Quarterly report pursuant to sections 13 or 15(d)

NOTE 3 - CONVERTIBLE DEBENTURES PAYABLE

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NOTE 3 - CONVERTIBLE DEBENTURES PAYABLE
9 Months Ended
Sep. 30, 2011
Debt Disclosure [Text Block]
NOTE 3 - CONVERTIBLE DEBENTURES PAYABLE

In June 2003, the Company issued $30,000 in 5% convertible debentures and in September 2003 issued an additional $100,000 in 5% convertible debentures to private investors (the June 2003 convertible debenture and the September 2003 convertible debenture together the “Convertible Debentures”. The total outstanding principal balance of the Convertible Debentures as of September 30, 2011 and December 31, 2010 was $15,000, plus accrued interest of $7,486 and $6,925.

On December 30, 2005, the Company entered into a Securities Purchase Agreement with YA Global Investments, L.P (YA Global). Pursuant to such purchase agreement, YA Global purchased $2,359,047 of secured convertible debentures, which are convertible into shares of the Company’s Class A Common Stock. Two such debentures were issued on December 30, 2005 for an aggregate of $1,759,047, interest payable at the rate of 7.5% per annum, and included a debenture that was issued on May 6, 2006 equal to $600,000 with interest payable at the rate of 7.5% per annum (the December 30, 2005 and May 6, 2006 convertible debenture together the “YA Convertible Debentures”).  As of December 31, 2010, the YA Convertible Debentures were $1,319,000.

During the first three months of 2011, the Company made payments in the amount of $205,000. In April 2011, the Company paid YA Global $530,000 to satisfy any and all obligations owed to YA Global, including outstanding principal, accrued interest and accrued liquidated damages.  As a result of the restructuring of the debt, the Company recorded a gain on the extinguishment of $1,461,660, which is presented as other income in the accompanying statement of operations. Additionally, the Company recorded a gain on the extinguishment of the derivative liability associated with this convertible debenture in the amount of $767,279 (see Note 5).