| |
(A Development Stage Company) | |
Balance Sheets | |
| | | | | | | |
Assets | |
| | | | | | | |
| | | Mar. 31, 2012 | | | June 30, 2011 | |
Current assets: | | Unaudited | | | | * | |
| Cash | | $ | 1,589 | | | $ | 189,135 | |
| Accounts receivable, net of allowances for doubtful accounts | | | | | | | | |
| of $28,423 and $23,500, respectively | | | 86,883 | | | | 11,198 | |
| Inventories, net of reserve of $390,000 and $399,000, respectively | | | 276,956 | | | | 322,562 | |
| Prepaid expenses | | | 21,439 | | | | 49,339 | |
| | | | | | | | | |
| Total current assets | | | 386,867 | | | | 572,234 | |
| | | | | | | | | |
Equipment, net | | | 133,271 | | | | 161,713 | |
Intangible assets, net | | | 111,073 | | | | 136,706 | |
| | | | | | | | | |
| Total assets | | $ | 631,211 | | | $ | 870,653 | |
| | | | | | | | | |
| | | | | | | | | |
Liabilities and Stockholders' (Deficit) | |
Current liabilities: | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 1,568,238 | | | $ | 1,344,168 | |
| Accrued payroll taxes and penalties | | | 1,467,641 | | | | 1,141,967 | |
| Customer deposits | | | 142,563 | | | | 112,563 | |
| Short-term derivative liability | | | 374,170 | | | | 691,663 | |
| Short-term debt, net of debt discount of $147,877 and $78,925 | | | 1,801,156 | | | | 1,706,018 | |
| | | | | | | | | |
| Total current liabilities | | | 5,353,768 | | | | 4,996,379 | |
| | | | | | | | | |
Long-Term liabilities: | | | | | | | | |
| Long-term debt, net of debt discount of $125,271 and $184,967 | | | 79,942 | | | | 301,033 | |
| | | | | | | | | |
| Total long-term liabilities | | | 79,942 | | | | 301,033 | |
| | | | | | | | | |
Convertible preferred stock (Series L), 9% cumulative annual dividend, | | | | | | | | |
no par value, 20 and 20 shares issued, respectively | | | 200,000 | | | | 200,000 | |
| Long-term derivative liability | | | 1,875 | | | | 102,409 | |
| | | | | | | | | |
Stockholders' (Deficit): | | | | | | | | |
| Preferred stock, Series P, no par value, 50 and 0 shares issued, respectively | | | 250,000 | | | | - | |
| Preferred stock, Series Q, $.001 par value, 51 and 0 shares issued, respectively | | | 1 | | | | - | |
| Common stock | | | 109,329,574 | | | | 107,476,957 | |
| Common and Preferred stock - Debt Collateral | | | (323,970 | ) | | | (73,970 | ) |
| Additional paid-in capital | | | 5,599,292 | | | | 5,626,252 | |
| Deficit accumulated during development stage | | | (119,859,271 | ) | | | (117,758,407 | ) |
| | | | | | | | | |
| Total stockholders' (Deficit) | | | (5,004,374 | ) | | | (4,729,168 | ) |
| | | | | | | | | |
| Total liabilities and stockholders' (Deficit) | | $ | 631,211 | | | $ | 870,653 | |
| | | | | | | | | |
| | | | | | | | | |
* Derived from audited financial statements. | | | | | | | | |
| | | | | | | | | |
The accompanying notes are an integral part of these condensed financial statements. | |
3
IMAGING DIAGNOSTIC SYSTEMS, INC. | |
(A Development Stage Company) | |
(Unaudited) | |
Condensed Statements of Operations | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | Nine Months Ended | | | Three Months Ended | | | Since Inception | |
| | March 31, | | | March 31, | | | (12/10/93) to | |
| | 2013 | | | 2012 | | | 2013 | | | 2012 | | | Mar. 31, 2013 | |
Net Sales | | $ | 27,238 | | | $ | 211,720 | | | $ | 1,238 | | | $ | 163,200 | | | $ | 2,618,740 | |
Gain on sale of fixed assets | | | - | | | | - | | | | - | | | | - | | | | 2,794,565 | |
Cost of Sales | | | 4,189 | | | | 35,895 | | | | 517 | | | | 29,821 | | | | 983,966 | |
| | | | | | | | | | | | | | | | | | | | |
Gross Profit | | | 23,049 | | | | 175,825 | | | | 721 | | | | 133,379 | | | | 4,429,339 | |
| | | | | | | | | | | | | | | | | | | | |
Operating Expenses: | | | | | | | | | | | | | | | | | | | | |
General and administrative | | | 701,702 | | | | 1,854,225 | | | | 263,025 | | | | 442,004 | | | | 64,586,118 | |
Research and development | | | 115,082 | | | | 527,634 | | | | 33,002 | | | | 127,482 | | | | 24,075,998 | |
Sales and marketing | | | 83,388 | | | | 380,526 | | | | 31,241 | | | | 95,652 | | | | 10,007,792 | |
Inventory valuation adjustments | | | 8,108 | | | | 20,383 | | | | 1,927 | | | | 5,578 | | | | 4,975,015 | |
Depreciation and amortization | | | 29,345 | | | | 42,147 | | | | 9,782 | | | | 12,317 | | | | 3,484,580 | |
Amortization of deferred compensation | | | - | | | | - | | | | - | | | | - | | | | 4,064,250 | |
| | | | | | | | | | | | | | | | | | | | |
| | | 937,625 | | | | 2,824,915 | | | | 338,977 | | | | 683,033 | | | | 111,193,753 | |
| | | | | | | | | | | | | | | | | | | | |
Operating Loss | | | (914,576 | ) | | | (2,649,090 | ) | | | (338,256 | ) | | | (549,654 | ) | | | (106,764,414 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Interest income | | | - | | | | 383 | | | | - | | | | - | | | | 311,217 | |
Other income | | | 73,330 | | | | 154,174 | | | | 18,704 | | | | 31,261 | | | | 1,285,429 | |
Other income - LILA Inventory | | | - | | | | - | | | | - | | | | - | | | | (69,193 | ) |
Derivative expense | | | - | | | | - | | | | - | | | | - | | | | (64,524 | ) |
Change in fair value of derivative liability | | | 1,337,298 | | | | 1,484,827 | | | | 297,077 | | | | 399,170 | | | | 2,438,540 | |
Interest expense | | | (654,945 | ) | | | (1,091,158 | ) | | | (291,596 | ) | | | (196,828 | ) | | | (11,421,225 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net Income (Loss) | | | (158,893 | ) | | | (2,100,864 | ) | | | (314,071 | ) | | | (316,051 | ) | | | (114,284,170 | ) |
| | | | | | | | | | | | | | | | | | | | |
Dividends on cumulative Pfd. stock: | | | | | | | | | | | | | | | | | | | | |
From discount at issuance | | | - | | | | - | | | | - | | | | - | | | | (5,402,713 | ) |
Earned | | | - | | | | - | | | | - | | | | - | | | | (1,445,047 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net Income (Loss) applicable to | | | | | | | | | | | | | | | | | | | | |
common shareholders | | $ | (158,893 | ) | | $ | (2,100,864 | ) | | $ | (314,071 | ) | | $ | (316,051 | ) | | $ | (121,131,930 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net Income (Loss) per common share: | | | | | | | | | | | | | | | | | | | | |
Basic and diluted | | $ | (0.0038 | ) | | $ | (0.0018 | ) | | $ | (0.0031 | ) | | $ | (0.0002 | ) | | $ | (56.76 | ) |
| | | | | | | | | | | | | | | | | | | | |
Weighted average number of | | | | | | | | | | | | | | | | | | | | |
common shares outstanding: | | | | | | | | | | | | | | | | | | | | |
Basic and diluted | | | 41,814,954 | | | | 1,171,588,914 | | | | 100,435,484 | | | | 1,476,755,676 | | | | 2,133,953 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these condensed financial statements. | |
| |
(A Development Stage Company) | |
(Unaudited) | |
Statement of Operations | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | Nine Months Ended | | | Three Months Ended | | | Since Inception | |
| | March 31, | | | March 31, | | | Dec. 10, 1993 to | |
| | 2012 | | | 2011 | | | 2012 | | | 2011 | | | Mar. 31, 2012 | |
| | | | | | | | | | | | | | | * | |
Net Sales | | $ | 211,720 | | | $ | 36,515 | | | $ | 163,200 | | | $ | 12,552 | | | $ | 2,591,502 | |
Gain on sale of fixed assets | | | - | | | | - | | | | - | | | | - | | | | 2,794,565 | |
Cost of Sales | | | 35,895 | | | | 7,590 | | | | 29,821 | | | | 1,669 | | | | 979,777 | |
| | | | | | | | | | | | | | | | | | | | |
Gross Profit | | | 175,825 | | | | 28,925 | | | | 133,379 | | | | 10,883 | | | | 4,406,290 | |
| | | | | | | | | | | | | | | | | | | | |
Operating Expenses: | | | | | | | | | | | | | | | | | | | | |
General and administrative | | | 1,854,225 | | | | 2,026,014 | | | | 442,004 | | | | 747,389 | | | | 63,524,456 | |
Research and development | | | 527,634 | | | | 685,396 | | | | 127,482 | | | | 206,758 | | | | 23,850,471 | |
Sales and marketing | | | 380,526 | | | | 368,885 | | | | 95,652 | | | | 112,194 | | | | 9,946,747 | |
Inventory valuation adjustments | | | 20,383 | | | | 17,919 | | | | 5,578 | | | | 6,405 | | | | 4,935,828 | |
Depreciation and amortization | | | 42,147 | | | | 77,969 | | | | 12,317 | | | | 23,416 | | | | 3,444,572 | |
Amortization of deferred compensation | | | - | | | | - | | | | - | | | | - | | | | 4,064,250 | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2,824,915 | | | | 3,176,183 | | | | 683,033 | | | | 1,096,162 | | | | 109,766,324 | |
| | | | | | | | | | | | | | | | | | | | |
Operating Loss | | | (2,649,090 | ) | | | (3,147,258 | ) | | | (549,654 | ) | | | (1,085,279 | ) | | | (105,360,034 | ) |
| | | | | | | | | | | | | | | | | | | | |
Interest income | | | 383 | | | | 1,114 | | | | - | | | | 375 | | | | 311,217 | |
Other income | | | 154,174 | | | | 39,887 | | | | 31,261 | | | | 1,144 | | | | 1,148,220 | |
Other income - LILA Inventory | | | - | | | | - | | | | - | | | | - | | | | (69,193 | ) |
Change in fair value of derivative liability | | | 1,484,827 | | | | (108,821 | ) | | | 399,170 | | | | (7,639 | ) | | | 1,555,709 | |
Interest expense | | | (1,091,158 | ) | | | (480,877 | ) | | | (196,828 | ) | | | (413,217 | ) | | | (10,597,430 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net Loss | | | (2,100,864 | ) | | | (3,695,955 | ) | | | (316,051 | ) | | | (1,504,616 | ) | | | (113,011,511 | ) |
| | | | | | | | | | | | | | | | | | | | |
Dividends on cumulative Preferred stock: | | | | | | | | | | | | | | | | | | | | |
From discount at issuance | | | - | | | | - | | | | - | | | | - | | | | (5,402,713 | ) |
Earned | | | - | | | | - | | | | - | | | | - | | | | (1,445,047 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net loss applicable to | | | | | | | | | | | | | | | | | | | | |
common shareholders | | $ | (2,100,864 | ) | | $ | (3,695,955 | ) | | $ | (316,051 | ) | | $ | (1,504,616 | ) | | $ | (119,859,271 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net Loss per common share: | | | | | | | | | | | | | | | | | | | | |
Basic and Diluted | | | | | | | | | | | | | | | | | | | | |
| | $ | (0.0018 | ) | | $ | (0.0042 | ) | | $ | (0.0002 | ) | | $ | (0.0017 | ) | | $ | (0.4657 | ) |
| | | | | | | | | | | | | | | | | | | | |
Weighted average number | | | | | | | | | | | | | | | | | | | | |
of common shares outstanding | | | | | | | | | | | | | | | | | | | | |
Basic and Diluted | | | 1,171,588,914 | | | | 876,753,982 | | | | 1,476,755,676 | | | | 893,265,107 | | | | 257,367,499 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
* The numbers presented from inception December 10, 1993 to June 30, 2005 are unaudited by our current auditor. | | | | | |
| | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these condensed financial statements. | |
4
IMAGING DIAGNOSTIC SYSTEMS, INC. | |
(A Development Stage Company) | |
(Unaudited) | |
Condensed Statement of Cash Flows | |
| | | | | | | | | |
| | Nine Months | | | From Inception | |
| | Ended March 31, | | | December 10, 1993 | |
| | 2013 | | | 2012 | | | to March 31, 2013 | |
Cash flows from operations: | | | | | | | | | |
Net Income (Loss) | | $ | (158,893 | ) | | $ | (2,100,864 | ) | | $ | (114,284,170 | ) |
Changes in assets and liabilities | | | (528,673 | ) | | | 606,513 | | | | 36,165,394 | |
Net cash used in operations | | | (687,566 | ) | | | (1,494,351 | ) | | | (78,118,776 | ) |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | | | | |
Proceeds from sale of property & equipment | | | - | | | | - | | | | 4,390,015 | |
Capital expenditures | | | - | | | | - | | | | (7,578,436 | ) |
Net cash (used in) investing activities | | | - | | | | - | | | | (3,188,421 | ) |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | | | | |
Repayment of capital lease obligation | | | - | | | | - | | | | (50,289 | ) |
Other financing activities | | | 717,650 | | | | 1,306,804 | | | | 11,067,656 | |
Proceeds from issuance of preferred stock | | | - | | | | 1 | | | | 18,389,500 | |
Net proceeds from issuance of common stock | | | - | | | | - | | | | 51,932,037 | |
| | | | | | | | | | | | |
Net cash provided by financing activities | | | 717,650 | | | | 1,306,805 | | | | 81,338,904 | |
| | | | | | | | | | | | |
Net increase (decrease) in cash | | | 30,084 | | | | (187,546 | ) | | | 31,707 | |
| | | | | | | | | | | | |
Cash, beginning of period | | | 1,623 | | | | 189,135 | | | | - | |
| | | | | | | | | | | | |
Cash, end of period | | $ | 31,707 | | | $ | 1,589 | | | $ | 31,707 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these condensed financial statements. | |
| |
(A Development Stage Company) | |
(Unaudited) | |
Condensed Statement of Cash Flows | |
| | | | | | | | | |
| | Nine Months | | | From Inception | |
| | Ended March 31, | | | December 10, 1993 to | |
| | 2012 | | | 2011 | | | March 31, 2012 | |
| | | | | | | | | * | |
Cash flows from operations: | | | | | | | | | | |
Net loss | | $ | (2,100,864 | ) | | $ | (3,695,955 | ) | | $ | (113,011,511 | ) |
Changes in assets and liabilities | | | 606,513 | | | | 1,916,017 | | | | 35,706,438 | |
Net cash used in operations | | | (1,494,351 | ) | | | (1,779,938 | ) | | | (77,305,073 | ) |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | | | | |
Proceeds from sale of property & equipment | | | - | | | | - | | | | 4,390,015 | |
Capital expenditures | | | - | | | | - | | | | (7,578,436 | ) |
Net cash (used in) investing activities | | | - | | | | - | | | | (3,188,421 | ) |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | | | | |
Repayment of capital lease obligation | | | - | | | | - | | | | (50,289 | ) |
Other financing activities | | | 1,306,804 | | | | 812,000 | | | | 10,223,834 | |
Proceeds from issuance of preferred stock | | | 1 | | | | - | | | | 18,389,501 | |
Net proceeds from issuance of common stock | | | - | | | | 900,000 | | | | 51,932,037 | |
| | | | | | | | | | | | |
Net cash provided by financing activities | | | 1,306,805 | | | | 1,712,000 | | | | 80,495,083 | |
| | | | | | | | | | | | |
Net increase (decrease) in cash | | | (187,546 | ) | | | (67,938 | ) | | | 1,589 | |
| | | | | | | | | | | | |
Cash, beginning of period | | | 189,135 | | | | 73,844 | | | | - | |
| | | | | | | | | | | | |
Cash, end of period | | $ | 1,589 | | | $ | 5,906 | | | $ | 1,589 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
* The numbers presented from inception December 10, 1993 to June 30, 2005 are unaudited by our current auditor. | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these condensed financial statements. | |
IMAGING DIAGNOSTIC SYSTEMS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
We have prepared the accompanying unaudited condensed financial statements of Imaging Diagnostic Systems, Inc. in accordance with generally accepted accounting principles for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Operating results for the three and nine month period ended March 31, 20122013 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending June 30, 2012.2013. These condensed financial statements have been prepared in accordance with Financial Accounting Standards guidance for Development Stage Enterprises, and should be read in conjunction with our condensed financial statements and related notes included in our Annual Report on Form 10-K filed on September 22, 2011.October 15, 2012.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses incurred during the reporting period. Actual results could differ from those estimates.
NOTE 2 - GOING CONCERN
Imaging Diagnostic Systems, Inc. (“IDSI”("IDSI") is a development stage enterprise and our continued existence is dependent upon our ability to resolve our liquidity problems, principally by obtaining additional debt and/or equity financing. IDSI has yet to generate a positive internal cash flow, and until significant sales of our product occur, we are dependent upon debt and equity funding. See Item 2 “Management’s Discussion
We have had cumulative losses since inception that raise doubt about our ability to continue as a going concern. We also have cash used in operations of $687,566 for the nine months ended March 31, 2013 and Analysishave negative working capital of Financial Condition$4,837,649 at March 31, 2013. These matters raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments related to the recovery and Resultsclassification of Operations”.recorded assets, or the amounts and classification of liabilities that might be necessary in the event we cannot continue in existence.
In the event that we are unable to obtain debt or equity financing or we are unable to obtain such financing on terms and conditions acceptable to us, we may have to cease or severely curtail our operations, which would materially impact our ability to continue as a going concern. Management has been able to raise the capital necessary to reach this stage of product development and has been able to obtain funding for capital requirements to date. Recently we have relied on raising additional capital through our new Private Equity Credit Agreement with Southridge Partners II, L.P. (“Southridge”("Southridge") dated January 7, 2010, which replaced the Charlton Agreement and through the issuance of short term promissory notes. We also intend to raise capital through other sources of financing. See Part II, Item 5. Other Information – “Financing/Equity Line of Credit.” In the eventSince June 2011, we arehave been unable to draw from this new private equity line, consequently, alternative financing will beis required to continue operations, and there is no assurance that we will be able to obtain alternative financing on commercially reasonable terms. There is no assurance that, if and when Food and Drug Administration (“FDA”("FDA") marketing clearance is obtained, the CTLM® will achieve market acceptance or that we will achieve a profitable level of operations.
We currently manufacture and sell our sole product, the CTLM® - Computed Tomography Laser Mammography. We are appointing distributors and installing collaboration systems as part of our global commercialization program. We have sold 17 systems as of March 31, 2012;2013; however, we continue to operate as a development stage enterprise
because we have yet to produce significant revenues. We are attempting to create increased product awareness as a foundation for developing markets through an international distributor network. We may be able to exit reporting as a Development Stage Enterprise upon two successive quarters of sufficient revenues such that we would not have to utilize other funding to meet our quarterly operating expenses.
NOTE 3 - INVENTORY
Inventories included in the accompanying condensed balance sheet are stated at the lower of cost or market as summarized below:
| | Mar. 31, 2012 | | | June 30, 2011 | | | Mar. 31, 2013 | | | June 30, 2012 | |
| | Unaudited | | | | | | Unaudited | | | | |
Raw materials consisting of purchased parts, components and supplies | | $ | 476,482 | | | $ | 508,176 | | | $ | 88,828 | | | $ | 87,681 | |
Work-in-process including units undergoing final inspection and testing | | | 28,916 | | | | 28,943 | | | | 28,915 | | | | 28,915 | |
Finished goods | | | 161,558 | | | | 184,443 | | | | 125,145 | | | | 129,424 | |
| | | | | | | | | | | | | | | | |
Sub-Total Inventories | | | 666,956 | | | | 721,562 | | |
| | | | | | | | | |
Less Inventory Reserve | | | (390,000 | ) | | | (399,000 | ) | |
| | | | | | | | | |
Total Inventory - Net | | $ | 276,956 | | | $ | 322,562 | | | $ | 242,888 | | | $ | 246,020 | |
| | | | | | | | | | | | | | | | |
We review our Inventory for parts that have become obsolete or in excess of our manufacturing requirements and our Finished Goods for valuation pursuant to our Critical Accounting Policy for Inventory. For the quarterfiscal year ending SeptemberJune 30, 2011,2012, we reclassified the net realizable value of $11,928 from Clinical Equipment to Consignment Inventory due to a CTLM® system being purchased by one of our Distributors in an installment sale.Distributors. For the fiscal year ending June 30, 2011, we reclassified the net realizable value of $6,525 of CTLM® systems in Inventory to Clinical equipment. For the fiscal year ending June 30, 2009, we reclassified the net realizable value of $8,591 as this CTLM® system is being used as a clinical system at the University of Florida. For the fiscal year ending June 30, 2008 since such finished goods are being utilized for collecting data for our FDA application, we reclassified the net realizable value of $311,252 of CTLM® systems in Inventory to Clinical equipment. For the fiscal year ending June 30, 2010 we identified $399,000 of Inventory that we deem impaired due to the lack of inventory turnover. We reduced Inventory Reserve by $9,000 for the quarter ending March 31, 2012 due to the sale of the CTLM® system to our distributor Kepter Internacional.
NOTE 4 - REVENUE RECOGNITION
We recognize revenue in accordance with the guidance provided in SEC Staff Accounting Bulletin No. 104. We sell our medical imaging products, parts, and services to independent distributors and in certain unrepresented territories directly to end-users. Revenue is recognized when persuasive evidence of a sales arrangement exists, delivery has occurred such that title and risk of loss have passed to the buyer or services have been rendered, the selling price is fixed or determinable, and collectibility is reasonable assured. Unless agreed otherwise, our terms with international distributors provide that title and risk of loss passes F.O.B. origin.
To be reasonably assured of collectibility, our policy is to minimize the risk of doing business with distributors in countries which are having difficult financial times by requesting payment via an irrevocable letter of credit (“("L/C”C") drawn on a United States bank prior to shipment of the CTLM®. It is not always possible to obtain an L/C from our distributors so in these cases we must seek alternative payment arrangements which include third-party financing, leasing or extending payment terms to our distributors.
NOTE 5 - RECENT ACCOUNTING PRONOUNCEMENTS
In May 2011,Various accounting pronouncements that have been issued or proposed by the Financial Accounting Standards Board (“FASB”) amended its guidance relatedFASB that do not require adoption until a further date are not expected to Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. generally accepted accounting principles (“U.S. GAAP”) and the International Financial Reporting Standards (“IFRS”), that results in a
consistent definition of fair value and common requirements for measurement of and disclosure about fair value. The new guidance clarifies and changes some fair value measurement principles and disclosure requirements under U.S. GAAP. Among them is the clarification that the concepts of highest and best use and valuation premise in a fair value measurement should only be applied when measuring the fair value of non-financial assets. Additionally, the new guidance requires quantitative information about unobservable inputs, and disclosure of the valuation processes used and narrative descriptions with regard to fair value measurements within the Level 3 categorization of the fair value hierarchy. The requirements of the amended accounting guidance are effective for us January 1, 2012 and early adoption is prohibited. The adoption of the new accounting guidance did not have a material impact on our consolidatedthe Company's financial statements.statements upon adoption.
All other issued but not yet effective FASB issued guidances have been deemed to be not applicable hence when adopted, these guidances are not expected to have any impact on the financial position of the company.
NOTE 6 – STOCK-BASED COMPENSATION
The Company relies on the guidance provided by ASC 718, (“("Share Based Payments”Payments"). ASC 718 requires companies to expense the value of employee stock options and similar awards and applies to all outstanding and vested stock-based awards.
