7. Convertible Debenture
On May 18, 2010, the Company entered into a convertible loan agreement.
The Company received US$50,000 ($51,850) which bears interest at 10% per annum and is due five years from the advancement date.
Interest shall accrue from the advancement date and shall be payable on the fifth anniversary of the advancement date. Proceeds
of the loan are to be used to continue with current business development activities. Any portion of the loan and unpaid interest
are convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price of US$0.035
per share. The Company recognized the intrinsic value of the embedded beneficial conversion feature of US$21,429 ($22,221) as additional
paid-in capital and reduced the carrying value of the convertible debenture to US$28,571 ($29,629). The carrying value will be
accreted over the term of the convertible debenture up to its face value of US$50,000. As at December 31, 2011, the carrying values
of the convertible debenture and accrued convertible interest thereon were $31,490 and $8,247, respectively, after translation
into Canadian dollars. The Company can repay any portion of the loan and accrued interest at any time without penalty.