognized an inducement expense equal to the fair value of common shares issued in excess of the fair value of securities issuable pursuant to the original conversion terms of $12,500. (k) On October 14, 2011, the Company issued a $40,000 convertible note and 800,000 warrants to purchase common shares at an exercise price of $0.002 per share. The note bears interest at 12% per annum, matures on October 14, 2013 and is convertible into common shares of the Company at $0.001 per share. In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Embedded Derivatives, and determined the note and conversion feature did not qualify as derivatives. The conversion feature did not qualify as a derivative because the note is convertible into a fixed number of shares and the Company had enough available common stock to issue in satisfaction of all common stock equivalents. In recording the transaction, the Company allocated the value of the proceeds to the convertible notes and the warrants based on their relative fair values. Fair value of the warrants was determined using the Black-Scholes valuation model. It was also determined that the convertible notes contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature and the value of the warrants were recorded as a discount to convertible notes and were amortized over the term of the notes using the straight-line method. During the year ended December 31, 2011, the Company entered into an amendment to reduce the conversion price of the notes to $0.0005. On October 14, 2011, the Company issued 80,000,000 common shares upon the conversion of the $40,000 at $0.0005 per share. The then-unamortized discount was written off on the conversion date. The conversion qualified for accounting as an induced conversion under ASC 470-20. The Company recognized an inducement expense equal to the fair value of common shares issued in excess of the fair value of securities issuable pursuant to the original conversion terms of $36,000.

Short Term Convertible Notes Payable

12 Months Ended

Dec. 31, 2011

Note 2. Short Term Convertible Notes Payable

(a) On November 23, 2005, the Company issued a $25,000 convertible note. The note bears interest at the rate of 5% per annum, is due and payable on November 23, 2006, and convertible into the Company’s common shares at $0.005 per share. The convertible note was issued with detachable warrants to purchase 500,000 shares of the Company’s common stock at $0.01 per share for five years.

In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Embedded Derivatives, and determined the note and conversion feature did not qualify as derivatives. The conversion feature did not qualify as a derivative because the note is convertible into a fixed number of shares and the Company had enough available common stock to issue in satisfaction of all common stock equivalents.

In recording the transaction, the Company allocated the value of the proceeds to the convertible notes and the warrants based on their relative fair values. Fair value of the warrants was determined using the Black-Scholes valuation model. It was also determined that the convertible notes contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature and the value of the warrants were recorded as a discount to convertible notes and were amortized over the term of the notes using the straight-line method. As of December 31, 2011 and 2010, the debt discount from the warrants and the beneficial conversion feature has been fully amortized and the note is in default.

During the year ended December 31, 2011, the Company no longer had enough available common stock to issue in satisfaction of all common stock equivalents. As a result, the Company reclassified the fair value of the conversion option as a derivative liability in accordance with ASC 815-15, Embedded Derivatives.

(b) On March 9, 2006, the Company issued a $20,000 convertible note. The note bears interest at the rate of 5% per annum, is due and payable on March 9, 2007, and convertible into the Company’s common shares at the lower of 70% of the previous day’s market price (to a minimum of $0.003) or $0.025 per share. The convertible note was issued with detachable warrants to purchase 400,000 shares of the Company’s common stock at $0.025 per share for five years.

In connection with the issuance of the convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, Embedded Derivatives, and determined the note and conversion feature did not qualify as derivatives. The conversion feature did not qualify as a derivative because the minimum conversion price provides a determinate number of shares issuable upon conversion and the Company had enough available common stock to issue in satisfaction of all common stock equivalents.

In recording the transaction, the Company allocated the value of the proceeds to the convertible notes and the warrants based on their relative fair values. Fair value of the warrants was determined using the Black-Scholes valuation model. It was also determined that the convertible notes contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature and the value of the warrants were recorded as a discount to convertible notes and were amortized over the term of the notes using the straight-line method. As of December 31, 2009, debt discount from the warrants and the beneficial conversion feature had been fully amortized. On April 23, 2010, the Company issued 400,000 shares upon the conversion of the note and $4,075 of interest.

(c) On July 19, 2006, the Company issued a $10,000 convertible note. The note bears interest at the rate of 5% per annum, is due and payable on July 19, 2007, and convertible into the Company’s common shares at $0.005 per share. The convertible note was issued with detachable warrants to purchase 200,000 shares of the Company’s common stock at $0.01 per share for five years.