In computing the impact, the fair value of each option is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk free interest rate; volatility; and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management’smanagement's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’sCompany's stock-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’sCompany's forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the amount of vested options as a percentage of total options outstanding. If the Company’sCompany's actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what we have recorded in the current period. The impact of applying ASC 718 during the three and nine months ended March 31, 20122013 approximated $8,690$0 and $13,269,$42,671, respectively, in additional compensation expense compared to $93,821$8,690 and $281,685 $13,269 for the corresponding periods in fiscal 2011.2012.
The fair value concepts were not changed significantly in ASC 718; however, in adopting this Standard, companies were given the option to choose among alternative valuation models and amortization assumptions. We elected to continue to use the Black-Scholes option pricing model and expense the options as compensation over the requisite service period of the grant. We will reconsider use of the Black-Scholes model if additional information becomes available in the future that indicates another model would be more appropriate, or if grants issued in future periods have characteristics that cannot be reasonably estimated using this model.
For purposes of the following disclosures the weighted-average fair value of options has been estimated on the date of grant using the Black-Scholes options-pricing model. For the quarter ending March 31, 2013, the net income and earnings per share reflect the actual deduction for option expense as a non-cash compensation expense.
Stock-based compensation expense recorded during the three months ended March 31, 2012,2013, was $8,690$0 compared to $93,821$8,690 from the corresponding period in fiscal 2011. See “Item 2, Results of Operations, Liquidity and Capital Resources, Sale/Lease-Back”2012.
The weighted average fair value per option at the date of grant for the three months ended March 31, 2013 using the Black-Scholes Option-Pricing Model was $0 due to not having any stock-based compensation expense during the quarter. The weighted average fair value per option at the date of grant for the three months ended March 31, 2013 was $0 due to not having any stock-based compensation expense during the quarter. Assumptions were as follows:
| Three Months Ended |
| March 31, |
| 2013 | 2012 |
Expected Volatility(1) | N/A | 182% |
Risk Free Interest Rate | 3% | 3% |
Expected Term(2) | 8 yrs | 8 yrs |
(1) We calculate expected volatility through a mathematical formula using the last day of the week's closing stock price for the previous 61 weeks prior to the option grant date. The expected volatility for the three months ending March 31, 2013 and 2012 in the table above are weighted average calculations.
(2) We continue to use an expected term assumption of eight years based on guidance provided by SEC Staff Accounting Bulletin 107 and subsequently, Staff Accounting Bulletin 110. These bulletins enable us to use the simplified method for "plain vanilla" options for this calculation.
NOTE 7 - COMMON STOCK ISSUANCES – PRIVATE EQUITY CREDIT AGREEMENT
During the third quarter ending March 31, 2012,2013, we did not draw from our Private Equity Credit Agreement with Southridge Partners II LP (“Southridge”("Southridge"). See Item 5. Other Information – “Financing/Equity Line of Credit.” Subsequent to the end of the firstsecond quarter, we did not initiate any put notices from our Private Equity Credit Agreement with Southridge through the date of this report.
NOTE 8 – DEBT DISCOUNT
For the quarter ending March 31, 2012, we received $55,000 from the proceeds of Convertible Short-Term Notes. We recorded interest expense to amortize the debt discount in the amount of $138,017 $263,724 for the quarter ending March 31, 2012,2013, which includesrelates to all of the outstanding Convertible Short-Term Notes. See “Part II, Item 5, Financing/Equity Line of Credit, Issuance of Stock in Connection with Short-Term Loans”
In connection with the sale of a Convertible Promissory Note Agreement on February 23, 2011, with an unaffiliated third party, JMJ Financial (the “Lender”"Lender" or “JMJ”"JMJ"), relating to a private placement of a total of up to $1,800,000 in principal amount of a Convertible Promissory Note (the “Note”"Note") providing for advances of a gross amount of $1,600,000 in seven tranches, we recorded interest expense to amortize the debt discount in the amount of $33,318$833 during the quarter ending March 31, 2012. See “Part II, Item 5, Financing/Equity Line of Credit, Issuance of Stock in Connection with Long-Term Loans”2013.
There remains a total of $273,148$538,662 of debt discount yet to be amortized as of March 31, 2012.2013.
NOTE 9 – SHORT-TERM DEBT
From November 10, 2009 to March 31, 2012 2013 we borrowed $3,614,769$4,426,891 in the aggregate from ten20 unaffiliated third party investors. As additional consideration for $237,500 of these loans in December
In November 2009, we issued 16,625,000 restricted sharesborrowed a total of common stock. Upon maturity$237,500 from four private investors pursuant to short-term promissory notes. These notes were due and extensions ofpayable in the original maturity dates, we are obligated to pay the principal amount and $112,100 in premium. With respect to $1,000,000 principal amount of these notes,principal plus 20% premium, so that the total amount due was $285,000. In addition, we issued 55,363,907to the investors 70 shares of restricted common stock as collateral.for each $1 lent so that a total of 16,625,000 shares of stock were issued to the investors. The aggregate fair market value of these collateral shares at the date of issuance were recorded and presented as a contra equity account “Common stock – Debt Collateral” as they remain unearned and subject to be returned once the related debt is repaid. With respect to $350,000 principal amount of a note, we issued 3516,625,000 shares of Series L Convertible Preferred Stock as collateral. On March 31, 2010stock when issued was $465,500. $30,000 principal on one of the third party investors converted these collateral shares, pursuantnotes was sold to OTC Global Partners in September 2012. $10,000 premium on one of the termsnotes was sold to WHC Capital LLC on March 22, 2013. As of their $350,000 promissory note, and the note was cancelled. During the third quarter ending March 31, 2010,2013, we have repaid an aggregate principal and premium in the amount of $93,750 and $10,000 in premium$148,500 on these notes. Duringshort-term notes and owe a balance of $196,300 of which $70,000 is the principal remaining. The original due date of December 21, 2009, was first extended to February 28, 2010, with a second extension to June 15, 2010, a third extension to September 30, 2010 and a fourth quarter endingextension to October 31, 2010. Further extensions of the $100,000 note were made through June 30, 2010,2012 for 3% additional premium per month. However, as of June 30, 2012, we repaidare accruing this 3% additional premium per month but have not yet received an aggregate principal amountextension of $48,044maturity date and $644are in technical default of the note. We are negotiating with the lender to extend the maturity date. In connection with all of the extensions, a total of $89,800 of additional premium on the notes.was accrued as of March 31, 2013.
In December 2009, we borrowed a total of $400,000 from a private investor pursuant to three short-term promissory notes. These notes were payable from March 10 through March 15, 2010 in the amount of principal plus 15% premium, so that the total amount due was $460,000. In addition, we issued to the investor 24,000,00048,000 shares of restricted common stock as collateral. These shares are to be returned and cancelled upon payment of the notes. The original due date of March 15, 2010 was first extended to June 15, 2010, with a second extension to September 30, 2010 and a third extension to October 31, 2010. Further extensions of the notes were made through June 30, 2012 for 3% additional premium per month on each note. We have not yet received an extension of maturity date and are in technical default of the note. We are negotiating with the lender to extend the maturity date. In connection with these extensions a total of $283,400$284,420 of additional premium was accrued for the December 2009 notes as the date of this report. In April 2011, Southridge purchased a total of $200,000 in principal value of promissory notes from the private investor. All conversions before December 10, 2012, were adjusted to reflect a 1 for 500 reverse split effective that date. As of March 31, 2013, Southridge has converted $100,000$180,515 principal and $55,600 premium into 20,746,6662,257,052 shares of which 41,493 shares of our common stock that was previously issued as collateral.
On December 12, 2012, the private investor sold $180,769 of a promissory note originally dated December 15, 2009 to ASC Recap. The terms of the original note remain the same except that the holder may elect at any time to convert any part or all of the $180,769 into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date. We reserved 18,000,000 shares of our common stock in connection with this transaction.
On January 3, 2013, Magna Group, LLC ("Magna") purchased $100,000 principal of a Promissory Note dated December 10, 2009 from a private investor. A new Convertible Promissory Note was issued to Magna on January 3, 2013 with a maturity date of September 3, 2013. Interest will accrue at 12% per annum. Any amount on principal or interest that remains unpaid when due shall bear an interest rate of 22% from the due date until paid. Magna may elect at any time to convert any part or all of the $100,000 plus interest into shares of our common stock at an Initial Conversion Price equal to 45% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice. We reserved 50,000,000 shares of our common stock in connection with this transaction.
On January 18, 2013, Redwood Management LLC ("Redwood") purchased $100,000 principal of a $100,000 Promissory Note originally dated December 14, 2009 from a private investor. Redwood may elect at any time to convert any part or all of the $100,000 into shares of our common stock at an Initial Conversion Price equal to 45% of the lowest closing bid price during the 15 trading days immediately prior to the date of the conversion notice. We reserved 100,000,000 shares of our common stock in connection with this transaction.
On January 8, 2010, we borrowed a total of $600,000 from a private investor pursuant to two short-term promissory notes. These notes were payable April 6, 2010 in the amount of principal plus 15% premium, so that the total amount due was $690,000. In addition, we issued to the investor 31,363,63762,727 shares of restricted common stock as collateral. These shares are to be returned and cancelled upon payment of the notes. The original due date of April 6, 2010 was first extended to June 15, 2010, with a second extension to September 30, 2010 and a third extension to October 31, 2010. Further extensions of the notes were made through July 31, 2011 for 3% additional premium per month on each note. In January 2011, Southridge purchased a total of $600,000 in principal value of promissory notes from the private investor. As of the date of this report, Southridge has fully converted $600,000 principal and $340,099 premium into 384,456,103768,912 shares of our common stock of which 31,056,10862,112 shares were collateral shares and 353,399,995706,800 new shares were issued pursuant to Rule 144. Although we arewere in technical default of these two notes, the holder, Southridge has elected to convert these notes into common shares. In connection with these prior extensions through June 30, 2012 and the accrual of the additional premiums through May 31, 2012, a total of $255,647 of additional premium was accrued for the January 2010 notes as of the date of this report.June 30, 2012.
On February 25, 2010, we borrowed $350,000 from a private investor pursuant to a short-term promissory note. We issued to the investor 35 shares of Series L Convertible Preferred Stock as collateral. This note had a maturity date of April 30, 2010; however, the investor gave us notice of conversion to the collateral shares on March 31, 2010. The Note was cancelled upon this conversion. The 35 shares of Series L Convertible Preferred Stock accrue dividends at an annual rate of 9% and are convertible into an aggregate of 16,587,690 shares of common stock (473,934 shares of common stock for each share of preferred stock). Pursuant to the Certificate of Designation, Rights and Preferences for the Series L Convertible Preferred Stock, we are obligated to reduce the conversion price and reserve additional shares for conversion if we sold or issued common shares below the price of $.0211 per share (the market price on the date of issuance of the Preferred Stock). In October 2010, we obtained a waiver from the private investor holding the 35 shares of Series L Convertible Preferred Stock in which the investor agreed to convert no more than the 16,587,690 common shares currently reserved as we do not have sufficient authorized common shares to reserve for further conversions pursuant to the Certificate of Designation, Rights and Preferences. The investor agreed to a conversion floor price of $.015, which required us to reserve an additional 6,745,64313,491 common shares.
On January 6, 2011, the investor converted 15 shares of the Series L Convertible Preferred Stock into 10,000,00020,000 shares of common stock. As of the date of this report, the investor holds 20 shares of the Series L Convertible Preferred Stock.
On December 13, 2010, we borrowed a total of $60,000 from a private investor pursuant to a short-term promissory note. The note is payable on or before January 31, 2011. As consideration for this loan, we were obligated to pay back his principal, $20,400$26,400 in premium and issue 3,000,0006,000 restricted shares of common stock upon the approval by our shareholders of an increase in authorized common stock at our annual meeting to be held on July 12, 2011. On September 9, 2011, we issued the 3,000,0006,000 common shares pursuant to Rule 144. We received an extension of maturity date to June 30,December 31, 2012 for this note. On September 5, 2012, the private investor sold $40,000 principal of the note to SGI Group. On December 17, 2012, the private investor sold the balance of his note totaling $46,400 ($20,000 principal and $26,400 premium) to WHC Capital LLC.
In November and December 2010, we received a total of $145,000 from Southridge pursuant to three short-term promissory notes. All three notes provide for a redemption premium of 15% of the principal amount on or before March 31, 2011. Interest will accrue at 8% per annum until maturity. Southridge may elect at an Event of Defaultany time to convert any part or all of the $145,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest
closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In January 2011, we received a total of $157,000 from Southridge pursuant to three short-term promissory notes. All three notes provide for a redemption premium of 15% of the principal amount on or before May 31, 2011. Interest will accrue at 8% per annum until maturity. Southridge may elect at an Event of Defaultany time to convert any part or all of the $157,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest
closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In February 2011, we received a total of $115,000 from Southridge pursuant to two short-term promissory notes. Both notes provide for a redemption premium of 15% of the principal amount on or before May 31, 2011. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Defaultany time to convert any part or all of the $115,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In March 2011, we received $60,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before May 31, 2011. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Defaultany time to convert any part or all of the $60,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In April 2011, we received $165,000 from Southridge pursuant to two short-term promissory notes. The notes provide for a redemption premium of 15% of the principal amount on or before July 31, 2011. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Defaultany time to convert any part or all of the $165,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In May 2011, we received $80,000 from Southridge pursuant to two short-term promissory notes. The notes provide for a redemption premium of 15% of the principal amount on or before July 31, 2011. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Defaultany time to convert any part or all of the $80,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In July 2011, we received $150,000 from Southridge pursuant to a short-term promissory note. The note provided for a redemption premium of 15% of the principal amount on or before December 31, 2011. We received an extension of maturity date to February 29, 2012 for these notes. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Defaultany time to convert any part or all of the $150,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 70% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In August 2011, we received $82,500 from Southridge pursuant to two short-term promissory notes of which the principal on these notes was $100,000 and $7,500, respectively. The $100,000 note provided for a $25,000 original
issue discount and both notes provided for a redemption premium of 15% of the principal amount on or before December 31, 2011. We received an extension of maturity date to February 29, 201223, 2013 for these notes. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Defaultany time to convert any part or all of the $107,500 principal amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 70% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. The $100,000 and the$7,500 note hashave been paid in full through the conversion to common stock pursuant to Rule 144.
In August 2011, we received $50,000 from OTC Global Partners, LLC pursuant to a short-term promissory note. The note provided for a redemption premium of 15% of the principal amount on or before March 1, 2012. Interest will accrue at 8% per annum until maturity above and beyond the premium. OTC Global Partners, LLC may elect at an Event of Defaultany time to convert any part or all of the $50,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.014 or (b) 65% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In September 2011, we received $133,000 from Southridge pursuant to two short-term promissory notes of which the principal on these notes was $100,000 and $100,000, respectively. One of the $100,000 notes provided for a $33,000 original issue discount and the other $100,000 note provided a $34,000 original issue discount. The notes provided for a redemption premium of 15% of the principal amount on or before December 31, 2011. We received an extension of maturity date to June 30,December 31, 2012 for these notes. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Defaultany time to convert any part or all of the $200,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.0075 or (b) 70% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. The $100,000 note has been paid in full through the conversion to common stock pursuant to Rule 144.
In October 2011, we received $67,000 from Southridge pursuant to a short-term promissory note of which the principal on the note was $100,000. The note provides for a $33,000 original issue discount. The note provided for a redemption premium of 15% of the principal amount on or before January 12, 2012. We received an extension of maturity date to June 30,December 31, 2012 for this note. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Defaultany time to convert any part or all of the $100,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.0075 or (b) 70% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice.
In October 2011, we received $67,000 from Southridge pursuant to a short-term promissory note of which the principal on the note was $100,000. The note provides for a $33,000 original issue discount. The note provided for a redemption premium of 15% of the principal amount on or before January 26, 2012. We received an extension of maturity date to June 30,December 31, 2012 for this note. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Defaultany time to convert any part or all of the $100,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.005 or (b) 70% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice.The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In October 2011, we received $78,500 from Asher Enterprises pursuant to a short-term promissory note due on or before July 26, 2012. Interest will accrue at 8% per annum until maturity above and beyond the premium. Asher Enterprises may elect at an Event of Defaultany time after 180 days to convert any part or all of the $78,500 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 58% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In November 2011, we received $20,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before December 31, 2012. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Defaultany time to convert any part or all of the $20,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 62% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.The note has been paid in full through the conversion to common stock pursuant to Rule 144.
On November 21, 2011, Southridge sold their May 12, 2011 $60,000 short-term promissory note to Panache Capital, LLC (“Panache”("Panache"). The terms of the original note remain the same except that the maturity date is now November 21, 2012 and interest will accrue at 10% per annum until maturity above and beyond the premium.
In November 2011, we received $40,000 from Panache pursuant to a short-term promissory note. The note provides a maturity date of November 21, 2012. Interest will accrue at 10% per annum until maturity. Panache may elect at an Event of Defaultany time to convert any part or all of the $40,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 62% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In November 2011, we received $53,000 from Asher Enterprises pursuant to a short-term promissory note due on or before September 5, 2012. Interest will accrue at 8% per annum until maturity above and beyond the premium. Asher Enterprises may elect at an Event of Defaultany time after 180 days to convert any part or all of the $53,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 58% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In December 2011, we received $17,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before December 18, 2012. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default any time to convert any part or all of the $17,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 62% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In December 2011, we received $12,000 from an unaffiliated third party investor pursuant to a short-term promissory note. The note provided for a redemption premium of 15% of the principal amount on or before March 8, 2012. Interest will accrue at 10% per annum until maturity above and beyond the premium. On January 6, 2012, we amended a promissory note in the principal amount of $12,000 dated December 9, 2011 held by an unaffiliated third-party investor. The note provided for a redemption premium of 15% of the principal amount on or before March 8, 2012. Interest will accrue at 10% per annum until maturity above and beyond the premium. The amendment provided for the issuance of three (3) restricted shares of Series P Preferred Stock having a stated value of $5,000 per share. These shares, having a total value of $15,000, will be used as collateral for the note held by the investor. We received an extension of maturity to June 4, 2012 for this note. Thereafter, a late fee premium of 1% per month will be due if unpaid. We have not yet received an extension of maturity date and are in technical default of the note. We are negotiating with the lender to extend the maturity date.
In December 2011, we borrowed a total of $21,604 from a private investor pursuant to two short-term promissory notes. The notes provided for a 2% premium per month. One of the notes was payable on or before December 16, 2011 and the other on or before January 6, 2012. We received an extension of maturity date to June 30,August 31, 2012 for these notes for 3% additional premium per month on each note.
In January 2012, we received a total of $175,200 from an unaffiliated third party investor pursuant to five short-term promissory notes with a maturity date ranging from March 5, 2012 to March 20, 2012. The notes provided for a
redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 10% per annum until maturity above and beyond the premium. We issued a total of 38 Series P Preferred Stock to the investor as collateral with a total stated value of $190,000. We received an extension of maturity to June 4, 2012 for these notes. Thereafter, a late fee premium of 1% per month will be due if unpaid. We have not yet received an extension of maturity date and are in technical default of the note. We are negotiating with the lender to extend the maturity date. On March 20, 2013, the private investor sold $57,600 Principal of his $57,600 note to Tangiers Investment Group LLC. The full sale of the note was for $75,969 ($57,600 Principal, $8,640 Premium, $4,032 Late Fee Premium and $5,697 Interest). On March 20, 2013, we entered into a new Promissory Note with Tangiers Capital for $75,969 in Principal with a maturity date of March 19, 2014. Interest will accrue at 15% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $75,969 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In February 2012, we received a total of $42,000 from an unaffiliated third party investor pursuant to two short-term promissory notes with a maturity date ranging from April 13, 2012 to April 30, 2012. The notes provided for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 10% per annum until maturity above and beyond the premium. We issued a total of 9 Series P Preferred Stock to the investor as collateral with a total stated value of $45,000. We received an extension of maturity to June 4, 2012 for these notes. Thereafter, a late fee premium of 1% per month will be due if unpaid.
We have not yet received an extension of maturity date and are in technical default of the note. We are negotiating with the lender to extend the maturity date.
On February 23, 2012, Southridge sold their $100,000 short-term promissory note to Panache Capital, LLC (“Panache”("Panache") of which a balance of $70,000 principal was remaining after Southridge converted $30,000 principal in a debt to equity conversion on February 17, 2012. The terms of the original note remain the same except that the maturity date is now November 21, 2012 and interest will accrue at 10% per annum until maturity above and beyond the premium.
10-Q Table of ContentsThe note has been paid in full through the conversion to common stock pursuant to Rule 144.
In February 2012, we received $25,000 from Panache pursuant to a short-term promissory note. The note provides a maturity date of February 28, 2013. Interest will accrue at 10% per annum until maturity. Panache may elect at an Event of Defaultany time to convert any part or all of the $25,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 55% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In March 2012, we received $30,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before March 18, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default any time to convert any part or all of the $30,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 62% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In April 2012, we received $11,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before December 31, 2012. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at any time to convert any part or all of the $11,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice. The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In April 2012, we received $2,500 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before April 25, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at any time to convert any
part or all of the $2,500 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice. The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In May 2012, we received a total of $25,000 from an unaffiliated third party investor pursuant to a short-term promissory note with a maturity date of August 2, 2012. The note provides for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 10% per annum until maturity above and beyond the premium. We issued a total of 5 Series P Preferred Stock to the investor as collateral with a total stated value of $25,000. We have not yet received an extension of maturity date and are in technical default of the note. We are negotiating with the lender to extend the maturity date.
In May 2012, we received $8,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before May 14, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at any time to convert any part or all of the $8,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice. The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In May 2012, we received $13,000 from Linda Grable, our CEO and Chairman of the Board, pursuant to a short-term promissory note. Ms. Grable is deemed an affiliated party. The note provides for a redemption premium of 15% of the principal amount on or before May 21, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. Ms. Grable may elect at any time to convert any part or all of the $13,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice. The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In May 2012, we received $32,000 from a private investor pursuant to two short-term promissory notes with a maturity date ranging from May 17, 2013 to May 20, 2013. The notes provides for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $32,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.
In June 2012, we received $6,672 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before June 17, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at any time to convert any part or all of the $6,672 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice. The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In June 2012, we received $14,000 from a private investor pursuant to two short-term promissory notes with a maturity date ranging from June 6, 2013 to June 20, 2013. The notes provides for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $14,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.
In July 2012, we received $20,100 from a private investor pursuant to four short-term promissory notes with a maturity date ranging from July 9, 2013 to July 24, 2013. The notes provide for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $20,100 Principal Amount of
the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.
In August 2012, we received $25,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before December 31, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at any time to convert any part or all of the $25,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice. We reserved 50,000,000 shares of our common stock in connection with this loan. The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In August 2012, we received $95,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before December 31, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at any time to convert any part or all of the $95,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date. We reserved 400,000,000 shares of our common stock in connection with this loan.
On August 20, 2012, Southridge sold $70,000 of their original $100,000 short-term promissory note dated October 12, 2011 to Levin Consulting Group. The terms of the original note remain the same except that the holder may elect at any time to convert any part or all of the $70,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date.
In August 2012, we received $35,000 from Levin Consulting Group pursuant to a short-term promissory note with a maturity date of August 20, 2013. The note provides for a redemption premium of 15% of the principal amount on or before November 18, 2012; 20% on or before December 18, 2012; 25% on or before January 17, 2013; and 30% on or before February 16, 2013. Interest will accrue at 10% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $35,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date.
On August 20, 2012, Southridge sold $30,000 of their original $100,000 short-term promissory note dated October 12, 2011 to SGI Group LLC ("SGI"). The terms of the original note remain the same except that the holder may elect at any time to convert any part or all of the $30,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date.
In August 2012, we received $15,000 from SGI pursuant to a short-term promissory note with a maturity date of August 20, 2013. The note provides for a redemption premium of 15% of the principal amount on or before November 18, 2012; 20% on or before December 18, 2012; 25% on or before January 17, 2013; and 30% on or before February 16, 2013. Interest will accrue at 10% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $15,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest
closing bid price during the five trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date.
In September 2012, we received $29,000 from Southridge pursuant to a short-term promissory note of which the principal on the note was $30,000. The note provides for a $1,000 original issue discount. The note provides for a redemption premium of 15% of the principal amount on or before December 31, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at any time to convert any part or all of the $30,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date. We reserved 150,000,000 shares of our common stock in connection with this loan.
