In May 2005, the Company issued convertible debentures and received proceeds of $4,000,000.
The debentures become convertible in August 2005 and mature in May 2006. The debentures are convertible into common stock at 80% the lowest bid price of the common stock for the five days preceding conversion. The debentures carry an interest rate of 7.00%.
As a result of the issuance, the Company allocated $1,227,273 of the proceeds to the beneficial conversion feature of the debentures. The beneficial conversion feature is being amortized to the statement of operations as interest expense over the period from issuance to the date the debentures become convertible.
These debentures were converted into 67,996,340 shares of common stock in September 2005.