In recording the transaction, the Company allocated the value of the proceeds to the convertible notes and the warrants based on their relative fair values. Fair value of the warrants was determined using the Black-Scholes valuation model. It was also determined that the convertible notes contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature and the value of the warrants were recorded as a discount to convertible notes and were amortized over the term of the notes using the straight-line method. As of December 31, 2011 and 2010, debt discount from the warrants and the beneficial conversion feature have been fully amortized and the note is in default.

(d) On May 26, 2006, the Company issued a $30,000 convertible note. The note bears interest at the rate of 5% per annum, is due and payable on October 31, 2007, and convertible into the Company’s common shares at $0.005 per share. The convertible note was issued with detachable warrants to purchase 600,000 shares of the Company’s common stock at $0.01 per share for five years.

In connection with the issuance of the above convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, “Embedded Derivatives”, and determined the note and conversion feature did not qualify as derivatives. The conversion feature did not qualify as a derivative because the note is convertible into a fixed number of shares and the Company had enough available common stock to issue in satisfaction of all common stock equivalents.

In recording the transaction, the Company allocated the value of the proceeds to the convertible notes and the warrants based on their relative fair values. Fair value of the warrants was determined using the Black-Scholes valuation model. It was also determined that the convertible notes contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature and the value of the warrants were recorded as a discount to convertible notes and were amortized over the term of the notes using the straight-line method. As of December 31, 2011 and 2010, debt discount from the warrants and the beneficial conversion feature have been fully amortized and the note is in default.

(e) On May 21, 2008, the Company issued a $200,000 convertible note. The note bears interest at the rate of 18% per annum, is due and payable on May 21, 2009, and convertible into the Company’s common shares at $0.02 per share. The convertible note was issued with detachable warrants to purchase 4,000,000 shares of the Company’s common stock at $0.02 per share for five years.

In recording the transaction, the Company allocated the value of the proceeds to the convertible notes and the warrants based on their relative fair values. Fair value of the warrants was determined using the Black-Scholes valuation model. It was also determined that the convertible notes contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature and the value of the warrants were recorded as a discount to convertible notes and were amortized over the term of the notes using the straight-line method. As of December 31, 2009, debt discount from the warrants and the beneficial conversion feature have been fully amortized and the note is in default.

During 2010, the note was modified to reduce the conversion price from $0.02 per share to $0.005 per share. The Company analyzed the modification as prescribed by ASC 470-50 to determine whether it was substantial. Based on the analysis, the Company determined that the modification was substantial and thus resulted in an extinguishment of the existing loan. Consequently, the old debt, along with any unamortized discount, is removed and the new debt is recorded at its fair value.

The Company evaluated the conversion option in the amended note for derivative treatment under ASC 815-15, Embedded Derivatives, and determined the note and conversion feature did not qualify as derivatives. The conversion feature did not qualify as a derivative because the note is convertible into a fixed number of shares and the Company had enough available common stock to issue in satisfaction of all common stock equivalents.

Additionally it was determined that the amended note contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature, $4,000, was expensed immediately because the maturity date of the loan had passed.

On April 23, 2010, the Company issued 53,600,000 shares upon the conversion of $200,000 of principal and $68,000 of interest.

(f) On April 7, 2009, the Company issued a $100,000 convertible note. The note bears interest at the rate of 12% per annum, is due and payable on April 7, 2011, and convertible into the Company’s common shares at $0.01 per share. The convertible note was issued with detachable warrants to purchase 2,000,000 shares of the Company’s common stock at $0.01 per share for five years.

During 2009, the note was modified to reduce the conversion price from $0.01 per share to $0.005 per share. The Company analyzed the modification as prescribed by ASC 470-50 to determine whether it was substantial. Based on the analysis, the Company determined that the modification was substantial and thus resulted in an extinguishment of the existing loan. Consequently, the old debt, along with any unamortized discount, is removed and the new debt is recorded at its fair value. Unamortized discount of $6,250 was recognized as a loss on extinguishment.

Additionally it was determined that the amended note contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature, $100,000, was recorded as a discount to convertible notes and was amortized over the term of the note using the straight-line method.