In September 2012, we received $25,000 from Panache pursuant to a short-term promissory note of which the principal on the note was $30,000. The note provides for a $5,000 original issue discount. The note provides for a redemption premium of 15% of the principal amount on or before December 31, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. Panache may elect at any time to convert any part or all of the $30,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date. We reserved 200,000,000 shares of our common stock in connection with this loan.
In September 2012, we received $30,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 20% on or before December 17, 2012; 25% on or before March 17, 2013; and 30% on or before June 15, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $30,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date. We reserved 700,000,000 shares of our common stock in connection with this loan.
On September 26, 2012, a private investor sold $30,000 of its original $100,000 short-term promissory note dated November 23, 2009 to OTC Global Partners. The terms of the original note remain the same except that the new note provides for a new redemption premium of 15% of the principal amount on or before September 25, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. OTC Global Partners may elect at any time to convert any part or all of the $30,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date.
In October 2012, we received $20,000 from Panache pursuant to a short-term promissory note. The note provides a maturity date of September 28, 2013. Interest will accrue at 10% per annum until maturity. Any amount on principal or interest that remains unpaid when due, shall bear an interest rate of 22% from the due date until paid. Panache may elect at any time to convert any part or all of the $20,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the initial closing bid price, then the purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date.
In October 2012, we received $38,500 from FLUX Carbon Starter pursuant to a short-term promissory note. The note provides a maturity date of October 3, 2013. We received net proceeds of $33,250 after deductions of $3,500 for legal fees and $1,750 for a finder's fee. Interest will accrue at 10% per annum until maturity. FLUX Carbon Starter may elect at any time to convert any part or all of the $38,500 principal amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the initial closing bid price, then the purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date.
In October 2012, we received $27,000 from Southridge pursuant to a short-term promissory note of which the principal on the note was $40,000 and the maturity date of the note is March 31, 2013. The note provides for a $13,000 original issue discount. The note provides for a redemption premium of 20% on or before January 7, 2013; 25% on or before April 7, 2013; and 30% on or before July 15, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $40,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the initial closing bid price, then the purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date. We reserved 300,000,000 shares of our common stock in connection with this loan.
In October 2012, we received $1,000 from Southridge pursuant to a short-term promissory note. The note provides a maturity date of April 30, 2013. The note provides for a redemption premium of 20% on or before January 22, 2013; 25% on or before April 24, 2013; and 30% after April 24, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $40,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the initial closing bid price, then the purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date. We reserved 300,000,000 shares of our common stock in connection with this loan.
In November 2012, we received $6,250 from SGI Group pursuant to a short-term promissory note of which the principal on the note was $12,500 and the maturity date of the note is May 31, 2013. The note provides for a $6,250 original issue discount. The note provides for a redemption premium of 20% of the principal amount on or before February 10, 2013; 25% on or before May 11, 2013; and 30% after May 11, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $12,500 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the initial closing bid price, then the purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date. We reserved 125,000,000 shares of our common stock in connection with this loan.
In November 2012, we received $6,250 from Star City Capital pursuant to a short-term promissory note of which the principal on the note was $12,500 and the maturity date of the note is May 31, 2013. The note provides for a $6,250 original issue discount. The note provides for a redemption premium of 20% of the principal amount on or before February 10, 2013; 25% on or before May 11, 2013; and 30% after May 11, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $12,500 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the initial closing bid price, then the purchase price shall be adjusted such that the discount shall be taken
from the Closing Bid Price on the clearing date. We reserved 125,000,000 shares of our common stock in connection with this loan.
In November 2012, we received $20,000 from Southridge pursuant to a short-term promissory note of which the principal on the note was $40,000 and the maturity date of the note is May 31, 2013. The note provides for a $20,000 original issue discount. The note provides for a redemption premium of 20% on or before March 27, 2013; 25% on or before June 25, 2013; and 30% after June 25, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $40,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the initial closing bid price, then the purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date. We reserved 400,000,000 shares of our common stock in connection with this loan.
In December 2012, we received $3,000 from a private investor pursuant to two short-term promissory notes with a maturity date ranging from December 5, 2013 to December 9, 2013. The notes provide for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $3,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In December 2012, we received $20,000 from a private investor pursuant to a short-term promissory note with a maturity date of December 19, 2013. The notes provide for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $20,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In December 2012, we received $12,000 from an unaffiliated third party investor pursuant to a short-term promissory note with a maturity date of June 13, 2013. The note provides for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 10% per annum until maturity above and beyond the premium. We issued a total of 3 Series P Preferred Stock to the investor as collateral with a total stated value of $15,000.
In December 2012, we received $15,000 from WHC Capital, LLC pursuant to a short-term promissory note with a maturity date of October 6, 2013. Interest will accrue at 12% per annum until maturity above and beyond the premium. Any amount on principal or interest that remains unpaid when due, shall bear an interest rate of 22% from the due date until paid. The holder may elect at any time to convert any part or all of the $15,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In January 2013, we received $31,500 from Hanover Holdings I, LLC ("Hanover") pursuant to a short-term promissory note. The note provides a maturity date of September 3, 2013. Interest will accrue at 12% per annum. Any amount on principal or interest that remains unpaid when due, shall bear an interest rate of 22% from the due date until paid. Hanover may elect at any time to convert any part or all of the $31,500 plus interest into shares of our common stock at an Initial Conversion Price equal to 45% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice. We reserved 20,000,000 shares of our common stock in connection with this transaction.
On January 3, 2013, Magna Group, LLC ("Magna") purchased $100,000 principal of a Promissory Note dated December 10, 2009 from a private investor. A new Convertible Promissory Note was issued to Magna on January 3, 2013 with a maturity date of September 3, 2013. Interest will accrue at 12% per annum. Any amount on principal or
interest that remains unpaid when due, shall bear an interest rate of 22% from the due date until paid. Magna may elect at any time to convert any part or all of the $100,000 plus interest into shares of our common stock at an Initial Conversion Price equal to 45% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice. We reserved 50,000,000 shares of our common stock in connection with this transaction.
In January 2013, we received $5,850 from a private investor pursuant to two short-term promissory notes with a maturity date ranging from January 3, 2014 to January 8, 2014. The notes provide for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $5,850 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In January 2013, we received $30,000 from Black Arch Opportunity Fund LP ("Black Arch") pursuant to a short-term promissory note. The note provides a maturity date of November 9, 2013. Interest will accrue at 12% per annum. Any amount on principal or interest that remains unpaid when due, shall bear an interest rate of 22% from the due date until paid. Black Arch may elect at any time to convert any part or all of the $30,000 plus interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice.
In January 2013, we received $25,000 from Redwood Management LLC ("Redwood") pursuant to a $125,000 short-term promissory note dated January 18, 2013. The terms of the note provide that the Redwood will pay $25,000 every 30 days from execution of the note until the entire $125,000 is paid in full. The note provides a maturity date of January 18, 2014. Interest will accrue at 12% per annum on the aggregate unconverted outstanding principal amount. Redwood may elect at any time to convert any part or all of the outstanding balance plus interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the fifteen trading days immediately prior to the date of the conversion notice. We reserved 100,000,000 shares of our common stock in connection with this transaction.
In January 2013, Redwood agreed to purchase five promissory notes held by a private investor totaling $365,688 of which $213,600 in principal and $123,752 in premium; $17,040 is cash redemption premium and $11,296 is interest. Redwood may elect at any time to convert any part or all of the outstanding balance plus interest into shares of our common stock at an Initial Conversion Price equal to 45% of the lowest closing bid price during the fifteen trading days immediately prior to the date of the conversion notice. We reserved 60,000,000 shares of our common stock in connection with this transaction.
In January 2013, we received $19,500 from Hanover Holdings I, LLC ("Hanover") pursuant to a short-term promissory note. The note provides a maturity date of January 23, 2014. Interest will accrue at 12% per annum. Any amount on principal or interest that remains unpaid when due, shall bear an interest rate of 22% from the due date until paid. Hanover may elect at any time to convert any part or all of the $19,500 plus interest into shares of our common stock at an Initial Conversion Price equal to 45% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice. We reserved 12,500,000 shares of our common stock in connection with this transaction.
In January 2013, we received $15,000 from WHC Capital, LLC pursuant to a short-term promissory note with a maturity date of January 25, 2014. Interest will accrue at 12% per annum until maturity above and beyond the premium. Any amount on principal or interest that remains unpaid when due, shall bear an interest rate of 22% from the due date until paid. The holder may elect at any time to convert any part or all of the $15,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In February 2013, we received $7,000 from a private investor pursuant to a short-term promissory note with a maturity date of February 7, 2014. The note provides for a redemption premium of 15% of the principal amount
upon maturity. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $7,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In February 2013, we received $25,000 from Redwood Management LLC ("Redwood") pursuant to a $125,000 short-term promissory note dated January 18, 2013. The terms of the note provide that the Redwood will pay $25,000 every 30 days from execution of the note until the entire $125,000 is paid in full. The note provides a maturity date of January 18, 2014. Interest will accrue at 12% per annum on the aggregate unconverted outstanding principal amount. Redwood may elect at any time to convert any part or all of the outstanding balance plus interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the fifteen trading days immediately prior to the date of the conversion notice.
In February 2013, we received $15,000 from WHC Capital, LLC pursuant to a short-term promissory note with a maturity date of January 25, 2014. Interest will accrue at 12% per annum until maturity above and beyond the premium. Any amount on principal or interest that remains unpaid when due, shall bear an interest rate of 22% from the due date until paid. The holder may elect at any time to convert any part or all of the $15,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In March 2013, we received $78,500 from Asher Enterprises pursuant to a short-term promissory note due on or before December 5, 2013. We received net proceeds of $75,000 after deductions of $2,500 for legal fees. Interest will accrue at 8% per annum until maturity above and beyond the premium. Asher Enterprises may elect at any time after 180 days to convert any part or all of the $78,500 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 58% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. We reserved 209,000,000 shares of our common stock in connection with this loan.
In March 2013, we received $30,000 from Tangiers Investment Group, LLC ("Tangiers") pursuant to a short-term promissory note due on or before December 5, 2013. We received net proceeds of $25,000 after deductions of $2,500 for legal fees and $2,500 for a consulting fee. Interest will accrue at 15% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $30,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In March 2013, we received $20,000 from JMJ Financial pursuant to a short-term promissory note with a maturity date of March 26, 2014. During the first 90 days of the loan period, interest will be 0%. Interest will accrue at 12% per annum after 90 days until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $20,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to the lower of $0.0016 or 60% of the average of the lowest closing bid price during the 25 trading days immediately prior to the date of the conversion notice. We reserved 500,000,000 shares of our common stock in connection with this loan.
In March 2013, we received $7,500 from Redwood Management LLC ("Redwood") pursuant to a $125,000 short-term promissory note dated January 18, 2013. The terms of the note provide that the Redwood will pay $25,000 every 30 days from execution of the note until the entire $125,000 is paid in full. The note provides a maturity date of January 18, 2014. Interest will accrue at 12% per annum on the aggregate unconverted outstanding principal amount. Redwood may elect at any time to convert any part or all of the outstanding balance plus interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the fifteen trading days immediately prior to the date of the conversion notice.
OID (Original Issue Discount) is included in debt discount and amortized ratably to interest expense over the term of the respective notes to which they relate.
Debt to Equity Conversions:
On May 11, 2011, Southridge executed a debt to equity conversion of a $80,000 short-term promissory note dated November 11, 2010 plus accrued interest of $3,174. We issued Southridge 11,089,82622,180 common shares pursuant to Rule 144 based on an agreed exchange price of $0.0075$3.75 per share. We canceled the $12,000 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On July 13, 2011, Southridge executed a debt to equity conversion of a $14,000 short-term promissory note dated December 16, 2010 plus accrued interest of $641. We issued Southridge 1,464,1322,928 common shares pursuant to Rule 144 based on an agreed exchange price of $0.01$5 per share. We canceled the $2,100 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On July 13, 2011, Southridge executed a debt to equity conversion of a $51,000 short-term promissory note dated December 22, 2010 plus accrued interest of $2,269. We issued Southridge 5,326,91510,654 common shares pursuant to Rule 144 based on an agreed exchange price of $0.01 per$5per share. We canceled the $7,650 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On July 21, 2011, Southridge executed a debt to equity conversion of a $55,000 short-term promissory note dated January 13, 2011 plus accrued interest of $2,278. We issued Southridge 5,727,83611,456 common shares pursuant to Rule 144 based on an agreed exchange price of $0.01$5 per share. We canceled the $8,250 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On July 21, 2011, Southridge executed a debt to equity conversion of a $22,000 short-term promissory note dated January 19, 2011 plus accrued interest of $882. We issued Southridge 2,288,2414,576 common shares pursuant to Rule 144 based on an agreed exchange price of $0.01$5 per share. We canceled the $3,300 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On August 24, 2011, Southridge executed a debt to equity conversion of a $80,000 short-term promissory note dated January 28, 2011 plus accrued interest of $3,647. We issued Southridge 8,364,71216,729 common shares pursuant to Rule 144 based on an agreed exchange price of $0.01$5 per share. We canceled the $12,000 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On August 24, 2011, Southridge executed a partial debt to equity conversion of a $80,000 short-term promissory note dated February 7, 2011 in which they converted $20,000 principal plus accrued interest of $868. We issued Southridge 2,086,7954,174 common shares pursuant to Rule 144 based on an agreed exchange price of $0.01$5 per share.
On September 27, 2011, Southridge executed a final debt to equity conversion of a $80,000 short-term promissory note dated February 7, 2011 in which they converted the remaining $60,000 principal plus accrued interest of $868. We issued Southridge 8,399,78116,780 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0075$3.75 per share. We canceled the $12,000 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On September 27, 2011, Southridge executed a debt to equity conversion of a $35,000 short-term promissory note dated February 15, 2011 plus accrued interest of $1,688. We issued Southridge 4,891,6899,783 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0075$3.75 per share. We canceled the $5,250 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On September 27, 2011, Southridge executed a debt to equity conversion of a $60,000 short-term promissory note dated March 31, 2011 plus accrued interest of $2,315. We issued Southridge 8,308,60316,617 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0075$3.75 per share. We canceled the $9,000 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On September 28, 2011, we amended the terms of all debt agreements with Southridge Partners II, LP and agreed to amend the conversion terms of the Notes such that the principal portion of the Notes, plus accrued interest, shall be
convertible into shares of our common stock at a conversion price per share equal to the lesser of (a) $0.0075$3.75 or (b) ninety percent (90%) of the average of the three (3) lowest closing bid prices during the ten (10) trading days immediately prior to the date of the conversion notice.
On October 13, 2011, Southridge executed a debt to equity conversion of a $100,000 short-term promissory note dated April 14, 2011 plus accrued interest of $3,989. We issued Southridge 20,797,80841,596 common shares pursuant to Rule 144 based on an agreed conversion price of $0.005$2.50 per share. We canceled the $15,000 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On November 3, 2011, Southridge executed a debt to equity conversion of a $65,000 short-term promissory note dated April 26, 2011 plus accrued interest of $2,721. We issued Southridge 13,544,21927,088 common shares pursuant to Rule 144 based on an agreed conversion price of $0.005$2.50 per share. We canceled the $9,750 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On November 16, 2011, Southridge executed a debt to equity conversion of a $20,000 short-term promissory note dated May 6, 2011 plus accrued interest of $850. We issued Southridge 6,725,93913,452 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0031$1.55 per share. We canceled the $3,000 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On December 15, 2011, Panache executed a partial debt to equity conversion of a $60,000 short-term promissory note dated May 12, 2011 in which they converted $14,415 principal. We issued Panache 5,000,00010,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.002883$1.4415 per share.
On January 3, 2012, Panache executed a partial debt to equity conversion of a $60,000 short-term promissory note dated May 12, 2011 in which they converted $12,896 principal. We issued Panache 8,000,00016,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.001612$0.806 per share.
On January 10, 2012, Panache executed a partial debt to equity conversion of a $60,000 short-term promissory note dated May 12, 2011 in which they converted $12,896 principal. We issued Panache 8,000,00016,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.001612$0.806 per share.
On January 18, 2012, Panache executed a partial debt to equity conversion of a $60,000 short-term promissory note dated May 12, 2011 in which they converted $12,710 principal. We issued Panache 10,000,00020,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.001271$0.6355 per share.
On January 27, 2012, Panache executed a debt to equity conversion of a $60,000 short-term promissory note dated May 12, 2011 in which they converted the final $7,083 in principal. We issued Panache 5,712,09711,424 common shares pursuant to Rule 144 based on an agreed conversion price of $0.001224$0.612 per share. We still owe Panache $3,139 in accrued interest associated with this note.
On January 23, 2012, Southridge executed a partial debt to equity conversion of a $150,000 short-term promissory note dated July 27, 2011 in which they converted $85,000 principal. We issued Southridge 66,390,690132,781 common shares with a restrictive legend based on an agreed conversion price of $0.0013$0.65 per share. The restrictive legend was removed on February 2, 2012 pursuant to Rule 144.
On January 27, 2012, Southridge executed a partial debt to equity conversion of a $150,000 short-term promissory note dated July 27, 2011 in which they converted $30,000 principal. We issued Southridge 24,193,54848,387 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0012$0.60 per share.
On February 7, 2012, Southridge executed a partial debt to equity conversion of a $150,000 short-term promissory note dated July 27, 2011 in which they converted $18,500 principal and $6,411 interest. We issued Southridge 24,277,32148,555 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00103$0.515 per share.
On February 10, 2012, Southridge executed a partial debt to equity conversion of a $150,000 short-term promissory note dated July 27, 2011 in which they converted $16,500 principal and $99 interest. We issued Southridge 17,272,24834,544 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00096$0.48 per share.
On February 17, 2012, Southridge executed a partial debt to equity conversion of a $100,000 short-term promissory note dated August 25, 2011 in which they converted $30,000 principal and $3,858 interest. We issued Southridge 34,237,57168,475 common shares on February 27, 2012 pursuant to Rule 144 based on an agreed conversion price of $0.00099$0.495 per share.
On February 23, 2012, Southridge executed a debt to equity conversion of a $7,500 short-term promissory note dated August 23, 2011 in which they converted $7,500 principal and $289 interest. We issued Southridge 7,545,59215,091 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00103$0.515 per share.
On February 28, 2012, Southridge executed a partial debt to equity conversion of a $100,000 short-term promissory note dated September 12, 2012 in which they converted $51,000 principal and $3,595 interest. We issued Southridge 60,728,054121,456 restricted common shares pursuant to Rule 144 based on an agreed conversion price of $0.0009$0.45 per share.
On March 5, 2012, OTC Global Partners executed a debt to equity conversion of a $50,000 short-term promissory note dated August 30, 2011 in which they converted $50,000 principal and $2,027 interest. We issued OTC Global Partners 72,765,035145,530 common shares pursuant to Rule 144 based on an agreed conversion price of $0.3575 per share.
On April 13, 2012, Southridge executed a partial debt to equity conversion of a $100,000 short-term promissory note dated September 12, 2012 in which they converted $49,000 principal and $1,096 interest. We issued Southridge 247,387 restricted common shares on April 24, 2012 pursuant to Rule 144 based on an agreed conversion price of $0.205 per share.
On April 13, 2012, Southridge executed a partial debt to equity conversion of a $100,000 short-term promissory note dated September 28, 2012 in which they converted $4,000 principal and $4,340 interest. We issued Southridge 41,184 restricted common shares on April 24, 2012 pursuant to Rule 144 based on an agreed conversion price of $0.205 per share.
On May 1, 2012, Panache executed a partial debt to equity conversion of a $100,000 short-term promissory note dated August 25, 2011 in which they converted $9,765 principal. We issued Panache 42,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.2325 per share.
On May 1, 2012, Asher executed a partial debt to equity conversion of a $78,500 short-term promissory note dated October 24, 2011 in which they converted $12,000 principal. We issued Asher 52,174 common shares pursuant to Rule 144 based on an agreed conversion price of $0.23 per share.
On May 2, 2012, Asher executed a partial debt to equity conversion of a $78,500 short-term promissory note dated October 24, 2011 in which they converted $15,000 principal. We issued Asher 88,235 common shares pursuant to Rule 144 based on an agreed conversion price of $0.17 per share.
On May 10, 2012, Asher executed a partial debt to equity conversion of a $78,500 short-term promissory note dated October 24, 2011 in which they converted $13,000 principal. We issued Asher 136,842 common shares pursuant to Rule 144 based on an agreed conversion price of $0.095 per share.
On May 10, 2012, Panache executed a partial debt to equity conversion of a $100,000 short-term promissory note dated August 25, 2011 in which they converted $7,440 principal. We issued Panache 60,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.124 per share.
On May 15, 2012, Panache executed a partial debt to equity conversion of a $100,000 short-term promissory note dated August 25, 2011 in which they converted $9,330 principal. We issued Panache 100,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0933 per share.
On May 21, 2012, Asher executed a partial debt to equity conversion of a $78,500 short-term promissory note dated October 24, 2011 in which they converted $18,500 principal. We issued Asher 205,556 common shares pursuant to Rule 144 based on an agreed conversion price of $0.09 per share.
On May 22, 2012, Panache executed a partial debt to equity conversion of a $100,000 short-term promissory note dated August 25, 2011 in which they converted $9,330 principal. We issued Panache 100,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.093 per share.
On May 29, 2012, Asher executed a partial debt to equity conversion of a $78,500 short-term promissory note dated October 24, 2011 in which they converted $12,000 principal. We issued Asher 133,333 common shares pursuant to Rule 144 based on an agreed conversion price of $0.09 per share.
On May 30, 2012, Panache executed a partial debt to equity conversion of a $100,000 short-term promissory note dated August 25, 2011 in which they converted $9,330 principal. We issued Panache 100,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.093 per share.
On June 4, 2012, Asher executed a partial debt to equity conversion of a $78,500 short-term promissory note dated October 24, 2011 in which they converted $8,000 principal and $3,140 in interest. We issued Asher 171,385 common shares pursuant to Rule 144 based on an agreed conversion price of $0.065 per share.
On June 5, 2012, Panache executed a partial debt to equity conversion of a $100,000 short-term promissory note dated August 25, 2011 in which they converted $9,920 principal. We issued Panache 160,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.062 per share.
On June 8, 2012, Asher executed a partial debt to equity conversion of a $53,000 short-term promissory note dated November 29, 2011 in which they converted $12,000 principal. We issued Asher 171,385 common shares pursuant to Rule 144 based on an agreed conversion price of $0.07 per share.
On June 12, 2012, Asher executed a partial debt to equity conversion of a $53,000 short-term promissory note dated November 29, 2011 in which they converted $14,000 principal. We issued Asher 200,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.07 per share.
On June 15, 2012, Asher executed a partial debt to equity conversion of a $53,000 short-term promissory note dated November 29, 2011 in which they converted $13,000 principal. We issued Asher 136,842 common shares pursuant to Rule 144 based on an agreed conversion price of $0.095 per share.
On June 20, 2012, Asher executed a partial debt to equity conversion of a $53,000 short-term promissory note dated November 29, 2011 in which they converted $14,000 principal and $2,120 in interest. We issued Asher 189,647 common shares pursuant to Rule 144 based on an agreed conversion price of $0.085 per share.
On July 17, 2012, Ms. Grable, our CEO and Chairman of the Board, executed a full debt to equity conversion of a $13,000 short-term promissory note in which she converted $13,000 principal and $148 in interest. We issued Ms. Grable 87,654 restricted common shares pursuant to Rule 144 based on an agreed conversion price of $0.15 per share. Ms. Grable is deemed an affiliated party.
On July 17, 2012, a private investor executed a partial debt to equity conversion of five of her notes in which she converted $19,583 principal into 200,000 restricted common shares pursuant to Rule 144 based on an agreed conversion price of $0.0885 per share.
On July 25, 2012, a private investor executed a full debt to equity conversion of a $3,000 short-term promissory note in which she converted $3,000 principal into 20,000 restricted common shares pursuant to Rule 144 based on an agreed conversion price of $0.15 per share.
