Quarterly report pursuant to Section 13 or 15(d)

NOTE 7 - CONVERTIBLE DEBENTURES

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NOTE 7 - CONVERTIBLE DEBENTURES
9 Months Ended
Sep. 30, 2012
Debt Disclosure [Abstract]  
NOTE 7 - CONVERTIBLE DEBENTURES

 

NOTE 7 - CONVERTIBLE DEBENTURES

 On July 31, and September 2, 1998, the Company sold its 8% convertible debenture in the aggregate principal amount of $1,500,000 to an accredited investor pursuant to an exemption from registration under Section 4(2) and/or Regulation D.

The material terms of the Company' convertible debentures provide for the payment of interest at 8% per annum payable quarterly, mandatory redemption after 3 years from the date of issuance at 130% of the principal amount.  Subject to adjustment, the debentures are convertible into Common Stock at the lower of a fixed conversion price ($1.82 per share for $900,000 principal amount of debentures; $1.61 per share for $600,000 principal amount of debentures) or 75% of the average closing bid price for the Company's Common Stock for the 5 trading days preceding the date of the conversion notice.  Repayment of the indebtedness is secured by a general lien on the assets of the Company and guarantee by 5 of the Company's subsidiaries.   


Total issue costs were $156,551 which were amortized over the initial terms of the debt with a maturity date of July 31 and September 2, 2001.


The Company has stopped accruing interest on the convertible debentures since the six year statute of limitations under New York state law has expired.  The Company believes no further payments are due, and becaue of that no interest should accrue.