this is the section of this that I did not like wh

this is the section of this that I did not like when I read it.  in all do respect I am not trying to start anything  . I am just showing what I didn't like about this report.

Convertible Notes Payable

(The Company receives proceeds, at various dates, from an unrelated third party in exchange for a series of convertible promissory notes at an annual interest rate of 8% on any unpaid principal and a maturity date of nine months from the date of funding.  A penalty interest rate will be in effect for any amount of principal or interest which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date.  The note is convertible at the option of the holder at any time during the lending period.  The note is convertible into common stock at a conversion price of 35% (65% discount) of the calculated average of the lowest three trading prices for the common stock during the ten trading day period prior to the date of the conversion notification.  The holder has converted a portion of these notes in satisfaction of the amounts due.  During the three month period ended March 31, 2013, notes with a face value of $144,000 was converted into 725,652,448shares of common stock.  The debt conversion was recorded at the fair market value of the stock, at an average price of $.0002.  The difference in the calculated issue price, per the agreed terms listed above, and the fair market value of the shares resulted in a recognition of $103,916 as income from the conversion, included as a change in derivative.  The Company currently reports the amount due, under these convertible notes net of unamortized discounts and financing costs (amortized to interest expense over the term of each note) associated with origination fees and the beneficial conversions resulting from the terms of the installment funding.

The Company has recognized the derivative liability associated with this agreement and has revalued the beneficial conversion feature, classified as a derivative liability.  As of March 31, 2013 and December 31, 2012, the derivative liability was calculated to be $295,650 and $399,566, respectively. )