On July 30, 2012, a private investor executed a partial debt to equity conversion of a $10,000 short-term promissory note in which she converted $6,900 principal into 46,000 restricted common shares pursuant to Rule 144 based on an agreed conversion price of $0.15 per share.
On August 7, 2012, a private investor sold their December 2011 short-term promissory notes totaling $21,604 in principal and $5,334 in premium to OTC Global Partners. A new short-term promissory note was issued to OTC Global Partners dated August 7, 2012 with a taking period back to December 7, 2011. OTC Global Partners may elect at an Event of Default to convert any part or all of the $21,604 Principal Amount of the Note plus accrued premium into shares of our common stock at a conversion price $0.16.
On August 7, 2012, OTC Global Partners executed a partial debt to equity conversion of the $21,604 short-term promissory note in which they converted $21,604 principal and $2,396 in premium. We issued OTC Global Partners 150,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.16 per share.
On September 5, 2012, Southridge executed a partial debt to equity conversion of a $100,000 short-term promissory note dated September 28, 2011 in which they converted $85,582 principal. We issued Southridge 760,727 common shares pursuant to Rule 144 based on an agreed conversion price of $0.115 per share.
On September 10, 2012, Levin Consulting Group executed a partial debt to equity conversion of the $70,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $20,000 principal. We issued Levin Consulting Group 160,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.125 per share. On September 21, 2012 we issued Levin Consulting Group an additional 240,000 shares because the closing bid price on the clearing date fell below the Initial closing bid price.
On September 10, 2012, Panache executed a partial debt to equity conversion of a $100,000 short-term promissory note dated August 25, 2011 in which they converted $14,885 principal. We issued Panache 160,054 common shares pursuant to Rule 144 based on an agreed conversion price of $0.093 per share.
On September 11, 2012, Southridge executed a final debt to equity conversion of a $100,000 short-term promissory note dated September 28, 2011 in which they converted $10,418 principal and $3,004 in interest. We issued Southridge 178,958 common shares pursuant to Rule 144 based on an agreed conversion price of $0.075 per share.
On September 11, 2012, Southridge executed a partial debt to equity conversion of a $100,000 short-term promissory note dated October 26, 2011 in which they converted $32,500 principal and $7,036 in interest. We issued Southridge 527,142 common shares pursuant to Rule 144 based on an agreed conversion price of $0.075 per share.
On September 12, 2012, Southridge executed a partial debt to equity conversion of a $100,000 short-term promissory note dated October 26, 2011 in which they converted $4,150 principal. We issued Southridge 55,333 common shares pursuant to Rule 144 based on an agreed conversion price of $0.075 per share.
On September 12, 2012, Panache executed a partial debt to equity conversion of a $40,000 short-term promissory note dated November 21, 2011 in which they converted $23,250 principal. We issued Panache 250,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.093 per share.
On September 19, 2012, Panache executed a final debt to equity conversion of a $40,000 short-term promissory note dated November 21, 2011 in which they converted $16,750 principal and $3,244 in interest. We issued Panache 257,983 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0775 per share.
On September 20, 2012, Southridge executed a partial debt to equity conversion of a $100,000 short-term promissory note dated October 26, 2011 in which they converted $47,300 principal and $153 in interest. We issued Southridge 759,255 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0625 per share.
On September 27, 2012, OTC Global Partners executed a partial debt to equity conversion of the $30,000 short-term promissory note in which they converted $18,000 in principal. We issued OTC Global Partners 360,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.05 per share.
On September 28, 2012, Panache executed a partial debt to equity conversion of a $25,000 short-term promissory note dated February 28, 2012 in which they converted $13,200 principal. We issued Panache 240,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.055 per share.
On October 1, 2012, Southridge executed a final debt to equity conversion of a $100,000 short-term promissory note dated October 26, 2011 in which they converted $16,050 principal and $219 in interest. We issued Southridge 325,384 common shares pursuant to Rule 144 based on an agreed conversion price of $0.05 per share.
On October 1, 2012, Southridge executed a partial debt to equity conversion of a $20,000 short-term promissory note dated November 14, 2011 in which they converted $10,900 principal and $1,398 in interest. We issued Southridge 245,967 common shares pursuant to Rule 144 based on an agreed conversion price of $0.05 per share.
On October 2, 2012, Southridge executed a final debt to equity conversion of a $20,000 short-term promissory note dated November 14, 2011 in which they converted $9,100 principal and $18 in interest. We issued Southridge 182,351 common shares pursuant to Rule 144 based on an agreed conversion price of $0.05 per share.
On October 3, 2012, SGI Group executed a partial debt to equity conversion of the $30,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $9,000 principal and $106 in interest. We issued SGI Group 364,248 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On October 4, 2012, Panache executed a partial debt to equity conversion of a $25,000 short-term promissory note dated February 28, 2012 in which they converted $6,600 principal. We issued Panache 240,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0275 per share.
On October 10, 2012, FLUX Carbon Starter Fund executed a partial debt to equity conversion of a $38,500 short-term promissory note dated October 4, 2012 in which they converted $15,000 principal. We issued FLUX Carbon Starter 300,000 restricted common shares pursuant to Rule 144 based on an agreed conversion price of $0.05 per share.
On October 11, 2012, OTC Global Partners executed a final debt to equity conversion of the $30,000 short-term promissory note in which they converted $18,000 in principal. We issued OTC Global Partners 240,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.05 per share.
On October 18, 2012, Southridge executed a partial debt to equity conversion of a $17,000 short-term promissory note dated December 19, 2011 in which they converted $15,900 principal and $1,125 in interest. We issued Southridge 681,010 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On October 23, 2012, Panache executed a final debt to equity conversion of a $25,000 short-term promissory note dated February 28, 2012 in which they converted $5,200 principal and $1,512 in interest. We issued Panache 244,061 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0275 per share.
On October 24, 2012, Levin Consulting Group executed a partial debt to equity conversion of the $70,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which
they converted $12,200 principal and $214 in interest. We issued Levin Consulting Group 496,417 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On October 24, 2012, SGI Group executed a partial debt to equity conversion of the $30,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $5,100 principal and $88 in interest. We issued SGI Group 207,528 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On November 6, 2012, Southridge executed a final debt to equity conversion of a $17,000 short-term promissory note dated December 19, 2011 in which they converted $1,100 principal and $26 in interest. We issued Southridge 45,043 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On November 6, 2012, Southridge executed a debt to equity conversion of a $30,000 short-term promissory note dated March 19, 2012 in which they converted $30,000 principal and $1,433 in interest. We issued Southridge 1,257,337 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On November 6, 2012, Southridge executed a partial debt to equity conversion of an $11,000 short-term promissory note dated April 9, 2012 in which they converted $2,750 principal and $475 in interest. We issued Southridge 128,998 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On November 21, 2012, Southridge executed a final debt to equity conversion of an $11,000 short-term promissory note dated April 9, 2012 in which they converted $8,250 principal and $53 in interest. We issued Southridge 332,122 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On November 21, 2012, Southridge executed a debt to equity conversion of a $2,500 short-term promissory note dated April 26, 2012 in which they converted $2,500 principal and $111 in interest. We issued Southridge 1,104,427 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On November 21, 2012, Southridge executed a debt to equity conversion of an $8,000 short-term promissory note dated May 15, 2012 in which they converted $8,000 principal and $321 in interest. We issued Southridge 332,835 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On December 18, 2012, Levin Consulting Group executed a partial debt to equity conversion of the $70,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $10,000 principal and $315 in interest. We issued Levin Consulting Group 1,085,800 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0095 per share. On January 10, 2013 we issued Levin Consulting Group an additional 633,383 shares because the closing bid price on the clearing date fell below the Initial closing bid price.
On December 18, 2012, SGI Group executed a partial debt to equity conversion of the $30,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $10,000 principal and $315 in interest. We issued SGI Group 1,085,800 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0095 per share.
On December 21, 2012, WHC Capital LLC executed a partial debt to equity conversion of the $46,400 short-term promissory note originally dated December 10, 2010 and purchased on August 20, 2012 from a private investor, in which they converted $9,329 principal. We issued WHC Capital LLC 982,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0095 per share.
On January 8, 2013, ASC Recap executed a partial debt to equity conversion of the $180,769 balance of a short-term promissory originally dated December 15, 2009 and purchased on December 12, 2012 from a private investor, in which they converted $11,115 principal. We issued ASC Recap 1,852,500 common shares pursuant to Rule 144 based on an agreed conversion price of $0.006 per share.
On January 8, 2013, SGI Group executed a partial debt to equity conversion of the $30,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $5,900 principal and $4,400 in interest. We issued SGI Group 1,716,672 common shares pursuant to Rule 144 based on an agreed conversion price of $0.006 per share.
On January 10, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $10,000 principal. We issued Magna 1,554,002 common shares pursuant to Rule 144 based on an agreed conversion price of $0.006435 per share.
On January 15, 2013, WHC Capital LLC executed a partial debt to equity conversion of the $46,400 short-term promissory note originally dated December 10, 2010 and purchased on August 20, 2012 from a private investor, in which they converted $5,945 principal. We issued WHC Capital LLC 1,033,900 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00575 per share.
On January 18, 2013, ASC Recap executed a partial debt to equity conversion of the $180,769 balance of a short-term promissory originally dated December 15, 2009 and purchased on December 12, 2012 from a private investor, in which they converted $11,100 principal. We issued ASC Recap 1,850,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.006 per share.
On January 18, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $13,600 principal. We issued Magna 1,766,234 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0077 per share.
On January 23, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $12,500 principal. We issued Redwood 2,192,982 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0057 per share.
On January 28, 2013, WHC Capital LLC executed a partial debt to equity conversion of the $46,400 short-term promissory note originally dated December 10, 2010 and purchased on August 20, 2012 from a private investor, in which they converted $4,726 in principal and $5,019 in premium. We issued WHC Capital LLC 1,949,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.005 per share.
On January 28, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $9,900 principal. We issued Magna 1,766,234 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0055 per share.
On January 28, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $12,500 principal. We issued Redwood 2,272,727 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0055 per share.
On February 1, 2013, Levin Consulting Group executed a partial debt to equity conversion of the $70,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $7,000 principal and $248 in interest. We issued Levin Consulting Group 1,767,771 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0041 per share. On February 22, 2013 we issued Levin Consulting Group an additional 3,409,271 shares because the closing bid price on the clearing date fell below the Initial closing bid price.
On February 1, 2013, SGI Group executed a partial debt to equity conversion of the $30,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $2,857 in interest. We issued SGI Group 696,878 common shares pursuant to Rule 144 based on an agreed conversion price of $0.006 per share. On February 11, 2013 we issued SGI Group an additional 446,002 shares because the closing bid price on the clearing date fell below the Initial closing bid price.
On February 6, 2013, Southridge executed a debt to equity conversion of a $6,672 short-term promissory note dated June 18, 2012 in which they converted $6,672 principal and $338 in interest. We issued Southridge 2,046,658 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00343 per share.
On February 6, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $6,500 principal. We issued Magna 4,166,667 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00156 per share.
On February 6, 2013, WHC Capital LLC executed a partial debt to equity conversion of the $46,400 short-term promissory note originally dated December 10, 2010 and purchased on August 20, 2012 from a private investor, in which they converted $5,843 in premium. We issued WHC Capital LLC 2,050,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00285 per share.
On February 6, 2013, ASC Recap executed a partial debt to equity conversion of the $180,769 balance of a short-term promissory originally dated December 15, 2009 and purchased on December 12, 2012 from a private investor, in which they converted $5,375 principal. We issued ASC Recap 1,628,788 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0033 per share.
On February 6, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $3,500 principal. We issued Redwood 2,121,212 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00165 per share.
On February 12, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $5,000 principal. We issued Redwood 3,030,303 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00165 per share.
On February 12, 2013, Southridge executed a partial debt to equity conversion of a $25,000 short-term promissory note dated August 2, 2012 in which they converted $7,475 principal and $1,058 in interest. We issued Southridge 4,162,212 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00205 per share.
On February 14, 2013, Southridge executed a partial debt to equity conversion of a $25,000 short-term promissory note dated August 2, 2012 in which they converted $2,185 principal and $11 in interest. We issued Southridge 1,626,636 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00135 per share.
On February 15, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $6,100 principal. We issued Magna 6,931,819 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00088 per share.
On February 18, 2013, Black Arch executed a partial debt to equity conversion of a $95,000 Promissory Note originally dated August 15, 2012 which they purchased $15,000 Principal from Southridge on February 11, 2013, in which they converted $7,500 principal. We issued Black Arch 5,555,556 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00135 per share.
On February 19, 2013, WHC Capital LLC executed a partial debt to equity conversion of the $46,400 short-term promissory note originally dated December 10, 2010 and purchased on August 20, 2012 from a private investor, in which they converted $4,083 in premium. We issued WHC Capital LLC 3,711,600 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0011 per share.
On February 20, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $3,400 principal. We issued Redwood 3,863,636 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00088 per share.
On February 20, 2013, a private investor executed a partial debt to equity conversion of a $95,000 Promissory Note originally dated August 15, 2012 which they purchased $5,000 Principal from Southridge on February 11, 2013, in which they converted $3,000 principal. We issued the private investor 2,736,273 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0011 per share.
On February 22, 2013, Southridge executed a partial debt to equity conversion of a $25,000 short-term promissory note dated August 2, 2012 in which they converted $6,325 principal and $49 in interest. We issued Southridge 5,794,832 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0011 per share.
On February 26, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $3,500 principal. We issued Redwood 3,977,272 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00088 per share.
On February 27, 2013, WHC Capital LLC executed a partial debt to equity conversion of the $46,400 short-term promissory note originally dated December 10, 2010 and purchased on August 20, 2012 from a private investor, in which they converted $10,800 in premium. We issued WHC Capital LLC 12,000,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0009 per share.
On March 5, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $3,950 principal. We issued Redwood 4,488,636 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00088 per share.
On March 5, 2013, Black Arch executed a final debt to equity conversion of a $95,000 Promissory Note originally dated August 15, 2012 which they purchased $15,000 Principal from Southridge on February 11, 2013, in which they converted $7,500 principal and $44 in interest. We issued Black Arch 8,382,648 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0009 per share. On March 21, 2013 we issued Black Arch Group an additional 3,224,096 shares because the closing bid price on the clearing date fell below the Initial closing bid price.
On March 5, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $6,100 principal. We issued Magna 6,931,819 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00088 per share.
On March 5, 2013, Southridge executed a partial debt to equity conversion of a $25,000 short-term promissory note dated August 2, 2012 in which they converted $4,865 principal and $60 in interest. We issued Southridge 5,794,440 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00085 per share.
On March 7, 2013, a private investor executed a partial debt to equity conversion of a $95,000 Promissory Note originally dated August 15, 2012 which they purchased $5,000 Principal from Southridge on February 11, 2013, in
which they converted $2,000 principal and $11 in interest. We issued the private investor 2,365,882 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00085 per share.
On March 13, 2013, Southridge executed a final debt to equity conversion of a $25,000 short-term promissory note dated August 2, 2012 in which they converted $4,150 principal. We issued Southridge 6,384,615 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00065 per share.
On March 13, 2013, Southridge executed a partial debt to equity conversion of a $30,000 short-term promissory note dated September 5, 2012 in which they converted $4,755 principal and $1,243 in interest. We issued Southridge 9,227,292 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00065 per share.
On March 13, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $4,620 principal. We issued Magna 7,000,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00066 per share.
On March 13, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $6,400 principal. We issued Redwood 8,311,688 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00077 per share.
On March 13, 2013, WHC Capital LLC executed a partial debt to equity conversion of the $46,400 short-term promissory note originally dated December 10, 2010 and purchased on August 20, 2012 from a private investor, in which they converted $656 premium and $643 in interest. We issued WHC Capital LLC 1,998,308 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00065 per share.
On March 14, 2013, SGI Group executed a partial debt to equity conversion of a $95,000 Promissory Note originally dated August 15, 2012 which they purchased $10,000 Principal from Southridge on February 11, 2013, in which they converted $6,700 principal and $70 in interest. We issued SGI Group 10,416,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00065 per share.
On March 14, 2013, Levin Consulting Group executed a partial debt to equity conversion of the $70,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $6,500 principal and $294 in interest. We issued Levin Consulting Group 10,452,215 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00065 per share.
On March 20, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $5,250 principal. We issued Redwood 8,750,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0006 per share.
On March 20, 2013, Panache executed a partial debt to equity conversion of a $25,000 short-term promissory note dated September 6, 2012 in which they converted $3,900 principal. We issued Panache 6,500,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0006 per share.
On March 21, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $3,616 principal. We issued Tangiers 6,026,789 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0006 per share.
On March 22, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $5,005 principal. We issued Magna 7,000,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.000715 per share.
On March 27, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $7,049 principal. We issued Tangiers 12,817,145 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00055 per share.
From January 2011 to April 2011, Southridge acquired promissory notes from a private investor totaling $800,000 in principal and 55,363,907110,728 shares of common stock which were issued as collateral. Southridge proposed that we amend the conversion terms of the notes permitting the holder to convert the notes and we agreed to the amendment. From January 12, 2011 to March 31,May 18, 2012, Southridge issued notices of conversion to settle $699,216$700,000 in principal plus accrued premiums totaling $375,689$395,699 into 268,809,327810,406 shares of our common stock, of which 51,802,774103,606 shares were collateral shares and 217,006,553706,800 new shares were issued pursuant to Rule 144.
As of March 31, 2012,2013, we owe a total of $1,949,033$1,852,487 of short term debt of which $1,394,094$1,193,524 is principal, $524,432$593,674 is accrued premium and $30,507$65,288 is accrued interest. We have repaid aggregate principal and premium in the amount of $173,376 on these short-term notes and a total of $1,709,716$2,825,959 principal, $375,689$432,190 in premium, and $40,742$86,385 in interest has been converted into 711,947,979273,636,206 shares of our common stock of which 51,802,774103,606 shares were collateral shares and 660,145,205273,532,600 new shares were issued pursuant to Rule 144. Out of the original 55,363,637103,606 shares of common stock held as collateral, a balance of 3,561,1337,122 shares remains on the $300,790$85,985 principal of the remaining notes.
All debt conversions were consummated at the contractual terms agreed upon for each loan. Accordingly, there was no gain/loss on conversions.
There can be no assurances that we will be able to pay our short-term loans when due. If we default on all of the notes due to the lack of new funding, the holders could exercise their right to sell the remaining 103,606 collateral shares and could take legal action to collect the amount due which could materially adversely affect IDSI and the value of our stock.
NOTE 10 – LONG-TERM CONVERTIBLE DEBT
On February 23, 2011, we entered into a Convertible Promissory Note Agreement with an unaffiliated third party, JMJ Financial (the “Lender”"Lender" or “JMJ”"JMJ"), relating to a private placement of a total of up to $1,800,000 in principal amount of a Convertible Promissory Note (the “Note”"Note") providing for advances of a gross amount of $1,600,000 in seven tranches. Pursuant to the terms of a Registration Rights Agreement (the “Rights Agreement”"Rights Agreement") dated February 23, 2011, between the Company and JMJ, we are required to file within 10 days from the effective date of an increase of authorized shares approved by our shareholders, an S-1 Registration Statement (the “Registration Statement”"Registration Statement") covering 130,000,000 shares of Company common stock to be reserved for conversion of the Note.
Although our shareholders on July 12, 2011, voted to increase our authorized shares to 2,000,000,000, we have not filed the registration statement as required by the Rights Agreement.
The Note provides for funding in seven tranches as stipulated in the Funding Schedule attached. The first tranche of $300,000 was closed on February 24, 2011, and we received $258,000 after deductions of $30,000 for a 10% Finder’sFinder's Fee and $12,000 for an Origination Fee. The second tranche of $100,000 closed on May 20, 2011, and we received $93,000 after deduction of $7,000 for a 7% Finder’sFinder's Fee. A partial closing on the third tranche of $35,000 closed on October 7, 2011 and we received $32,250 after deduction of $2,750 for a 7% Finder’sFinder's Fee. A partial closing on the third tranche of $25,000 closed on February 8, 2012 and we received $25,000. In connection with this partial third tranche we will pay a 7% Finder’sFinder's Fee, which is $1,750. A partial closing on the third tranche of $25,000 closed on February 29, 2012 and we received $25,000. In connection with this partial third tranche we will pay a 7% Finder’sFinder's Fee, which is $1,750. A final closing on the third tranche of $15,000 closed on April 4, 2012 and we received $15,000. In connection with this final third tranche we will pay a 7% Finder’sFinder's Fee, which is $1,050. We received $10,000 from a partial closing on the fourth tranche with JMJ on October 3, 2012. In connection with this partial fourth tranche we will pay a 7% Finder's Fee, which is $700. The remaining four tranches are to be funded based on achievement of milestones relating to the Registration Statement, with the final tranche of $300,000 being available 150 days after effectiveness of the Registration Statement, which must be effective 120 days after the date of the Agreement. For the remaining four tranches, we are obligated to pay a Finder’sFinder's Fee equal to 7% in cash at each closing date. We may cancel the unfunded portion of the Agreement at a fee of 20% of the unfunded amount. As of the date of this report, $1,300,000March 31, 2013, $1,290,000 in principal amount remains unfunded and if we choose to cancel we will have to pay JMJ $260,000$258,000 to terminate the agreement.
The Note, after the seven tranches are drawn, would generate net proceeds of $1,467,000 after payment of the Origination Fee and a 7% Finder’sFinder's Fee. JMJ has the option to provide an additional $1,600,000 of funding on substantially the same terms as the first Agreement; however, we have the right to cancel, without penalty, the Note Agreement within five days of JMJ’sJMJ's execution. Once executed and accepted by both parties and five days has passed, cancellation of unfunded payments is permitted at a fee of 20% of the unfunded amount. Cancellation of funded portions is not permitted.
The funding schedule of the seven tranches is as follows:
§ | $300,000 paid to Borrower within 2 business days of execution and closing of the agreement. |
§ | $100,000 paid to Borrower within 5 business days of filing of Definitive Proxy to increase authorized shares to 2,000,000,000 or more. |
§ | $100,000 paid to Borrower within 5 business days of effective increase in authorized shares to 2,000,000,000 or more. |
§ | $100,000 paid to Borrower within 5 business days of filing of registration statement, and that registration statement must be filed no later than 10 days from the effective increase of authorized shares. |
§ | $400,000 paid to Borrower within 5 business days of notice of effective registration statement, and that registration statement must be effective no later than 120 days from the execution of the agreement. |
§ | $300,000 paid to Borrower within 90 business days of notice of effective registration statement, and that registration statement must be effective no later than 120 days from the execution of the agreement. |
§ | $300,000 paid to Borrower within 150 business days of notice of effective registration statement, and that registration statement must be effective no later than 120 days from the execution of the agreement. |
The conditions to funding each payment are as follows:
§ | At the time of each payment interval, the Conversion Price calculation on Borrower’sBorrower's common stock must yield a Conversion Price equal to or greater than $0.015 per share (based on the Conversion Price calculation, regardless of whether a conversion is actually completed or not). |
§ | At the time of each payment interval, the total dollar trading volume of Borrower’sBorrower's common stock for the previous 23 trading days must be equal to or greater than $1,000,000. The total dollar volume will be calculated by removing the three highest dollar volume days and summing the dollar volume for the remaining 20 trading days. |
§ | At the time of each payment interval, there shall not exist an event of default as described within any of the agreements between Borrower and Holder. |
Prior to the maturity date of February 2, 2014, JMJ may convert both principal and interest into our common stock at 75% of the average of the three lowest closing prices in the 20 days previous to the conversion. We have the right to enforce a conversion floor of $0.015 per share; however, if we receive a conversion notice in which the Conversion Price is less than $0.015 per share, JMJ will incur a conversion loss [(Conversion Loss = $0.015 – Conversion Price) x number of shares being converted] which we must make whole by either of the following options: pay the conversion loss in cash or add the conversion loss to the balance of principal due. Prepayment of the Note is not permitted.
The Note has a 9% one-time interest charge on the principal sum. No interest or principal payments are required until the Maturity Date, but both principal and interest may be included in conversions prior to the maturity date.
