In February, 2012 the Company received $100,000 from one investor for convertible notes sold according to the specifics of the Term Sheet. The Company paid Wellington Shields a fee of $3,000 for this transaction in satisfaction of the requirements of the Wellington Shields agreement for investors of short term loans not introduced by Wellington Shields. The Company determined that based on the conversion terms of the notes, the notes qualify as stock settled debt in accordance with ASC 480 “Distinguishing Liabilities from Equity”. Accordingly, a premium of $33,333 will be accreted to the total $100,000 notes balance from the note dates to the first computable date they become convertible, which is December 31, 2012. In the six months ended June 30, 2012 a total of $16,667 was amortized and recorded as a Put Premium which is netted against current portion of notes payable on the accompanying consolidated balance sheet. In addition, the relative fair value of the warrants, which totals $45,441 will be recorded as additional paid in capital and debt discount to be amortized over the debt term, to December 31, 2012. In the six months ended June 30, 2012, a total of $19,312 was amortized for these warrants leaving a balance of debt discount of $26,129 which is netted against current portion of notes payable on the accompanying consolidated balance sheet.