On April 6, 2010, the Company issued 22,393,200 shares upon the conversion of the $100,000 note and accrued interest of $11,966. The then-unamortized discount of $80,000 was written off on the conversion date.

(g) On November 6, 2009, the Company issued a $50,000 convertible note. The note bears interest at the rate of 12% per annum, is due and payable on November 6, 2011, and convertible into the Company’s common shares at $0.01 per share. The convertible note was issued with detachable warrants to purchase 1,000,000 shares of the Company’s common stock at $0.01 per share for five years.

In recording the transaction, the Company allocated the value of the proceeds to the convertible notes and the warrants based on their relative fair values. Fair value of the warrants was determined using the Black-Scholes valuation model. It was also determined that the convertible notes contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature and the value of the warrants were recorded as a discount to convertible notes and were amortized over the term of the notes using the straight-line method. As of December 31, 2011, the remaining debt discount from the warrants and the beneficial conversion feature is $Nil (2010 -$2,917) and the note is in default.

On September 9, 2011, the Company issued 6,105,000 shares upon the conversion of $50,000 of principal and $11,050 of interest.

(h) On March 3, 2010, the Company issued a $25,000 convertible note. The note bears interest at the rate of 12% per annum, is due and payable on March 3, 2012, and convertible into the Company’s common shares at $0.01 per share. The convertible note was issued with detachable warrants to purchase 500,000 shares of the Company’s common stock at $0.01 per share for five years.

In recording the transaction, the Company allocated the value of the proceeds to the convertible notes and the warrants based on their relative fair values. Fair value of the warrants was determined using the Black-Scholes valuation model. It was also determined that the convertible notes contained a beneficial conversion feature since the fair market value of the common stock issuable upon the conversion of the notes exceeded the value allocated to the notes. The value of the beneficial conversion feature and the value of the warrants were recorded as a discount to convertible notes and were amortized over the term of the notes using the straight-line method. As of December 31, 2010, the remaining debt discount from the warrants and the beneficial conversion feature was $5,833 and the note was in default.

During the year ended December 31, 2011, the Company entered into an amendment which reduced the conversion price of the note to $0.0005 and the exercise price of the warrants to $0.005. On October 7, 2011, the Company issued 59,566,660 common shares upon the conversion of $25,000 of the note and $4,783 of interest at $0.0005 per share. The then-unamortized discount was written off on the conversion date.

The conversion qualified for accounting as an induced conversion under ASC 470-20. The Company recognized an inducement expense equal to the fair value of common shares issued in excess of the fair value of securities issuable pursuant to the original conversion terms of $50,930.

(i) On August 26, 2011, the Company issued a $27,500 convertible note and 550,000 warrants to purchase common shares at an exercise price of $0.002 per share. The note bears interest at 12% per annum, matures on August 26, 2013 and is convertible into common shares at $0.001 per share.

During the year ended December 31, 2011, the Company entered into an amendment to reduce the conversion price of the notes to $0.0005. On October 3, 2011, the Company issued 55,357,500 common shares upon the conversion of the $27,500 convertible note and $179 of interest at $0.0005 per share. The then-unamortized discount was written off on the conversion date.

(j) On September 19, 2011, the Company issued a $12,500 convertible note and 250,000 warrants to purchase common shares at an exercise price of $0.002 per share. The note bears interest at 12% per annum, matures on September 19, 2013 and is convertible into common shares of the Company at $0.001 per share.

During the year ended December 31, 2011, the Company entered into an amendment to reduce the conversion price of the notes to $0.0005. On October 4, 2011, the Company issued 25,062,511 common shares upon the conversion of the $12,500 convertible note and $31 of interest at $0.0005 per share. The then-unamortized discount was written off on the conversion date.

(k) On October 14, 2011, the Company issued a $40,000 convertible note and 800,000 warrants to purchase common shares at an exercise price of $0.002 per share. The note bears interest at 12% per annum, matures on October 14, 2013 and is convertible into common shares of the Company at $0.001 per share.

During the year ended December 31, 2011, the Company entered into an amendment to reduce the conversion price of the notes to $0.0005. On October 14, 2011, the Company issued 80,000,000 common shares upon the conversion of the $40,000 at $0.0005 per share. The then-unamortized discount was written off on the conversion date.

TURBODYNE TECHNOLOGIES, INC 10-K