Debt to Equity Conversions:
On August 24, 2011, JMJ executed a debt to equity conversion of $36,015 in principal of the first tranche of $300,000 which we closed on February 24, 2011. We issued JMJ 3,500,0007,000 common shares pursuant to Rule 144 based on a conversion price of $0.0103$5.15 per share.
On August 31, 2011, JMJ executed a debt to equity conversion of $41,160 in principal of the first tranche of $300,000 which we closed on February 24, 2011. We issued JMJ 4,000,0008,000 common shares pursuant to Rule 144 based on a conversion price of $0.01029$5.15 per share.
On September 15, 2011, JMJ executed a debt to equity conversion of $37,597 in principal of the first tranche of $300,000 which we closed on February 24, 2011. We issued JMJ 4,100,0008,200 common shares pursuant to Rule 144 based on a conversion price of $0.00917$4.59 per share.
On September 28, 2011, JMJ executed a debt to equity conversion of $40,950 in principal of the first tranche of $300,000 which we closed on February 24, 2011. We issued JMJ 5,000,00010,000 common shares pursuant to Rule 144 based on a conversion price of $0.00819$4.10 per share.
In October 2011, we received $32,250 from JMJ after deduction of $2,750 for a 7% Finder’s Fee. This third tranche of $35,000 is from the Convertible Promissory Note Agreement we entered into with JMJ on February 23, 2011.
On October 12, 2011, JMJ executed a debt to equity conversion of $36,750 in principal of the first tranche of $300,000 which we closed on February 24, 2011. We issued JMJ 5,000,00010,000 common shares pursuant to Rule 144 based on a conversion price of $0.00735$3.68 per share.
On December 15, 2011, JMJ executed a debt to equity conversion of $63,840 in principal of the first tranche of $300,000 which we closed on February 24, 2011. We issued JMJ 20,000,00040,000 common shares pursuant to Rule 144 based on a conversion price of $0.003192$1.60 per share. As of the date of this report, we now owe JMJ a total of $108,188 of which $43,688 is principal, $37,500 is consideration and $27,000 is interest associated with this first tranche.
On January 24, 2012, JMJ executed a debt to equity conversion totaling $44,100 of which $43,688 was principal and $412 was consideration for the first tranche of $300,000, which we closed on February 24, 2011. We issued JMJ 30,000,00060,000 common shares pursuant to Rule 144 based on a conversion price of $0.00147$0.74 per share.
On February 9, 2012, JMJ executed a debt to equity conversion totaling $44,100 of which $37,088 was consideration and $7,012 was interest for the first tranche of $300,000, which we closed on February 24, 2011. We issued JMJ 35,000,00070,000 common shares pursuant to Rule 144 based on a conversion price of $0.00126$0.63 per share.
On February 29, 2012, JMJ executed a debt to equity conversion totaling $39,550 of which $19,988 was interest for the first tranche of $300,000, which we closed on February 24, 2011 and $19,562 was principal for the second tranche of $100,000, which we closed on May 20, 2011. We issued JMJ 50,000,000100,000 common shares pursuant to Rule 144 based on a conversion price of $0.000791$0.40 per share.
In FebruaryOn April 24, 2012, JMJ executed a debt to equity conversion of $29,120 in principal of the second tranche of $100,000 which we received $50,000 from JMJ. Thisclosed on May 20, 2012. We issued JMJ 104,000 common shares pursuant to Rule 144 based on a conversion price of $0.28 per share.
On May 9, 2012, JMJ executed a debt to equity conversion of $28,980 in principal of the second tranche of $100,000 which we closed on May 20, 2012. We issued JMJ 138,000 common shares pursuant to Rule 144 based on a conversion price of $0.21 per share.
On May 14, 2012, JMJ executed a debt to equity conversion of $4,389 in principal of the second tranche of $100,000 which we closed on May 20, 2011. We issued JMJ 38,000 common shares pursuant to Rule 144 based on a conversion price of $0.12 per share.
On May 24, 2012, JMJ executed a debt to equity conversion of $22,260 in principal of the second tranche of $100,000 which we closed on May 20, 2011. We issued JMJ 212,000 common shares pursuant to Rule 144 based on a conversion price of $0.11 per share.
On May 31, 2012, JMJ executed a debt to equity conversion of $2,940 in principal of the second tranche of $100,000 which we closed on May 20, 2011. We issued JMJ 28,000 common shares pursuant to Rule based on a conversion price of $0.11 per share.
On June 6, 2012, JMJ executed a debt to equity conversion totaling $19,551 of which $14,249 was interest for the second tranche of $100,000, which we closed on May 20, 2011 and $5,302 was principal for the third tranche of $50,000 is$35,000, which we closed on October 7, 2011. We issued JMJ 210,000 common shares pursuant to Rule 144 based on a conversion price of $0.093 per share.
On September 7, 2012, JMJ executed a debt to equity conversion of $19,572 in principal of the third tranche of $35,000, which we closed on October 7, 2011. We issued JMJ 240,000 common shares pursuant to Rule 144 based on a conversion price of $0.082 per share.
On October 3, 2012, JMJ executed a debt to equity conversion totaling $42,000 of which $14,501 was principal and $3,150 was interest for the third tranche of $35,000, which we closed on October 7, 2011; and $24,349 was principal of the fourth tranche of $25,000, which we closed on February 8, 2012. We issued JMJ 600,000 common shares pursuant to Rule 144 based on a conversion price of $0.07 per share.
On October 24, 2012, JMJ executed a debt to equity conversion totaling $10,500 of which $3,776 was principal and $2,250 was interest for the fourth tranche of $25,000, which we closed on February 8, 2012; and $4,474 was
principal of the fifth tranche of $25,000, which we closed on February 29, 2012. We issued JMJ 300,000 common shares pursuant to Rule 144 based on a conversion price of $0.035 per share.
On January 16, 2013, JMJ executed a debt to equity conversion of $7,455 in principal of the fifth tranche of $25,000, which we closed on February 29, 2012. We issued JMJ 895,000 common shares pursuant to Rule 144 based on a conversion price of $0.00833 per share.
On January 29, 2013, JMJ executed a debt to equity conversion of $6,334 in principal of the fifth tranche of $25,000, which we closed on February 29, 2012. We issued JMJ 890,000 common shares pursuant to Rule 144 based on a conversion price of $0.007117 per share.
On February 11, 2013, JMJ executed a debt to equity conversion of $10,083 in principal of the fifth tranche of $25,000, which we closed on February 29, 2012. We issued JMJ 2,900,000 common shares pursuant to Rule 144 based on a conversion price of $0.003477 per share.
On February 20, 2013, JMJ executed a debt to equity conversion of $2,028 in principal of the fifth tranche of $25,000, which we closed on February 29, 2012; and $3,335 in principal of the sixth tranche of $15,000, which we closed on April 5, 2012. We issued JMJ 2,910,000 common shares pursuant to Rule 144 based on a conversion price of $0.001843 per share.
On February 27, 2013, JMJ executed a debt to equity conversion of $5,226 in principal of the sixth tranche of $15,000, which we closed on April 5, 2012. We issued JMJ 3,500,000 common shares pursuant to Rule 144 based on a conversion price of $0.001493 per share.
On March 5, 2013, JMJ executed a debt to equity conversion of $7,425 in principal of the sixth tranche of $15,000, which we closed on April 5, 2012. We issued JMJ 5,400,000 common shares pursuant to Rule 144 based on a conversion price of $0.001377 per share.
On March 5, 2013, JMJ executed a debt to equity conversion of $2,229 in principal and interest of the sixth tranche of $15,000, which we closed on April 5, 2012; and $5,625 was the balance owed of consideration on the principal from the Convertible Promissory Note Agreement we entered into withprior six tranches. We issued JMJ 7,829,800 common shares pursuant to Rule 144 based on February 23, 2011. In connection with this final third tranche we will pay a 7% Finder’s Fee, which is $3,500.conversion price of $0.001003 per share.
All debt conversions were consummated at the contractual terms agreed upon for each loan. Accordingly, there was no gain/loss on conversions.
As of the March 31, 2012,2013, we owe JMJ a total of $205,213$12,263 in long-term debt of which $165,438$10,000 is principal, $23,125$1,250 is consideration on the principal and $16,650$1,013 is interest.
NOTE 11 – PREFERRED STOCK
In accordance with ASC 480-10-699 (Redeemable Preferred Stocks) redeemable equity instruments are reported as a separate component of temporary equity. Redeemable Preferred Stock includes our Series L Preferred Stock which can be redeemed upon a majority vote by our Board of Directors.
On February 25, 2010, we issued 35 shares of our Series L Convertible Preferred Stock at a purchase price of $10,000 per share as collateral in connection with a $350,000 short-term loan. On March 31, 2010 the holder converted the note into the collateral shares of 35 preferred shares of Series L Convertible Preferred Stock. We have reserved 16,587,690 shares of common stock to cover the conversion of the 35 shares of Series L Convertible Preferred Stock outstanding. Pursuant to the Certificate of Designation of Series L Convertible Preferred Stock, (iii) Issuance of Securities, a reset provision is provided if common shares are issued at less than $.0211 per share on or before the conversion of all of the Series L Convertible Preferred shares. The reset provision triggered a Derivative Liability valuation for such provision.provision (See Note 12). On January 6, 2011, the investor converted 15 shares of the Series L Convertible Preferred Stock into 10,000,00020,000 shares of common stock. On May 11, 2011, we obtained a waiver from the private investor where the investor agreed to convert no additional Series L Convertible Preferred Stock into common shares until the approval by our shareholders of an increase in authorized common stock at our next annual meeting to be held on July 12, 2011. At the annual meeting, our shareholders voted to increase our authorized shares to 2,000,000,000 and the waiver was terminated.
From January 1, 2012 to March 31, 2012,2013, we issued 5058 shares of our Series P Preferred Stock which has a stated value of $5,000 per share as collateral in connection with sevennine short-term promissory notes from an unaffiliated third party investor. The total stated value of the collateral is $250,000.$290,000.
On March 21, 2012 we entered into a Series Q Preferred Stock Purchase Agreement with our CEO, Linda B. Grable pursuant to which she was issued all of the 51 authorized shares of Series Q Preferred Stock, with a stated value of $0.001 per share as partial consideration for past and future services rendered and recorded the nominal amount of $1.00 for this issuance. The Series Q Preferred Stock has no economic value and was issued solely for voting purposes.
NOTE 12 – DERIVATIVE LIABILITY
Effective June 1, 2010, we adopted the ASC 815 guidance provided for Derivatives and Hedging which applies to any free standing financial instruments or embedded features that have characteristics of a derivative and to any free standing financial instruments that are potentially settled in an entity’sentity's own common stock. As of September 30, 2011, we had 20 shares of Series L Convertible Preferred Stock outstanding for which the underlying common has a reset provision which classifiesrelating to the Series L Convertible Preferred Stock as a free standing derivative instrument. ASC 815 requires the Series L Convertible Preferred Stock to be recorded as a liability as it is no longer afforded equity treatment.conversion price. As a result of the reset provision we recorded a Derivative Liability of $64,524 which accrued on the date of issuance and recorded an increase of $137,631 as a result in changes in the market price of our stock. The total Derivative Liability for the Series L Convertible Preferred Stock for the fiscal year ended June 30, 2010 was $202,156. For the quarter ending September 30, 2010, we recorded additional Derivative Expense of $19,355 due to a conversion rate adjustment from $.0211 to $.019933 associated with Series L Convertible Preferred Stock issued to the holder. For the quarter ending December 31, 2010, we recorded additional Derivative Expense of $81,827 due to a conversion rate adjustment from $.019933 to $.015 associated with Series L Convertible Preferred Stock issued to the holder. On January 6, 2011, the investor converted 15 shares of the Series L Convertible Preferred Stock into 10,000,00020,000 shares of common stock. On May 11, 2011, we obtained a waiver from the private investor where the investor agreed to convert no additional Series L Convertible Preferred Stock into common shares until the approval by our shareholders of an increase in authorized common stock at our next annual meeting to be held on July 12, 2011. Due to this conversion and the receipt of the waiver, we retired $303,337 of Derivative Liability. Because of the fixed conversion price established at the time of the waiver, no further Derivative Liability was recorded. At the annual meeting, our shareholders voted to increase our authorized shares to 2,000,000,000 and the waiver for the holder to convert to commonwas terminated.
ForWe have notes payable outstanding that can be converted into our common stock at any time at the three months ending option of the note holder. The number of shares to be issued is made pursuant to conversion notices by the note holder and is based on agreed-upon formulas. The conversions have no floor and thus give rise to a derivative liability in accordance with ASC 815. The derivative liabilities associated with these conversion notices are valued using the Black Scholes Pricing Model and are marked-to-market at the end of each quarter. As of March 31, 2013 and June 30, 2012, we had derivative liabilities reported in our balance sheet in connection with these types of options totaling $611,940 and $961,058, respectively and recorded the mark to market changesas gain on change in the Derivative Liability which required a credit to Derivative Expense of $399,170. For the nine months ending March 31, 2012, we recorded the mark to market changes in the Derivative Liability which required a credit to Derivative Expense of $1,484,827. Because of these changes in the fair value of derivative liability,liabilities in our net loss decreased a totalstatement of $399,170operations $297,077 and $1,484,827$1,337,298 for the three and nine months ended March 31, 2013, respectively. Gain on change in fair value was $399,170 and $1,484,827 for the three and nine months ending March 31, 2012.
The net Derivative Liability for the quarter ending March 31, 2012 is $376,045., respectively.
NOTE 13 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, receivables, accounts payable, short-term debt and accrued liabilities approximated their fair values due to the short maturity of these instruments. After a review of our accounts receivable, the Company has recorded an allowance of $28,423$1,088 for doubtful accounts. The fair value of the Company’sCompany's debt obligations is estimated based on the quoted market prices for the same or similar issues or on current rates offered to the Company for debt of the same remaining maturities. At March 31, 20122013 and 2011,2012, the aggregate fair value of the Company’sCompany's debt obligations approximated its carrying value.
The Company relies upon the guidance of ASC 820 (“("Fair Value Measurements and Disclosures”Disclosures"). ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.
Upon adoption of ASC 820, there was no cumulative effect adjustment to the beginning retained earnings and no impact on the consolidated financial statements.
The carrying value of the Company’sCompany's cash and cash equivalents, accounts payable, short-term borrowings (including convertible notes payable), and other current liabilities approximate fair value because of their short-term maturity. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the consolidated financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.
The following table sets forth the Company’sCompany's financial instruments as of March 31, 2013 which are recorded on the balance sheet at fair value on a recurring basis by level within the fair value hierarchy. As required by ASC 820, these are classified based on the lowest level of input that is significant to the fair value measurement:
| | | | | | | | | | | | |
| | Quoted Prices in Active Markets for Identical Instruments Level 1 | | | Significant Other Observable Inputs Level 2 | | Significant Unobservable Inputs Level 3 | | Assets at Fair Value | |
| | | | | | | | | | |
Liabilities: | | | | | | | | | | | | |
Series L Convertible Preferred Stock | | $ | | | | $ | | | | $ | (200,000 | ) | | $ | (200,000 | ) |
Series L Accrued Dividend Payable | | | | | | | | | | $ | (67,426 | ) | | $ | (67,426 | ) |
Derivative Liability | | | | | | | | | | $ | (611,940 | ) | | $ | (611,940 | ) |
At March 31, 2013, the carrying amount of the Series L Convertible Preferred Stock at stated value is deemed to be the fair value. The balance sheet also reflects a liability for the accrued dividend payable on the Series L Convertible Preferred Stock.
The following table sets forth the Company's financial instruments as of June 30, 2012 which are recorded on the balance sheet at fair value on a recurring basis by level within the fair value hierarchy. As required by ASC 820, these are classified based on the lowest level of input that is significant to the fair value measurement:
| | | | | | | | | | | | | | | | | | | | | | |
| | Quoted Prices in Active Markets for Identical Instruments Level 1 | | Significant Other Observable Inputs Level 2 | | Significant Unobservable Inputs Level 3 | | Assets at Fair Value | | | Quoted Prices in Active Markets for Identical Instruments Level 1 | | | Significant Other Observable Inputs Level 2 | | Significant Unobservable Inputs Level 3 | | Assets at Fair Value | |
| | | | | | | | | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | | | | | | | | | | | |
Series L Convertible Preferred Stock | | $ | | | $ | | | $ | (200,000 | ) | $ | (200,000 | ) | | $ | | | | $ | | | | $ | (200,000 | ) | | $ | (200,000 | ) |
Series L Accrued Dividend Payable | | | | | | | $ | (49,426 | ) | $ | (49,426 | ) | | | | | | | | | | $ | (53,914 | ) | | $ | (53,914 | ) |
Derivative Liability | | | | | | | $ | (376,045 | ) | $ | (376,045 | ) | | | | | | | | | | $ | (961,058 | ) | | $ | (961,058 | ) |
At March 31,June 30, 2012, the carrying amount of the Series L Convertible Preferred Stock at parstated value is deemed to be the fair value. The balance sheet also reflects a liability for the accrued dividend payable on the Series L Convertible Preferred Stock.
The following table sets forth the Company’s financial instruments as of June 30, 2011 which are recorded on the balance sheet at fair value on a recurring basis by level within the fair value hierarchy. As required by ASC 820, these are classified based on the lowest level of input that is significant to the fair value measurement:
| | | | | | | | | | | | | |
| | Quoted Prices in Active Markets for Identical Instruments Level 1 | | Significant Other Observable Inputs Level 2 | | Significant Unobservable Inputs Level 3 | | Assets at Fair Value | |
| | | | | | | | | |
Liabilities: | | | | | | | | | | | | | |
Series L Convertible Preferred Stock | | $ | | | $ | | | $ | (200,000 | ) | $ | (200,000 | ) |
Series L Accrued Dividend Payable | | | | | | | | $ | (35,864 | ) | $ | (35,864 | ) |
Derivative Liability | | | | | | | | $ | (794,072 | ) | $ | (794,072 | ) |
At June 30, 2011, the carrying amount of the Series L Convertible Preferred Stock at par value is deemed to be the fair value. The balance sheet also reflects a liability for the accrued dividend payable on the Series L Convertible Preferred Stock.
NOTE 14 – PROPERTY AND EQUIPMENT
The following is a summary of property and equipment, less accumulated depreciation:
| | Mar. 31, 2013 | | | June 30, 2012 | |
Furniture and fixtures | | $ | 257,565 | | | $ | 257,565 | |
Computers, equipment and software | | | 426,873 | | | | 426,873 | |
CTLM® software costs | | | 352,932 | | | | 352,932 | |
Trade show equipment | | | 298,400 | | | | 298,400 | |
Clinical equipment | | | 428,034 | | | | 435,534 | |
Laboratory equipment | | | 212,560 | | | | 212,560 | |
| | | | | | | | |
Total Equipment | | | 1,976,364 | | | | 1,983,864 | |
Less: accumulated depreciation | | | (1,856,425 | ) | | | (1,852,712 | ) |
| | | | | | | | |
Total Equipment - Net | | $ | 119,939 | | | $ | 131,152 | |
| | Mar. 31, 2012 | | | June 30, 2011 | |
Furniture and fixtures | | $ | 257,565 | | | $ | 257,565 | |
Computers, equipment and software | | | 426,873 | | | | 426,873 | |
CTLM® software costs | | | 352,932 | | | | 352,932 | |
Trade show equipment | | | 298,400 | | | | 298,400 | |
Clinical equipment | | | 435,534 | | | | 447,462 | |
Laboratory equipment | | | 212,560 | | | | 212,560 | |
| | | | | | | | |
Total Equipment | | | 1,983,864 | | | | 1,995,792 | |
Less: accumulated depreciation | | | (1,850,593 | ) | | | (1,834,079 | ) |
| | | | | | | | |
Total Equipment - Net | | $ | 133,271 | | | $ | 161,713 | |
For the fiscal year ending June 30, 2008, we reclassified the net realizable value of $311,252 of CTLM® systems in Inventory to Clinical equipment as these CTLM® systems continue to be used as clinical systems associated with the data collection for our FDA application which we planned to submit to the FDA in December 2008.
For the fiscal year ending June 30, 2009, we reclassified the net realizable value of $8,591 of CTLM® systems in Inventory to Clinical equipment as this CTLM® system is being used as a clinical system at the University of Florida.
For the fiscal year ending June 30, 2011, we reclassified the net realizable value of $6,525 of CTLM® systems in Inventory to Clinical equipment.
For the nine monthsfiscal year ending March 31,June 30, 2012, we reclassified the net realizable value of $11,928 from Clinical Equipment to Consignment Inventory.
The estimated useful lives of property and equipment for purposes of computing depreciation and amortization are:
| Furniture, fixtures, clinical, computers, laboratory | |
| equipment and trade show equipment | 5-7 years |
| Building | 40 years |
| CTLM® software costs | 5 years |
Telephone equipment, acquired under a long-term capital lease at a cost of $50,289, is included in furniture and fixtures. The CTLM® software is fully amortized.
NOTE 15 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
| | Mar. 31, 2012 | | | June 30, 2011 | | | Mar. 31, 2013 | | | June 30, 2012 | |
Accounts payable - trade | | $ | 1,007,954 | | | $ | 877,449 | | | $ | 815,393 | | | $ | 928,385 | |
Accrued tangible personal property taxes payable | | | 6,000 | | | | 6,000 | | | | 6,000 | | | | 6,000 | |
Accrued compensated absences | | | 53,063 | | | | 53,063 | | | | 41,417 | | | | 41,417 | |
Accrued wages, payroll taxes and penalties | | | 1,781,649 | | | | 1,287,800 | | | | 2,050,092 | | | | 2,100,436 | |
Other accrued expenses | | | 187,213 | | | | 261,823 | | | | 157,023 | | | | 141,740 | |
| | | | | | | | | | | | | | | | |
Totals | | $ | 3,035,879 | | | $ | 2,486,135 | | | $ | 3,069,925 | | | $ | 3,217,978 | |
As of March 31, 2012,2013, we owe $314,009$725,639 in accrued wages and $1,467,641$1,324,453 in accrued payroll taxes. The $1,467,641$1,324,453 in accrued payroll taxes represents unfunded payroll taxes, interest and penalties for the nine quarters commencing with the quarter ending March 31, 2010. The reason we incurred the penalties and interest was due to the difficulty in raising capital to have sufficient funds to pay the taxes.
From May 2010 to June 2012, claims were made by the IRS for payment of our accrued payroll taxes, interest and penalties, which as of June 30, 2012 was $1,489,640. We engaged tax counsel to handle this matter and intend to fully satisfy our tax obligations. In order to qualify for an IRS Installment Agreement, we must be current in our payment of payroll taxes in the period they are due. We have paid all of our payroll taxes payable for the calendar year 2012.
The IRS sent formal collection demands for each quarter we were delinquent in payment of payroll taxes beginning with the quarter ending March 31, 2010. On November 22, 2011, the IRS filed a lien with the Secretary of State of Florida in Tallahassee, Florida totaling $779,996. Subsequently, on February 2, 2012, the IRS filed a lien with the Secretary of State of Florida in Tallahassee, Florida totaling $140,439; and on June 28, 2012, the IRS filed a lien with the Secretary of State of Florida in Tallahassee, Florida totaling $1,479. Our tax counsel negotiated an Installment Agreement to make installment payments to satisfy outstanding taxes, penalties and interest due. The Installment Agreement states that we must pay $15,000 a month for 12 months with the first payment due by November 28, 2012; $20,000 a month for 12 months beginning November 28, 2013; and $25,000 a month for 12 months beginning November 28, 2014 until such time as the balance owed is paid in full. In the event that we are able to pay off the balance due to the IRS, our tax counsel would attempt to negotiate a waiver on the penalties.
From July 1, 2012 through March 31, 2013, we have made payments to the IRS totaling $230,490. We have paid all of our payroll taxes payable for the calendar year 2012 and 2013. Of the $230,490, we made two $15,000 payments totaling $30,000 during the quarter ending December 31, 2012 and three $15,000 payments totaling $45,000 during the quarter ending March 31, 2013 as per our Installment Agreement. We paid accrued payroll taxes totaling $67,359 for the quarter ending March 31, 2012 and $21,134 for the quarter ending June 30, 2012. We paid a total of $33,091 in payroll taxes for the quarter ending September 30, 2012; $14,368 for the quarter ending December 31, 2012; and $18,927 for the quarter ending March 31, 2013.
If we ultimately are unable to pay the outstanding payroll tax, penalties and interest on a timetable pursuant to the terms of the Installment Agreement, we may have to cease operations.
NOTE 16 – SUBSEQUENT EVENTS
On May 14, 2012, we signed1, 2013, our Board of Directors appointed Elizabeth J. Shotmeyer to serve on our Board. Ms. Shotmeyer, prior to her appointment as a distribution agreementDirector, had loaned the Company a principal amount of $91,950. At the time these loans were made Ms. Shotmeyer was deemed an unaffiliated third party investor. Immediately upon her appointment she became an affiliated party. The appointment of Ms. Shotmeyer will fill one vacancy on our Board of Directors. Ms. Shotmeyer was appointed to the Compensation Committee. Ms. Shotmeyer has held executive positions in the oil, gas, and real estate sectors for over 40 years, from 1964-2004. She has held several roles such as Director and Vice President at United States Oil Corporation and related companies, located in New Jersey. She has owned and operated oil tank farms in New York, Delaware and Virginia. Ms. Shotmeyer is currently the owner of Shotmeyer Enterprises LLC and Big Shot Communications located in Florida. She has served on various boards from 1989-1993, including but not limited to the Board of Directors for Children's Museum of Boca Raton. In 1972, Ms. Shotmeyer earned her B.A. in English (Pre Law) from University of La Verne, Pomona, CA. Ms. Shotmeyer witnessed her mother's struggle with Shimadzu Medicalbreast cancer, a devastating battle that resulted in her mother's demise. As a result, she is a firm believer of innovative methods of early detection. Ms. Shotmeyer is appointed to market the CTLM® in Australia, New Zealand and the Pacific Islands. Shimadzu Medical Systems (Oceania) Pty Ltd is an Australasian subsidiaryserve as a director until our 2013 annual meeting of Shimadzu Corporation, Kyoto, Japan.shareholders or until her earlier resignation or removal.
In April 2012,2013, we received $11,000$8,000 from Southridge Linda Grable, our CEO and Chairman of the Board, pursuant to a short-term promissory note. Ms. Grable is deemed an affiliated party. The note provides for a redemption premium of 15% of the principal amount on or before DecemberMarch 31, 2012.2014. Interest will accrue at 8% per annum until maturity above and beyond the premium. SouthridgeMs. Grable may elect at an Event of Default to convert any part or all of the $11,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.
In April 2012, we received $2,500 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before April 25, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default to convert any part or all of the $2,500 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.
In April 2012, we received $15,000 from JMJ. This fourth tranche of $15,000 is from the Convertible Promissory Note Agreement we entered into with JMJ on February 23, 2011. In connection with this partial fourth tranche we will pay a 7% Finder’s Fee, which is $1,050.
In May 2012, we received a total of $25,000 from an unaffiliated third party investor pursuant to a short-term promissory note with a maturity date of August 2, 2012. The note provides for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 10% per annum until maturity above and beyond the premium. We issued a total of 5 Series P Preferred Stock to the investor as collateral with a total stated value of $25,000.
In May 2012, we received $8,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before May 14, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Defaulttime to convert any part or all of the $8,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.
In April 2013, we received $10,000 from a private investor pursuant to a short-term promissory note with a maturity date of April 2, 2014. The note provides for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $10,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In April 2013, we received $32,500 from Asher Enterprises pursuant to a short-term promissory note due on or before January 14, 2014. We received net proceeds of $30,000 after deductions of $2,500 for legal fees. Interest will accrue at 8% per annum until maturity above and beyond the premium. Asher Enterprises may elect at any time after 180 days to convert any part or all of the $32,500 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 58% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. We reserved 2,662,000,000 shares of our common stock in connection with this loan.
On April 13, 2012,25, 2013, the private investor sold $16,000 Principal of his $16,000 note to Tangiers Investment Group LLC. The full sale of the note was for $21,916 ($16,000 Principal, $4,000 Premium and $1,916 Interest). On April 25, 2013, we entered into a new Promissory Note with Tangiers Capital for $21,916 in Principal with a maturity date of April 24, 2014. Interest will accrue at 15% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $21,916 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
On April 25, 2013, the private investor sold $11,648 Principal of his $22,000 note to Tangiers Investment Group LLC. The full sale of the note was for $18,084 ($11,648 Principal, $3,947 Premium and $2,489 Interest). On April 25, 2013, we entered into a new Promissory Note with Tangiers Capital for $18,084 in Principal with a maturity date of April 24, 2014. Interest will accrue at 15% per annum until maturity above and beyond the premium. The holder
may elect at any time to convert any part or all of the $18,084 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In April 2013, we received $20,000 from Tangiers Investment Group, LLC ("Tangiers") pursuant to a short-term promissory note due on or before April 24, 2014. We received net proceeds of $15,000 after deductions of $2,500 for legal fees and $2,500 for a consulting fee. Interest will accrue at 15% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $20,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In April 2013, we received $5,000 from Redwood Management LLC ("Redwood") pursuant to a $125,000 short-term promissory note dated January 18, 2013. The terms of the note provide that the Redwood will pay $25,000 every 30 days from execution of the note until the entire $125,000 is paid in full. The note provides a maturity date of January 18, 2014. Interest will accrue at 12% per annum on the aggregate unconverted outstanding principal amount. Redwood may elect at any time to convert any part or all of the outstanding balance plus interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the fifteen trading days immediately prior to the date of the conversion notice.
Debt to Equity Conversions:
On April 1, 2013, Southridge executed a partial debt to equity conversion of a $100,000$30,000 short-term promissory note dated September 12,5, 2012 in which they converted $49,000$14,990 principal and $1,096$66 in interest. We issued Southridge 123,693,557 restricted common shares on April 24, 2012 pursuant to Rule 144 based on an agreed conversion price of $0.00041 per share.
On April 13, 2012, Southridge executed a partial debt to equity conversion of a $100,000 short-term promissory note dated September 28, 2012 in which they converted $4,000 principal and $4,340 interest. We issued Southridge 20,591,916 restricted common shares on April 24, 2012 pursuant to Rule 144 based on an agreed conversion price of $0.00041 per share.
On April 24, 2012, JMJ executed a debt to equity conversion of $29,120 in principal of the second tranche of $100,000 which we closed on May 20, 2011. We issued JMJ 52,000,000 common shares pursuant to Rule 144 based on a conversion price of $0.00056 per share.
On May 1, 2012, Panache executed a partial debt to equity conversion of a $100,000 short-term promissory note dated August 25, 2011 in which they converted $9,765 principal. We issued Panache 21,000,00023,163,689 common shares pursuant to Rule 144 based on an agreed conversion price of $0.000465$0.00065 per share.
On MayApril 1, 2012, Asher2013, Redwood executed a partial debt to equity conversion of a $78,500 short-term promissory note$100,000 Promissory Note originally dated October 24, 2011December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $12,000$5,500 principal. We issued Asher 26,086,957Redwood 9,166,667 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00046$0.0006 per share.
On MayApril 2, 2012, Asher2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a $78,500 short-term promissory note dated October 24, 2011new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $15,000$4,628 principal. We issued Asher 44,117,647Tangiers 9,256,920 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00034$0.0005 per share.
On May 9, 2012, JMJ executed a debt to equity conversion of $28,980 in principal of the second tranche of $100,000 which we closed on May 20, 2011. We issued JMJ 69,000,000 common shares pursuant to Rule 144 based on a conversion price of $0.00042 per share.
On May 10, 2012, AsherApril 4, 2013, WHC Capital LLC executed a partial debt to equity conversion of a $78,500the $10,000 short-term promissory note originally dated October 24, 2011November 20, 2009 and purchased on March 22, 2013 from a private investor, in which they converted $13,000 principal.$6,864 in premium. We issued Asher 68,421,053WHC Capital LLC 17,160,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00019$0.004 per share.
On May 10, 2012, PanacheApril 5, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a $100,000 short-term promissory note dated August 25, 2011new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $7,440$8,169 principal. We issued Panache 30,000,000Tangiers 32,676,600 common shares pursuant to Rule 144 based on an agreed conversion price of $0.000248$0.0005 per share.
On May 14, 2012, JMJ executed a debt to equity conversion of $4,389 in principal of the second tranche of $100,000 which we closed on May 20, 2011. We issued JMJ 19,000,000 common shares pursuant to Rule 144 based on a conversion price of $0.000231 per share.
On May 15, 2012, PanacheApril 5, 2013, Redwood executed a partial debt to equity conversion of a $100,000 short-term promissory notePromissory Note originally dated August 25, 2011December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $9,330$2,600 principal. We issued Panache 50,000,000Redwood 9,454,545 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0001866$0.000275 per share.
On April 5, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 20113, 2013 in which they converted $4,015 principal. We issued Magna 14,600,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.000275 per share.
On April 2011,8, 2013, Southridge acquiredexecuted a partial debt to equity conversion of a $30,000 short-term promissory notesnote dated September 5, 2012 in which they converted $9,240 principal and $25 in interest. We issued Southridge 23,161,811 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0004 per share. On April 24, 2013 we issued Southridge an additional 13,897,087 shares because the closing bid price on the clearing date fell below the Initial closing bid price.
On April 9, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $4,380 principal. We issued Magna 19,909,091 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00022 per share.
On April 9, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $7,626 principal. We issued Tangiers 38,129,900 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0002 per share.
On April 15, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $7,577 principal. We issued Tangiers 50,513,800 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00015 per share.
On April 18, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor totaling $800,000on January 18, 2013, in principal and 55,363,907which they converted $3,200 principal. We issued Redwood 29,090,909 common shares of common stock which were issued as collateral. Southridge proposed that we amend the conversion terms of the notes permitting the holder to convert the notes and we agreed to the amendment. From January 12, 2011 to May 18, 2012, Southridge issued notices of conversion to settle $700,000 in principal
plus accrued premiums totaling $395,699 into 405,202,769 shares of our common stock, of which 51,802,774 shares were collateral shares and 353,399,995 new shares were issued pursuant to Rule 144.144 based on an agreed conversion price of $0.00011 per share.
On April 19, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $6,600 principal. We issued Magna 60,000,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00011 per share.
On April 19, 2013, Panache executed a partial debt to equity conversion of a $25,000 short-term promissory note dated September 6, 2012 in which they converted $5,920 principal. We issued Panache 59,200,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0006 per share.
On April 22, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $5,396 principal. We issued Tangiers 53,964,900 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0001 per share.
On April 23, 2013, Levin Consulting Group executed a partial debt to equity conversion of the $70,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $6,500 principal and $349 in interest. We issued Levin Consulting Group 68,493,200 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0001 per share.
On April 23, 2013, SGI Group executed a final debt to equity conversion of a $95,000 Promissory Note originally dated August 15, 2012 which they purchased $10,000
Principal from Southridge on February 11, 2013, in which they converted $3,300 principal and $85 in interest. We issued SGI Group 33,853,200 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0001 per share. On April 24, 2013 we issued SGI Group an additional 33,835,200 shares because the closing bid price on the clearing date fell below the Initial closing bid price.
On April 23, 2013, SGI Group executed a partial debt to equity conversion of a $15,000 short-term promissory note dated August 20, 2012 in which they converted $3,250 principal and $220 in interest. We issued SGI Group 34,698,300 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0001 per share. On April 24, 2013 we issued SGI Group an additional 34,698,300 shares because the closing bid price on the clearing date fell below the Initial closing bid price.
On April 24, 2013, Southridge executed a final debt to equity conversion of a $30,000 short-term promissory note dated September 5, 2012 in which they converted $1,015 principal and $2 in interest. We issued Southridge 5,086,123 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0002 per share.
On April 24, 2013, Southridge executed a partial debt to equity conversion of a $30,000 short-term promissory note dated September 19, 2012 in which they converted $3,485 principal and $1,427 in interest. We issued Southridge 49,118,493 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0001 per share.
On April 24, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $4,300 principal. We issued Redwood 39,090,909 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00011 per share.
On April 26, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $4,000 principal. We issued Tangiers 79,995,200 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00005 per share.
On April 29, 2013, Linda Grable, our CEO and Chairman of the Board, executed a debt to equity conversion of an $8,000 short-term promissory note dated April 1, 2013 in which she converted $8,000 principal. We issued Linda Grable 80,000,000 restricted common shares pursuant to Rule 144 based on an agreed conversion price of $0.0001 per share. Ms. Grable is deemed an affiliated party.
On April 30, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $6,600 principal. We issued Magna 120,000,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.000055 per share.
On April 30, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $5,485 principal. We issued Tangiers 109,696,200 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00005 per share.
On May 3, 2013, WHC Capital LLC executed a final debt to equity conversion of the $10,000 short-term promissory note originally dated November 20, 2009 and purchased on March 22, 2013 from a private investor, in which they converted $3,136 in premium and $56 in interest. We issued WHC Capital LLC 63,847,600 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00005 per share.
On May 6, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $6,633 principal. We issued Tangiers 132,663,600 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00005 per share.
On May 8, 2013, Southridge executed a partial debt to equity conversion of a $30,000 short-term promissory note dated September 19, 2012 in which they converted $4,065 principal and $46 in interest. We issued Southridge 82,229,841 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00005 per share.
On May 9, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $3,998 principal. We issued Redwood 79,960,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00005 per share.
On May 9, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $11,000 principal. We issued Magna 200,000,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.000055 per share.
On May 10, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $9,221 principal. We issued Tangiers 184,425,800 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00005 per share.
All debt conversions were consummated at the contractual terms agreed upon for each loan. Accordingly, there was no gain/loss on conversions.
As of the date of this report, we owe a total of $1,882,356$1,760,386 of short term debt of which $1,320,269$1,129,436 is principal, $526,562$571,018 is accrued premium and $35,525$59,931 is accrued interest. Eight promissory notes totaling $756,000 in principal have been extended to June 30, 2012; two promissory notes totaling $21,604 in principal have been extended to June 30, 2012; one promissory note with $38,500 in principal has a maturity date of July 26, 2012; one promissory note with $20,000 in principal has a maturity date of December 31, 2012; one promissory note with $40,000 in principal has a maturity date of November 21, 2012; one promissory note with $43,465 in principal has a maturity date of November 21, 2012; one promissory note with $53,000 in principal has a maturity date of September 5, 2012; one promissory note with $17,000 in principal has a maturity date of December 18, 2012; one promissory note with $25,000 in principal has a maturity date of February 28, 2013; one promissory note with $30,000 in principal has a maturity date of March 18, 2013; one promissory note with $11,000 in principal has a maturity date of December 31, 2012; one promissory note with $2,500 in principal has a maturity date of April 25, 2013; one promissory note with $25,000 in principal has a maturity date of August 2, 2012; one promissory note with $8,000 in principal has a maturity date of May 14, 2013; and eight promissory notes totaling $229,200 have maturity dates from March 6, 2012 to April 30, 2012. We have repaid aggregate principal and premium in the amount of $173,376 on these short-term notes and a total of $1,830,035$2,964,632 principal, $395,699$450,830 in premium, and $46,178$91,701 in interest has been converted into 1,232,252,5512,159,559,970 shares of our common stock of which 51,802,774103,606 shares were collateral shares and 1,180,449,7772,159,559,970 new shares were issued pursuant to Rule 144. Out of the original 55,363,637103,606 shares of common stock held as collateral, a balance of 3,561,1337,122 shares remains on the $300,000$85,985 principal of the remaining notes.
As of the date of this report, we owe JMJ a total of $160,949$12,263 in long-term debtdebt. Of the $12,263 we owe a total of which $117,949 is$10,000 in principal, $25,000$1,250 is consideration on the principal and $18,000$1,013 is interest.
As of the date of this report, if all of the outstanding convertible promissory notes totaling $1,772,649 were converted based on the closing bid price of $0.0001, we would be required to issue approximately 25 billion shares. Based on the 2,124,402,540 current issued and outstanding shares and our current authorized of 10 billion shares, we would require an additional 17 billion authorized shares to satisfy the potential conversions.
We have evaluated all subsequent events for disclosure purposes.
| Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations |
FORWARD LOOKINGCAUTIONARY STATEMENTS
The following discussion of the financial condition and results of operations of Imaging Diagnostic Systems, Inc. should be read in conjunction with the Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations; the Condensed Financial Statements; the Notes to the Financial Statements; the Risk Factors included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2011,2012, which are incorporated herein by reference; and all our other filings, including Current Reports on Form 8-K, filed with the SEC through the date of this report. This quarterly report on Form 10-Q contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements using terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “projects”"may," "will," "expects," "plans," "anticipates," "estimates," "projects", “potential,”"potential," or “continue,”"continue," or the negative or other comparable terminology regarding beliefs, plans, expectations, or intentions regarding the future. These forward-looking statements involve substantial risks and uncertainties, and actual results could differ materially from those discussed and anticipated in such statements. These forward-looking statements include, among others, statements relating to our business strategy, which is based upon our interpretation and analysis of trends in the healthcare treatment industry, especially those related to the diagnosis and treatment of breast cancer, and upon management’smanagement's ability to successfully develop and commercialize its principal product, the CTLM®. This strategy assumes that the CTLM® will provide benefits, from both a medical and an economic perspective, to alternative techniques for diagnosing and managing breast cancer. Factors that could cause actual results to materially differ include, without limitation, the timely and successful submission of our U.S. Food and Drug Administration (“FDA”("FDA") application to obtain marketing clearance; manufacturing risks relating to the CTLM®, including our reliance on a single or limited source or sources of supply for some key components of our products as well as the need to comply with especially high standards for those components and in the manufacture of optical imaging products in general; uncertainties inherent in the development of new products and the enhancement of our existing CTLM® product, including technical and regulatory risks, cost overruns and delays; our ability to accurately predict the demand for our CTLM® product as well as future products and to develop strategies to address our markets successfully; the early stage of market development for medical optical imaging products and our ability to gain market acceptance of our CTLM® product by the medical community; our ability to expand our international distributor network for both the near and longer-term to effectively implement our globalization strategy; our dependence on senior management and key personnel and our ability to attract and retain additional qualified personnel; our ability to obtain financing and the risks relating to financing utilizing our Private Equity Credit Agreementconvertible promissory notes, convertible debentures, convertible preferred stock, private equity credit agreements or other working capital financing arrangements; technical innovations that could render the CTLM® or other products marketed or under development by us obsolete; competition; risks and uncertainties relating to intellectual property, including claims of infringement and patent litigation; risks relating to future acquisitions and strategic investments and alliances; and reimbursement policies for the use of our CTLM® product and any products we may introduce in the future. There are also many known and unknown risks, uncertainties and other factors, including, but not limited to, technological changes and competition from new diagnostic equipment and techniques, changes in general economic conditions, healthcare reform initiatives, legal claims, regulatory changes and risk factors detailed from time to time in our Securities and Exchange Commission filings that may cause these assumptions to prove incorrect and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, those described above or elsewhere in this quarterly report. All forward-looking statements and risk factors included in this document or incorporated by reference from our Annual Report on Form 10-K for the fiscal year ended June 30, 2011,2012, are made as of the date of this report based on information available to us as of the date of this report, and we assume no obligation to update any forward-looking statements or risk factors. You are cautioned not to place undue reliance on these forward-looking statements.
OVERVIEW
Imaging Diagnostic Systems, Inc. (“IDSI”("IDSI") is a development stage medical technology company. Since inception in December 1993, we have been engaged in the development and testing of a laser breast imaging system that uses computed tomography and laser techniques designed to detect breast abnormalities. The CT Laser Mammography system (“("CTLM®”") is currently being commercialized in certain international markets where regulatory approvals have been obtained. However, it is not yet approved for sale in the U.S. market. The CTLM® system must obtain marketing clearance through the U.S. Food and Drug Administration (“FDA”("FDA") before commercialization can begin in the U.S. market.
Our financial statements have been prepared assuming that we will continue as a going concern. Our auditors, in their report for the fiscal year ended June 30, 2011,2012, stated that we have incurred recurring operating losses and will have to obtain additional capital to sustain operations. These conditions raise substantial doubt about our ability to continue as a going concern. Management’sManagement's plans in regard to these matters are also described in Note 2 “Going Concern”"Going Concern", in the Notes to the Financial Statements. The accompanying financial statements to this reportAnnual Report do not include any adjustments to reflect the possible effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
Originally, the FDA determined the CTLM® to be a “new"new medical device”device" for which there was no predicate device and designated it as a Class III medical device. Consequently; the CTLM® was required to go through the FDA Premarket approval (“PMA”("PMA") application process. In May 2003 we filed a PMA application for the CTLM® with the FDA. In August 2003, we received a letter from the FDA citing deficiencies in our PMA application requiring a response to the deficiencies. We initially planned on submitting an amendment to the PMA application to resolve the deficiencies and requested an extension. In March 2004 we received an extension to respond with the amendment; however, in October 2004, we made a decision to voluntarily withdraw the original PMA application and resubmit a modified PMA in a simpler and more clinically and technically robust filing.
In November 2004, we received a letter from the FDA stating that the CTLM® study has been declared a Non-Significant Risk (“NSR”("NSR") study when used for our intended use.
In 2005, we initiated the PMA process by designing a new clinical study protocol and a modified intended use, which limited the participants in the study to patients with dense breast tissue. The inclusion criteria was modified because we believed that we would be more successful in proving our hypothesis of the CTLM® system’ssystem's intended use and have the most success at obtaining marketing clearance from the FDA. Concurrently, we identified qualified clinical sites and retained them to proceed with our clinical study.
In 2006, we made changes to bring the CTLM® system to its most current design level. We believe these changes improved the CTLM®’s's image quality and reliability. Upgraded CTLM® systems were installed at our U.S. clinical sites and data collection proceeded in accordance with our clinical protocol. The objective was to demonstrate the safety and efficacy of the CTLM® system when used per the “Intended Use” statement. The data collection continued from 2006 to 2010, progressing slowly due to low patient volume pursuant to the inclusion criteria of our clinical protocol.
We announced in March 2009 that our research and development team achieved a technical breakthrough with a new reconstruction algorithm that improved the visualization of angiogenesis in the CTLM® images. Angiogenesis is the process in which new blood vessels are formed in response to a chemical signal sent out by cancerous tumors. The CTLM visualizes the blood distribution in the breast, to detect the new blood vessels (angiogenesis) required for cancerous lesions to grow. The improved algorithm enhances the images by reducing the number of artifacts occasionally produced during an examination, thereby making diagnosis easier. We also incorporated streamlined numerical methods into the software so that the new algorithm does not require additional computing resources, allowing us to provide the improved functionality to existing customers as a software upgrade.
As of May 2009, 10 clinical sites had participated in the clinical trialtrials and at the time we believed we had sufficient clinical data to support our PMA application but only our independent biostatistician could make that determination.application. However, at the time we did not have sufficient financing to perform the statistical analysis study, support the clinical sites, initiate the reading phase, the statistical analysis study and complete the submission of the PMA application to the FDA.
Through the years, new MRI and other dedicated breast imaging systems gained FDA marketing clearance pursuant to applications under the FDA’sFDA's Section 510(k) premarket notification of intent to market (a “Section"Section 510(k) premarket notification”notification"). In the last several years, the De Novo 510(k) process became an alternate pathway for new technologies with low to moderate risk an opportunity to seek FDA marketing clearance through this simpler process. In addition, laser safety data and clinical safety and efficacy data were obtained through previous clinical trials to support an FDA application through the traditional 510(k) process. We believe our CTLM® system is of low to moderate risk due to the series of technical studies conducted as well as the series of clinical studies we were engaged in which led the FDA to determine in 2004 that our clinical studies were a Non Significant Risk (NSR) device study.
A Section 510(k) premarket notification is a premarket submission made to the FDA to demonstrate that the device to be marketed is at least as safe and effective as, that is, substantially equivalent to, a legally marketed device that is not subject to PMA. Submitters must compare their device to one or more similar legally marketed devices and make and support their substantial equivalency claims. A legally marketed device is a device that was legally marketed prior to May 28, 1976 for which a PMA is not required, or a device which has been reclassified from Class III to Class II or I, or a device which has been found to be substantially equivalent through the 510(k) process. The legally marketed device(s) to which equivalence is drawn is commonly known as the "predicate" device.
To submit a Section 510(k) premarket notification application, a company must meet the following guidelines:
To demonstrate substantial equivalence to another legally U.S. marketed device, the 510(k) applicant must demonstrate that the new device, in comparison to the predicate:
| | has the same intended use as the predicate; and |
| | has the same technological characteristics as the predicate; or |
| | has the same intended use as the predicate; and |
| | has different technological characteristics when compared to the predicate, and |
| | does not raise new questions of safety and effectiveness; and |
| | demonstrates that the device is at least as safe and effective as the legally marketed device. |
One possible outcome resulting from applying for a Section 510(k) premarket notification of intent to market that we believed would have been an option, was the evaluation of automatic class III designation, commonly referred to “De"De Novo process”process". The De Novo process is an alternate pathway provided by the FDA to classify certain new devices that had automatically been placed in Class III due to lack of a predicate. The De Novo classification process was created to provide a mechanism for the classification of certain lower-risk devices for which there is no predicate, but would otherwise fall into Class III. The De Novo process is most applicable when the risks of a device are well-understood and appropriate special controls can be established to mitigate those risks.
The De Novode novo process cannot be requested until a Section 510(k) premarket notification has been submitted and the FDA responds with a determination that the device is “not"not substantially equivalent”equivalent" (NSE) to the predicate device. The FDA then classifies the applicant devices into Class III designation. Applicants who receive a class III determination from the FDA may request an evaluation for reclassification into Class I or II.
Although we did not have a final determination on whether the clinical collection allotment for the PMA study was complete, inIn March 2010, we decided to focus on the possibility of obtaining FDA marketing clearance through a Section 510(k) premarket notification for our CTLM® system instead of a PMA application based on our own
research of other medical imaging devices that received a Section 510(k) premarket notification, such as the Aurora MRI Breast Imaging System (the “breast MRI”"breast MRI"). Other sources of our research were obtained through reading medical imaging industry publications, the FDA’sFDA's website, and discussions with attendees at medical imaging trade shows; specifically the Radiological Society of North America in Chicago, IL in November 2009; Arab Health Show in Dubai, UAE in January 2010, and European Congress of Radiology in Vienna, Austria in March 2010. We began
the process of examining the various potential predicate devices that could be credible to support our Section 510(k) premarket notification application.
In July 2010, we made our decision to select as our predicate device the breast MRI. This decision was made as a result of our examination of comparative clinical images between CTLM® and breast MRI, which are both functional molecular imaging devices having the ability to visualize angiogenesis in the breast. We began preparing the Section 510(k) premarket notification submission and engaged the services of a FDA regulatory consultant to review our preliminary draft and then re-engaged the services of our FDA regulatory counsel to complete the Section 510(k) premarket notification application and to submit it to the FDA.
On November 22, 2010, we submitted a Section 510(k) premarket notification application to the FDA for its review. We believed that the Section 510(k) premarket notification submission was the best process to obtain U.S. marketing clearance in the least burdensome and most timely manner. FDA marketing clearance would enable us to market and sell the CTLM® system throughout the United States. Also, we believed that receipt of U.S. marketing clearance will substantially enhance our ability to sell the CTLM® in the international market.
On January 21, 2011, we received a request for additional information from the FDA regarding our Section 510(k) premarket notification application. A request for additional information is quite common during the FDA review process. Due to the extensive amount of additional information requested, we filed the response to the FDA request on July 8, 2011. Upon receipt of our response at the FDA offices, the FDA 90-day response time clock was re-activated. Consequently, we expected to get either an FDA determination on our Section 510(k) application or another request for additional information within the next 90-day time frame.
On August 2, 2011, we received official notification from the FDA that the review of our Section 510(k) premarket notification application had been completed and that the FDA determined that the device, (CTLM®), is not substantially equivalent to devices marketed in interstate commerce prior to May 28, 1976, the enactment date of the Medical Device Amendments, or to any device which has been reclassified into Class I (General Controls) or Class II (Special Controls), or to another device found to be substantially equivalent through the Section 510(k) process. This decision to deny our application was based on the fact that the FDA was not aware of a legally marketed preamendments device labeled or promoted for using “Diffuse"Diffuse Optical Tomography”Tomography" (DOT) to image the optical attenuation properties of breast tissue in order to aid the diagnosis of cancer, other conditions, diseases, or abnormalities. Although the FDA did not use the term “rejected” in the NSE letter, the effect of this letter is that our Section 510(k) premarket notification of intent to market the device (CTLM®) has been rejected. Therefore, this device was classified by statute into class III (Premarket Approval), under Section 513(t) of the Federal Food, Drug, and Cosmetic Act (the “Act”"Act"). All FDA determined Class III devices must fall under Section 515(a)(2) of the Act (which) requires a class III device to have an approved application (PMA) before it can be legally marketed.
The determination by the FDA that our CTLM® imaging technology will now be recognized as a DOT device and that there are no other DOT devices known to the FDA, presents us with a unique technological opportunity. Essentially, IDSI could be the first medical imaging company to file a PMA application for a Diffuse Optical Tomography breast imaging device. Since the FDA has identified CTLM® as a class III device, a formal clinical study will be required to obtain PMA approval. WeWhile we have begun the PMA process and plan to use clinical studies previously collected, from 2006 to 2010, if permitted to do so by the FDA, no meaningful progress can be made in additionthis process until we obtain the substantial financing required to cover the costs for any additional new studies that we may need; the cost of a clinical research organization (CRO) to manage the process; the cost of a biostatistician to prepare the statistical report; FDA filing fees; and other costs associated with the PMA process. We believe that we will need at least $1.2 million for this process. A timeline cannot be established until funding is secured. Once funding is secured we plan to collect over the next several months.
Essentially, the FDA has stated that the CTLM® technologyany additional case studies we may need from our clinical sites. The number of additional cases needed, will require a full PMA application based on a DOT clinical imaging format. Previously collected patient data from 2006 to 2010 was based on a protocol identifying CTLM® as an “adjunct to mammography”. We believe thatbe provided by our technology has always been based on a DOT scientific principle, that our
patient collection technique will not changebiostatistician in consultation with a future DOT protocol, and that the patient inclusion/exclusion criteria for the new study will not change. Consequently, it is our belief that previously collected and non-analyzed patient data may be allowed by the FDA to be included in a future DOT protocol. This belief will either be accepted or rejected during the official pre- IDE meeting, which is a pre-clinical meeting, to be held at the FDA.
Although we have collected substantial clinical data from 2006 to 2010, it is very likely that additional cases will be needed to support the statistical analysis protocol devised to demonstrate safety and efficacy of the CTLM® system. Ultimately, the FDA must decide as to how many patient cases will need to be bio-statistically analyzed to support the CTLM® “intended use” claims. We would rely on our independent bio-statistician regarding the actual number of case studies required; however, the FDA has the ultimate authority to determine the number of clinical cases needed for the PMA application. Like other governmental institutions, the FDA prefers to reserve the right to make bio-statistical determinations on an individual case-by-case basis. Therefore, it is very likely that a clinical trial will need to begin again, which will require approval by an IRB (Institutional Review Board - an organization required to review and approve clinical protocols outlining the study to be conducted at the hospital or imaging sites). In addition, after the collection of clinical data is completed, a “radiologist reading study” of the clinical cases will be required and a statistical analysis of the results of the “reading study” will have to be performed in order to support the "Intended Use" and demonstrate safety and efficacy of the CTLM® system prior to PMA submission.
We need to secure funding to continue with the PMA process. If funding is obtained, then we can begin to: contract with the FDA regulatory consultants, contract with the identified clinical sites (hospitals and imaging centers) to collect the clinical data, seek an IRB approval of the clinical protocol, which could take up to 30 to 120 days, place the CTLM® system at the selected sites, train the clinical staff on the CTLM® system and the clinical protocol at the selected sites, and recruit patients to volunteer for the clinical study.
Our main hurdle for completion of the PMA application is our lack of financial resources. Historically, we have contracted with outside FDA consultants both for guidance and to ensure that our FDA related submissions meet FDA requirements, as we did not have sufficient resources to hire qualified full-time FDA clinical staff. Further, this approach is more cost effective than employing full time FDA experienced staff that will not be required once FDA marketing clearance has been obtained. Our management has identified FDA regulatory consultants who have proven ability in achieving FDA marketing clearance for diagnostic imaging devices. We cannot move forward until such time as we secure sufficient financing to engage these FDA regulatory consultants.
In previous filings, management had disclosed the potential to have our CTLM® device approved through the FDA “De Novo”"De Novo" process. This process would only become an option to us if the FDA did not approve our 510(k) premarket notification of intent to market the device. While waiting for a ruling from the FDA on our 510(k) premarket notification of intent to market the CTLM®, management continued to research the advantages and
disadvantages regarding the potential option to initiate a De Novo application if the FDA determined our traditional 510(k) application to be “Not"Not Substantially Equivalent”Equivalent". Our research identified several articles illustrating the potential pitfalls of going down the De Novo pathway. One such article from Medical Device Consultants (MDCI), a full service contract research organization and consulting firm that helps emerging and established firms commercialize novel and innovative medical devices, dated March 21, 2011(included below)below) best summarizes the issues that we would face if we choose the De Novo pathway.
“"The De Novo process has been around since the implementation of the FDA Modernization Act of 1997 (FDAMA). The FDAMA was intended to help improve the efficiency of bringing low-risk medical devices to market, allowing for simpler reclassification of devices that were classified as Class III due to the lack of a suitable predicate. The section of the FDAMA that handled this aspect of medical device classification (Section 513(f)(2)) became known as the De Novo process.
De Novo is a two-step process that requires a company to submit a 510(k) and complete a standard review, including an analysis of the risk to the patient and operator associate with the use of the device and the substantial equivalence rationale. Once that has been accomplished, and the medical device in question has been determined to be Not Substantially Equivalent (NSE) by the FDA, the product is automatically
classified as a Class III device. The manufacturer can then submit a request for evaluation of Automatic Class III designation to have the product reclassified from Class III into Class I or Class II. The FDA will review the device classification proposal and either recommend special controls to create a new Class I or II device classification or determine that the product is a Class III device. If FDA determines that the level of risk associated with the use of the device is appropriate for a Class II or Class I designation, then the product can be cleared as a 510(k) and FDA will issue a new classification regulation and product code. This also adds the device in question to the predicate pool, which in turn broadens the market for other medical device companies considering products in a similar therapeutic area. If the device is not approved through De Novo, then it must go through the standard premarket approval (PMA) process for Class III devices.
The number of FDA NSE determinations due to the lack of a suitable predicate is very low for those low risk medical devices that have the potential for reaching the market via the De Novo process. Medical device manufacturers are attracted to the cost efficiencies associated with the De Novo process when compared against the investment and post-market FDA oversight associated with a PMA. Unfortunately, the time to market for devices eligible for the De Novo process can be very long.
FDAMA calls for the FDA to review and return a decision on a De Novo reclassification submission within 60 days of receipt (the initial submission must be sent by the manufacturer within 30 days of receiving NSE notification). In practice, however, the amount of time taken to review De Novo requests by the FDA and issue the special controls guidance has risen from 62 days in 2006 to 241 days since 2007. Tacked on to the 510(k) review times, devices traveling the De Novo pathway average 482 days of review time from beginning to end.
Further compounding the delays associated with De Novo is the fact that the entire process resembles a procedural “black"black hole.”" The FDA is not required to provide any updates concerning the status of a De Novo application, nor is there any simple way for medical device manufacturers to track a De Novo submission on their own.
De Novo is rare in the realm of low-risk medical devices – a mere 54 products took this particular route between 1998 and 2009. Given the extensive delays associated with the process, MDCI advises medical device companies to consider all other market approval pathways before deciding on to pursue a De Novo reclassification.”"
Prepared by Benjamin Hunting, Cindy Nolte, and Helen Mayfield
MDCI Blogging Team”Team"
Understanding that the above statements were a fair representation of the regulatory industry's general feelings towards the FDA De Novo process, management decided to accept and heed the FDA's letter (received on August 2, 2011) detailing their decision of CTLM® being “not"not substantially equivalent”equivalent" and furthermore, accepting their recommendation that CTLM® is a class III device that would require a PMA submission. Other considerations such as comparing time frames between De Novo and the PMA process were taken into account. The average De Novo application took 482 days to be reviewed compared to the average PMA review of 284 days. In addition, upon further review, both the De Novo and PMA process require virtually identical clinical safety and efficacy data; therefore, the PMA path was chosen. Management has identified potential FDA regulatory consultants who can guide us through the complete PMA application process and is presently in contract negotiations with several prospective consulting firms. We will not be able to engage the services of an FDA consulting firm or a biostatistician until we have a commitment for funding. There can be no assurance that we will obtain this funding.
Progress toward re-submitting a PMA application during Fiscal Year 2012 and the ten months of Fiscal Year 2013 was significantly delayed and then eventually halted simply due to lack of funding to hire the necessary FDA consultants required to assist in the process. Our employees had reached their level of FDA expertise related to preparing the "ground work" for a PMA application submission and could not proceed any further without the expert assistance of FDA consultants.
During the fiscal year ended June 30, 2012, there was a significant reduction in key Company staff due to employee resignations, retirement and layoffs, which reduced operating overhead until additional external funding could be secured. We will not hire replacement staff until such time as we have secured sufficient funding to complete the PMA filing with the FDA. Prior to the reduction in key staff members, an internal PMA application strategy that might allow inclusion of previously collected patient data was developed. This approach (generally referred to as a PMA Protocol) will need to be qualified by our FDA consultants prior to presenting our approach to the FDA Reviewers/Examiners. The forum for this process is generally referred to as an FDA "Pre- IDE" meeting (essentially a pre-clinical meeting) between the Company, its FDA Consultants and the FDA/PMA Examiners. During the "Pre-IDE" meeting, the Company (and its FDA Consultants) would present their approach for data collection, patient selection and data analysis. The FDA Reviewers would provide input (critique and suggestions) to us as to what they believe an acceptable PMA protocol would require. Once agreement is reached by all parties the next logical step is to implement the protocol.
In summary, our management team now believes that the more structured and proven PMA application approach with its semi-rigid timetable for mandatory responses would provide us with the best route to achieve marketing clearance for our innovative new imaging modality that in the future will be classified as Diffuse Optical Tomography.
The CTLM® system is a Diffuse Optical Tomography (DOT) CT-like scanner. Its energy source is a laser beam and not ionizing radiation such as is used in conventional x-ray
mammography or CT scanners. The advantages of imaging without ionizing radiation may be significant in our markets. CTLM® is an emerging new imaging modality offering the potential of functional molecular imaging, which can visualize the process of angiogenesis which may be used by the radiologist to distinguish between benign and malignant tissue. X-ray mammography is a well-established method of imaging the breast but has limitations especially in dense breast cases. While x-ray mammography and ultrasound produce two dimensional images (2D) of the breast, the CTLM® produces 3D images. Ultrasound is often used as an adjunct to mammography to help differentiate tumors from cysts or to localize a biopsy site. We believe the CTLM® will be used to provide the radiologist with additional information to manage the clinical case; help diagnose breast cancer earlier; reduce diagnostic uncertainty especially in mammographically dense breast cases; and may help decrease the number of biopsies performed on benign lesions. Because breast cancers nearly always develop in the dense tissue of the breast (not in the fatty tissue), older women
who have mostly dense tissue on a mammogram are at an increased risk of breast cancer. Abnormalities in dense breasts can be more difficult to detect on a mammogram. The CTLM® technology is unique and patented. We intend to develop our technology into a family of related products. We believe these technologies and clinical benefits constitute substantial markets for our products well into the future.
As of the date of this report, we have had no substantial revenues from our operations and have incurred net losses applicable to common shareholders since inception through March 31, 20122013 of $119,859,271$121,131,930 after discounts and dividends on preferred stock. We anticipate that losses from operations will continue for at least the next 12 months, primarily due to an anticipated increase in marketing and manufacturing expenses associated with the international commercialization of the CTLM®, expenses associated with our FDA marketing clearanceapproval process, and the costs associated with advanced product development activities. We will need sufficient financing through the sale of equity or debt securities to complete the FDA approval process and, in the event that we obtain marketing clearance, to have sufficient funding to launch the CTLM® in the U.S. There can be no assurance that we will obtain this financing. Finally, there can be no assurance that we will obtain FDA marketing clearance, that the CTLM® will achieve market acceptance or that sufficient revenues will be generated from sales of the CTLM® to allow us to operate profitably.
CRITICAL ACCOUNTING POLICIES
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to customer programs and incentives, inventories, and intangible assets. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Critical accounting policies are defined as those involving significant judgments and uncertainties which could potentially result in materially different results under different assumptions and conditions. Application of these policies is particularly important to the portrayal of the financial condition and results of operations. We believe the accounting policy described below meets these characteristics. All significant accounting policies are more fully described in the notes to the financial statements included in our annual report on Form 10-K for the fiscal year ended June 30, 2011.
Inventory
Our inventories consist of raw materials, work-in-process and finished goods, and are stated at the lower of cost (first-in, first-out) or market. As a designer and manufacturer of high technology medical imaging equipment, we may be exposed to a number of economic and industry factors that could result in portions of our inventory becoming either obsolete or in excess of anticipated usage. These factors include, but are not limited to, technological changes in our markets, our ability to meet changing customer requirements, competitive pressures in products and prices and reliability, replacement and availability of key components from our suppliers. We evaluate on a quarterly basis, using the guidance provided in ASC 330 (“Inventory”("Inventory"), our ability to realize the value of our inventory based on a combination of factors including the following: how long a system has been used for demonstration or clinical collaboration purpose; the utility of the goods as compared to their cost; physical obsolescence; historical usage rates; forecasted sales or usage; product end of life dates; estimated current and future market values; and new product introductions. Assumptions used in determining our estimates of future product demand may prove to be incorrect, in which case excess and obsolete inventory would have to be adjusted in the future. If we determined that inventory was overvalued, we would be required to make an inventory valuation adjustment at the time of such determination. Although every effort is made to ensure the accuracy of our forecasts
of future product demand, significant unanticipated changes in demand could have a significant negative impact on the value of our inventory and our reported operating results. Additionally, purchasing requirements and alternative usage avenues are explored within these processes to mitigate inventory exposure.
Stock-Based Compensation
The computation of the expense associated with stock-based compensation requires the use of a valuation model. ASC-718, (“("Compensation-Stock Compensation”Compensation") is a very complex accounting standard, the application of which requires significant judgment and the use of estimates, particularly surrounding Black-Scholes assumptions such as stock price volatility, expected option lives, and expected option forfeiture rates, to value equity-based compensation. The Company currently uses a Black-Scholes option pricing model to calculate the fair value of its stock options. The Company primarily uses historical data to determine the assumptions to be used in the Black-Scholes model and has no reason to believe that future data is likely to differ materially from historical data. However, changes in the assumptions to reflect future stock price volatility and future stock award exercise experience could result in a change in the assumptions used to value awards in the future and may result in a material change to the fair value calculation of stock-based awards. ASC-718 requires the recognition of the fair value of stock compensation in net income. Although every effort is made to ensure the accuracy of our estimates and assumptions, significant unanticipated changes in those estimates, interpretations and assumptions may result in recording stock option expense that may materially impact our financial statements for each respective reporting period.
Impact of Derivative Accounting
As a result of recent financing transactions we have entered into, our financial statements for the year ended June 30, 2011 and future periods have and will be impacted by the accounting effect of the application of derivative accounting. The application of EITF 07-05 “"Determining Whether an Instrument (or Embedded Feature) is Indexed to a Company's Own Stock,”" which was effective on January 1, 2009 will significantly affect the application of ASC Topic 815 and ASC Topic 815-40 for both freestanding and embedded derivative financial instruments in our financial statements. Generally, warrants, conversion features in debt, and similar terms that include “full-ratchet”"full-ratchet" or reset provisions, which mean that the exercise or conversion price adjusts to pricing in subsequent sales or issuances, no longer meet the definition of indexed to a company's own stock and are not exempt from equity classification provided in ASC Topic 815-15. This means that instruments that were previously classified in equity are reclassified to liabilities and ongoing measurement under ASC Topic 815. The amount of quarterly non-cash gains or losses we will record in future periods will be based upon the fair market value of our common stock on the measurement date.
RESULTS OF OPERATIONS
SALES AND COST OF SALES
We are continuing to develop our international markets through our global commercialization program. In the quarter ended March 31, 2012,2013, we recorded revenues of $163,200$1,238 representing an increasea decrease of $150,648$161,962 from $12,552$163,200 during the quarter ended March 31, 2011.2012. The Cost of Sales during the quarter ended March 31, 2012,2013, were $29,821$517 representing an increasea decrease of $28,152$29,304 or 1,687%98% from $1,669$29,821 during the quarter ended March 31, 2011.2012. The revenue of $163,200$1,238 and cost of sales of $29,821 are primarily$517 is from the sale of our CTLM® systemreplacement parts to our Mexican distributor, Kepter Internacional. See Item 5. Other Information – “Other Recent Events”distributors.
Revenues for the nine months ended March 31, 2012,2013, were $211,720$27,238 representing an increasea decrease of $175,205$184,482 or 480%87% from $36,515$211,720 in the corresponding period in 2011.2012. The Cost of Sales during the nine months ended March 31, 2012,2013, was $35,895$4,189 representing an increasea decrease of $28,305$31,706 or 373%88% from $7,590$35,895 in the corresponding period in 2011. The2012. Of the revenue of $211,720$27,238 and cost of sales of $35,895 are $4,189, the revenue of $25,000 and cost of sales of $3,672 is from the
installment sale of our CTLM® to Kepter Internacional and installment sales of our CTLM® system to twoone of our distributors and the revenue of $1,238 and cost of sales of $517 is from the sale of parts and servicing the CTLM® to our distributors. OneThis sale represented one new CTLM® System was sold during the nine months ended March 31, 2012.2013.
Other Income for the three and nine months ended March 31, 2012,2013, was $31,261$18,704 and $154,174.$73,330. Of the $31,261, $25,098$18,704, $18,000 represented the extinguishment of debt $5,304 was the reduction in the allowance for doubtful accounts and $859$704 represented the use of our facilities by Bioscan and consulting with our engineers pursuant to the Bioscan Agreement (See Part II, Item 5, Other Information, “Laser"Laser Imager for Lab Animals”Animals"). Of the $154,174, $130,049$73,330, $71,219 represented the extinguishment of debt $21,327 was the reduction in the allowance for doubtful accounts and $2,798$2,111 represented the use of our facilities by Bioscan and consulting with our engineers pursuant to the Bioscan AgreementAgreement.
GENERAL AND ADMINISTRATIVE
General and administrative expenses during the three and nine months ended March 31, 2012,2013, were $442,004 $263,025 and $1,854,225,$701,702, respectively, representing decreases of $305,385$178,979 or 41%40% and $171,789$1,152,523 or 8%62%, from $747,389$442,004 and $2,026,014$1,854,225 in the corresponding periods in 2011.2012. Of the $442,004,$263,025, compensation and related benefits comprised $184,872 (64%$158,054 (60%) compared to $408,836 (54%$284,874 (64%), during the three months ended March 31, 2011.2012. Of the $184,872$158,054 and $408,836$284,874 compensation and related benefits, $7,819$0 (0%) and $7,819 (3%) and $88,582 (21%), respectively, were due to non-cash compensation related to expensing stock options.
Of the $1,854,225,$701,702, compensation and related benefits comprised $889,813 (48%$264,630 (38%), compared to $1,233,261 (61%$889,813 (48%), during the nine months ended March 31, 2011.2012. Of the $889,813 $264,630 and $1,233,261$889,813 compensation and related benefits, $10,656$24,400 (9%) and $10,656 (1%) and $265,817 (22%), respectively, were due to non-cash compensation related to expensing stock options.
The three-month decrease of $305,385$178,979 is due primarily from $123,962$126,820 in compensation and related benefits as a result of a decreased amountreduction of stock option expense during the current quarter; $38,500 in placement fees, $85,501staff; $50,345 in premium expenses associated with the short-term promissory notesnotes; $8,757 in payroll tax penalty and $31,250interest expense; $6,037 in original issue discount; $18,327 in legalcell phone expenses; and $17,500 in consulting expenses.
The nine-month decrease of $171,789 is a net result. The significant decreases of $343,449 in compensation and related benefits during the current period of which $255,161 was a reduction in the equity based compensation related to expensing stock options; $102,000 in loan cost expenses and $26,875$3,903 in additional consideration expense associated with our short-term promissory notes; and $31,910$2,800 in placement fees associated with our long-term promissory notes.
. The decreases were partially offset by increasesan increase of $158,000$20,897 in legal expenses involving corporate and securities matters.
The nine-month decrease of $1,152,523 is a net result. The significant decreases of $625,183 in compensation and related benefits as a result of a reduction of staff and the executives not accruing any compensation for two of the three quarters; $177,371 in premium expense due to a reduction in the principal amount of new short-term promissory notes issued during the quarter; $119,500 in original issue discount and $14,573 in premium expensediscounts associated with our short-term promissory notes; $71,407$71,407 in payroll tax penalty and interest expense; $38,903$34,189 in consulting expenses; $26,026 in cell phone expenses ; $20,300 in accounting expenses; $13,968 in Directors and Officers’Officers' Liability insurance; $16,933$13,793 in rent expense; $7,825$10,822 in software expenseslegal fees for Extensive Business Reporting Language (“XBRL”) required by the SEC;maintenance of patents; $9,390 in additional consideration expense associated with our short-term promissory notes; and $5,380$7,153 in accounting fees.additional consideration expense associated with our short-term promissory notes.
We do not expect a material increase in our general and administrative expenses until we realize significant revenues from the sale of our product.
RESEARCH AND DEVELOPMENT
Research and development expenses during the three and nine months ended March 31, 2012,2013, were $127,482$33,002 and $527,634,$115,082, respectively, representing decreases of $79,276$94,480 or 38%74% and $157,762$412,552 or 23%78%, from $206,758$127,482 and $685,396$527,634 in the corresponding periods in 2011.2012. Of the $127,482,$33,002, compensation and related benefits comprised $134,382 (105%$30,627 (93%), compared to $173,311 (84%$134,382 (105%) during the three months ended March 31, 2011.2012. Of the $134,382$30,627 and $173,311$134,382 compensation and related benefits, $758$0 (0%) and $758 (1%) and $4,272 (3%), respectively, were due to non-cash compensation related to expensing stock options.
Of the $527,634,$115,082, compensation and related benefits comprised $479,175 (91%$108,972 (95%), compared to $556,595 (81%$479,175 (91%) during the nine months ended March 31, 2011.2012. Of the $479,175 $108,972 and $556,595$479,175 compensation and related benefits, $2,275$2,275 (13%) and $2,275 (1%) and $12,965 (2%), respectively, were due to non-cash compensation related to expensing stock options.
The three-month decrease of $79,276$94,480 is due primarily to a decrease of $103,755 in compensation and related benefits due to a reduction in staff which was partially offset by an increase of $11,375 in consulting expenses.
The nine-month decrease of $412,552 is due primarily to decreases of $38,929$370,203 in compensation and related benefits; $28,800benefits due to a reduction in staff; $15,450 in consulting expenses; and $7,412$4,558 in legal expenses associated with patent applications.
The nine-month decrease of $157,762 is due primarily to decreases of $77,420 in compensationapplications and related benefits; $37,212 in consulting expenses and $37,937$3,931 in legal expenses involving FDA matters.
In the eventProvided that we are able to raiseobtain sufficient capital, asfunding to which there can be no assurance,move forward with the FDA process, we would expect a significant increase in our research and development expenses during the remainderfiscal year ending June 30, 2013 due to increased costs associated with conducting a clinical study to obtain additional case studies and preparing the FDA application for Pre-Market Approval for submission to the FDA. We would also expect our consulting expenses and professional fees to increase due to the costs associated with conducting the clinical trial and preparing the FDA application. These increases will also be reflected in the subsequent fiscal year ending June 30, 2014. See Item 5. Other Information. CTLM® Development History, Regulatory and Clinical Status.
SALES AND MARKETING
Sales and marketing expenses during the three and nine months ended March 31, 2013, were $31,241 and $83,388, respectively, representing decreases of$64,411 or 67% and $297,138 or 78%, from $95,962 and $380,526 in the corresponding periods in 2012. Of the $31,241, compensation and related benefits comprised $18,630 (60%), compared to $18,813 (23%) during the three months ended March 31, 2012. Of the $18,630 and $18,813 compensation and related benefits, $0 (0%) and $113 (1%), respectively, were due to non-cash compensation related to expensing stock options.
Of the $83,388, compensation and related benefits comprised $56,489 (68%), compared to $57,050 (15%) during the nine months ended March 31, 2012. Of the $56,489 and $57,050 compensation and related benefits, $4,000 (7%) and $338 (1%), respectively, were due to non-cash compensation related to expensing stock options.
The three-month decrease of $64,411 is primarily due to decreases of $11,441 in travel expenses; $11,250 in trade show expenses; $2,185 in public relations expense (cost of issuing press releases); $9,566 in regulatory expenses; and a reduction of bad debt expense totaling $26,250.
The nine-month decrease of $297,138 is primarily due to decreases of $126,123 in trade show expenses; $68,409 in travel expenses; $12,098 in advertising and promotion; $11,851 in public relations expense (cost of issuing press releases); $10,923 in freight expenses ; $8,667 in regulatory expenses; and a reduction of bad debt expense totaling $43,913.
Due to cost saving initiatives instituted because of our inability to secure sufficient funding, we had to curtail implementation of our global commercialization program. If and when we obtain funding, the funds will be used primarily for the costs associated with the PMA. However, we will budget funds for support of our international distributors. As the distributor network develops, we anticipate sales which will result in increases in commissions, trade show expenses, advertising and promotion and travel and subsistence costs due to this program.
AGGREGATED OPERATING EXPENSES
In comparing our total operating expenses (general and administrative, research and development, sales and marketing, inventory valuation adjustments and depreciation and amortization) in the three months ended March 31, 2013 and 2012, which were $338,977 and $683,033 respectively, we had a decrease of $344,056 or 50%.
In comparing our total operating expenses (general and administrative, research and development, sales and marketing, inventory valuation adjustments and depreciation and amortization) in the nine months ended March 31, 2013 and 2012, which were $937,625 and $2,824,915 respectively, we had a decrease of $1,887,290 or 67%.
The decrease of $344,056 in the three-month comparative period was primarily due to decreases of $178,979 in general and administrative expenses; $94,480 in research and development expenses, $64,411 in sales and marketing expenses and $2,535 in depreciation and amortization.
The decrease of $1,887,290 in the nine-month comparative period was primarily due to decreases of $1,152,523 in general and administrative expenses; $412,552 in research and development expenses; $297,138 in sales and marketing expense; and $12,802 in depreciation and amortization.
We expect a significant increase in our research and development expenses during the fiscal year ending June 30, 2012 and thereafter2013 due to increased costs associated with conducting the clinical trial and preparing the FDA application for Pre-Market Approval and submitting it to the FDA. We also expect our consulting expenses and professional fees to increase due to the costs associated with conducting the clinical trial and preparing the FDA application. See Item 5. Other Information. CTLM® Development History, Regulatory and Clinical Status.
SALES AND MARKETING
Sales and marketing expenses during the three and nine months ended March 31, 2012, were $95,962 and $380,526, respectively, representing a decrease of $16,542 or 15% and an increase of $11,641 or 3%, from $112,194 and $368,885 in the corresponding periods in 2011. Of the $95,962, compensation and related benefits comprised $18,813 (20%), compared to $19,612 (17%) during the three months ended March 31, 2011. Of the $18,813 and $19,612 compensation and related benefits, $113 (1%) and $968 (6%), respectively, were due to non-cash compensation related to expensing stock options.
Of the $368,885, compensation and related benefits comprised $57,050 (15%), compared to $49,991 (14%) during the nine months ended March 31, 2011. Of the $57,050 and $49,991 compensation and related benefits, $338 (1%) and $2,903 (6%), respectively, were due to non-cash compensation related to expensing stock options.
The three-month decrease of $16,542 is a net result. The relevant decreases were $32,518 in travel expenses; $6,051 in trade show expenses; $5,326 in advertising and promotion. The decrease is offset by an increase of $26,250 in bad debt expense.
The nine-month increase of $11,641 is a net result. The relevant increases were $9,026 in trade show expenses; $4,117 in freight expenses; $7,455 in public relations expense (cost of issuing press releases); $26,250 in bad debt expense and $2,400 in estimated warranty expense.
The increase is offset by a decrease in regulatory expenses of $18,891 as a result of incurring the cost of EMC testing for the CTLM® in the corresponding period in 2011; $12,678 in travel expenses and $5,600 in consulting expenses.
We expect a significant increase in our sales and marketing expenses during the fiscal year ending June 30, 2012 due to the continued implementation of our global commercialization program. We expect commissions, trade show expenses, advertising and promotion and travel and subsistence costs to increase due to this program.
AGGREGATED OPERATING EXPENSES
In comparing our total operating expenses (general and administrative, research and development, sales and marketing, inventory valuation adjustments and depreciation and amortization) in the three months ended March 31, 2012 and 2011, which were $683,033 and $1,096,162 respectively, we had a decrease of $413,130 or 38%.
In comparing our total operating expenses (general and administrative, research and development, sales and marketing, inventory valuation adjustments and depreciation and amortization) in the nine months ended March 31, 2012 and 2011, which were $2,824,915 and $3,176,183 respectively, we had an increase of $351,268 or 11%.
The decrease of $413,130 in the three-month comparative period was primarily due to decreases of $305,385 in general and administrative expenses; $79,276 in research and development expenses, $16,542 in sales and marketing expenses and $11,099 in depreciation and amortization.
The decrease of $351,268 in the nine-month comparative period was primarily due to decreases of $171,789 in general and administrative expenses; $157,762 in research and development expenses and $35,822 in depreciation and amortization. The decreases were partially offset by an increase of $11,641 in sales and marketing expense.
In the event that we are able to raise sufficient capital, as to which there can be no assurance, we expect a significant increase in our research and development expenses during the remainder of the fiscal year ending June 30, 2012 and thereafter due to increased costs associated with conducting the clinical trial and preparing the FDA application for Pre-Market Approval and submitting it to the FDA. We also expect our consulting expenses and professional fees to increase due to the costs associated with conducting the clinical trial and preparing the FDA application.
Inventory Valuation Adjustments during the three and nine months ended March 31, 2012,2013, were $5,578$1,927 and $20,383,$8,108, respectively, representing a decreasedecreases of $827$3,651 or 13%65% and an increase of $2,464$12,275 or 14%60%, from $6,405$5,578 and $17,919,$20,383, respectively, during the three and nine months ended March 31, 2011.2012. The fluctuations were due to the write-down of systems that have lost value to due usage as demonstrators on consignment.
Compensation and related benefits during the three and nine months ended March 31, 2012,2013, were $438,069 $207,312 and $1,426,038,$430,091, respectively, representing decreases of $163,690$230,758 or 27%53% and $413,809$995,947 or 22%70% from $601,760 $438,069 and $1,839,847,$1,426,038, respectively, during the three and nine months ended March 31, 2011.2012. Of the $438,069 $207,312 and $1,426,038 $430,091compensation and related benefits, $8,690 (2%$0 (0%) and $13,269 (1%$42,671 (10%), respectively, were due to non-cash compensation associated with expensing stock options, which were decreasesa decrease of $85,131$8,690 or 91% 100% and $268,416an increase of $29,402 or 95%222% from $93,821$8,690 and $281,685$13,269 during the three and nine months ended March 31, 2011.2012.
Interest expense during the three and nine months ended March 31, 2012,2013, was $196,828$291,596 and $1,091,158,$654,945, respectively, representingan increase of $94,768 or 48% and a decrease of $216,389$436,213 or 52%40% from $196,828 and an increase of $610,281 or 127% from $413,217 and $480,877,$1,091,158, respectively, during the three and nine months ended March 31, 2011.2012. Of the $196,828$291,596 and $1,091,158,$654,945, respectively, $171,335$264,557 and
$873,177 is associated with the amortization of the debt discount on the convertible notes at below market prices on the Short-Term and Long-Term Promissory Notes during three and nine months ended March 31, 2012.2013. See Part II. Item 5. Other Information – “Financing/"Financing/Equity Line of Credit”Credit".
BALANCE SHEET DATA
Our combined cash and cash equivalents totaled $1,589$31,707 as of March 31, 2012.2013. This is a decreasean increase of $187,546$30,084 from $189,135$1,623 as of June 30, 2011.2012. During the quarter ending March 31, 2012,2013, we received no cash from the sale of common stock through our private equity agreement with Southridge, and we received a net of $272,200$292,650 from short term loans and a net of $0 from long-term loans. See Part II. Item 5, – “Financing/"Financing/Equity Line of Credit”Credit"
We do not expect to generate a positive internal cash flow for at least the next 12 months due to increased costs associated with conducting the clinical trial and preparing the FDA application for Pre-Market Approval and submitting it to the FDA, an anticipated increase in marketing and manufacturing expenses associated with the international commercialization of the CTLM®, and the costs associated with product development activities and the time required for homologations from certain countries.
Property and Equipment was valued at $133,271$119,939 net as of March 31, 2012.2013. The overall decrease of $28,442$11,213 from June 30, 20112012 is due primarily to depreciation recorded for the first, second and second quarter.third quarter.
LIQUIDITY AND CAPITAL RESOURCES
We are currently a development stage company, and our continued existence is dependent upon our ability to resolve our liquidity problems, principally by obtaining additional debt and/or equity financing. We have yet to generate a positive internal cash flow, and until significant sales of our product occur, we are mostly dependent upon debt and equity funding from outside investors. In the event that we are unable to obtain debt or equity financing or are unable to obtain such financing on terms and conditions acceptable to us, we may have to cease or severely curtail our operations. This would materially impact our ability to continue as a going concern.
Since inception we have financed our operating and research and product development activities through several Regulation S and Regulation D private placement transactions, with loans from unaffiliated third parties, and through a sale/lease-back transaction involving our former headquarters facility. Net cash used for operating and product development expenses during the nine months ending March 31, 2012,2013, was $1,494,351,$687,566, primarily due to the costs of wages and related benefits, legal and consulting expenses, research and development expenses, clinical expenses, and travel expenses associated with clinical and sales and marketing activities. At March 31, 2012,2013, we had working capital of $(4,966,901)$(4,837,649) compared to working capital of $(4,424,145)($5,650,805) at June 30, 2011.2012.
During the third quarter ending March 31, 2012,2013, we did not raise any money through the sale of shares of common stock pursuant to our Amended Private Equity Credit Agreement with Southridge dated January 7, 2010 and we received a net of $272,200$292,650 from short-term loans and a net of $0 from long-term loans. See Item 5. Other Information “Financing"Financing – Equity Line of Credit.”" We do not expect to generate a positive internal cash flow for at least the next 12 months due to limited expected sales and the expected costs of commercializing our initial product, the CTLM®, in the international market and the expense of continuing our ongoing product development program. We will require additional funds for operating expenses, FDA regulatory processes, manufacturing and marketing programs and to continue our product development program. We expect to use our Amended Private Equity Agreement with Southridge and/or alternative financing facilities to raise the additional funds required to continue operations. In the event that we are unable or elect not to utilize the Amended Private Equity Agreement with Southridge or any successor agreement(s) on comparable terms, we would have to raise the additional funds required by either equity or debt financing, including entering into a transaction(s) to privately place equity, either common or preferred stock, or debt securities, or combinations of both; or by placing equity into the public market through an
underwritten secondary offering. If additional funds are raised by issuing equity securities, whether to Southridge or other investors, dilution to existing stockholders will result, and future investors may be granted rights superior to those of existing stockholders.
Capital expenditures for the three months ending March 31, 2012,2013, were $0 as compared to $0 for the three months ending March 31, 2011.2012. We anticipate that the balance of our capital needs for the fiscal year ending June 30, 20122013 will be approximately $5,000.$10,000.
There were no other changes in our existing debt agreements other than extensions, and we had no outstanding bank loans as of March 31, 2012.2013. Our fixed commitments, including salaries and fees for current employees and consultants, rent, payments under license agreements and other contractual commitments are substantial and are likely to increase as additional agreements are entered into and additional personnel are retained. We will require substantial additional funds for our product development programs, operating expenses, regulatory processes, and manufacturing and marketing programs. Our future capital requirements will depend on many factors, including the following:
1) | The progress of our ongoing product development projects; |
2) | The time and cost involved in obtaining regulatory approvals; |
3) | The cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; |
4) | Competing technological and market developments; |
5) | Changes and developments in our existing collaborative, licensing and other relationships and the terms of any new collaborative, licensing and other arrangements that we may establish; |
6) | The development of commercialization activities and arrangements; and |
7) | The costs associated with compliance to SEC regulations. |
We do not expect to generate a positive internal cash flow for at least 12 months as substantial costs and expenses continue due principally to the international commercialization of the CTLM®, activities related to our FDA approval process, and advanced product development activities. We intend to use the proceeds from the sale of convertible debentures, convertible preferred shares, convertible promissory notes, and draws from our new Private Equity Agreement with Southridge and any successor private equity agreements and/or alternative financing facilities as our sources of working capital. It is unlikely that we will be able to use our Private Equity Agreement with Southridge or any successor private equity agreements due to the high costs of preparing and filing an S-1 registration statement and the limitation on how many shares can be registered to stay within the window to be deemed a secondary offering. There can be no assurance that the equity credit financing will continue to be available on acceptable terms.
We plan to continue our policy of investing excess funds, if any, in a High Performance Money Market savings account at Wells Fargo Bank, N.A.
BUSINESS LEASE AGREEMENT
On June 2, 2008, we executed a Business Lease Agreement with Ft. Lauderdale Business Plaza Associates, an unaffiliated third-party, for 9,870 square feet of commercial office and manufacturing space at 5307 NW 35th Terrace, Ft. Lauderdale, Florida. The term of the lease is five years and one month; with the first monthly rent payment due September 1, 2008; and with an option to renew for one additional period of three years. The monthly base rent for the initial year is $6,580 plus applicable sales tax. During the term and any renewal term of the lease, the base annual rent shall be increased each year. Commencing with the first day of August 2009 and each year thereafter, the base annual rent shall be cumulatively increased by 3.5% each lease year plus applicable sales tax. IDSI will also be obligated to pay as additional rent its pro-rata share of all common area maintenance expenses, which is estimated to be $3,084.37 per month for the first 12 months of the lease. The total monthly rent including Florida sales tax for the first 12 months is $10,244.23. Upon the execution of the lease, we paid the first month's rent of $10,244.23 and a security deposit of $13,160.00. In August 2008, we moved into our new headquarters facility. We believe that our new facility is adequate for our current and reasonably foreseeable future needs and provides us
with a monthly cost savings of $23,196 per month. We intend to assemble the CTLM® at our facility from hardware components that will be made by vendors to our specifications. In the event that demand for the CTLM® substantially increases, we will be utilizing FDA approved contract manufacturing companies to build our CTLM® systems.
commercial office space at 5301 NW 35th Terrace, Ft. Lauderdale, Florida. The term of the lease will run concurrent with our original lease commencing on September 1, 2011 and terminating on September 30, 2013. The monthly base rent for the initial year is $4,500 plus applicable sales tax and increase by 3.5% each year to the lease expiration. We terminated this lease agreement and obtained a release dated August 2, 2012 from Ft. Lauderdale Business Plaza Associates.
Issuance of Stock for Services/Dilutive Impact to Shareholders
We, from time to time, have issued and may continue to issue stock for services rendered by consultants, all of whom have been unaffiliated.
Since we have generated no significant revenues to date, our ability to obtain and retain consultants may be dependent on our ability to issue stock for services. Since July 1, 1996, we have issued an aggregate of 2,306,500 shares of common stock according to registration statements on Form S-8. The aggregate fair market value of the shares registered on Form S-8 when issued was $2,437,151. On July 15, 2008, we entered into a Financial Services Consulting Agreement (the “Agreement”"Agreement") with R.H. Barsom Company, Inc. of New York, NY, an unaffiliated third-party, to provide us with investor relations services and guidance and assistance in available alternatives to maximize shareholder value. The term of the Agreement was six months, with payment for services being made with shares of IDSI’sIDSI's common stock with a restricted legend to Richard E. Barsom. The total payment was 5,000,000 restricted shares, with the first payment of 2,500,000 restricted shares paid on July 16, 2008, and the second payment of 2,500,000 restricted shares paid on October 3, 2008. The aggregate fair market value of the 5,000,000 restricted shares when issued was $55,000. The Company agreed to register as soon as practicable the aggregate of 5,000,000 shares in an S-1 Registration Statement. In April 2010, we issued 250,000 restricted shares to Frederick P. Lutz to satisfy the balance of $2,250 previously owed to him for investor relation services and for additional investor relation services. The aggregate fair market value of the 250,000 restricted shares when issued was $13,500.
On May 8 2013, we issued Michael Addley, our COO, 120,645,200 shares of restricted common stock for partial payment of accrued wages. The aggregate fair value of the issuance was $36,194.
The issuance of large amounts of our common stock, sometimes at prices well below market price, for services rendered or to be rendered and the subsequent sale of these shares may further depress the price of our common stock and dilute the holdings of our shareholders. In addition, because of the possible dilution to existing shareholders, the issuance of substantial additional shares may cause a change-in-control.
Issuance of Stock in Connection with Short-Term Loans
In November 2009, we borrowed a total of $237,500 from four private investors pursuant to short-term promissory notes. These notes were due and payable in the amount of principal plus 20% premium, so that the total amount due was $285,000. In addition, we issued to the investors 70 shares of restricted common stock for each $1 lent so that a total of 16,625,000 shares of stock were issued to the investors. The aggregate fair market value of the 16,625,000 shares of stock when issued was $465,500. $30,000 principal on one of the notes was sold to OTC Global Partners in September 2012. $10,000 premium on one of the notes was sold to WHC Capital LLC on March 22, 2013.As of the date of this report,March 31, 2013, we have repaid an aggregate principal and premium in the amount of $148,500 on these short-term notes and owe a balance of $207,100$196,300 of which $100,000$70,000 is the principal remaining from one note and $107,100 is the balance of premium due from three notes.remaining. The original due date of December 21, 2009, was first extended to February 28, 2010, with a second extension to June 15, 2010, a third extension to September 30, 2010 and a fourth extension to October 31, 2010. Further extensions of the $100,000
note were made through June 30, 2012 for 3% additional premium per month. However, as of June 30, 2012, we are accruing this 3% additional premium per month but have not yet received an extension of maturity date and are in technical default of the note. We are negotiating with the lender to extend the maturity date. In connection with all of the extensions, a total of $70,600$89,800 of additional premium was accrued as of the date of this report.March 31, 2013.
In December 2009, we borrowed a total of $400,000 from a private investor pursuant to three short-term promissory notes. These notes were payable from March 10 through March 15, 2010 in the amount of principal plus 15% premium, so that the total amount due was $460,000. In addition, we issued to the investor 24,000,00048,000 shares of restricted common stock as collateral. These shares are to be returned and cancelled upon payment of the notes. The original due date of March 15, 2010 was first extended to June 15, 2010, with a second extension to September 30, 2010 and a third extension to October 31, 2010. Further extensions of the notes were made through June 30, 2012 for 3% additional premium per month on each note. We have not yet received an extension of maturity date and are in technical default of the note. We are negotiating with the lender to extend the maturity date. In connection with these extensions a total of $283,400$284,420 of additional premium was accrued for the December 2009 notes as of the date of this report. In April 2011, Southridge purchased a total of $200,000 in principal value of promissory notes from the private investor. All conversions before December 10, 2012, were adjusted to reflect a 1 for 500 reverse split effective that date. As of March 31, 2013, Southridge has converted $100,000$180,515 principal and $55,600 premium into 20,746,6662,257,052 shares of which 41,493 shares of our common stock that was previously issued as collateral.
On December 12, 2012, the private investor sold $180,769 of a promissory note originally dated December 15, 2009 to ASC Recap. The terms of the original note remain the same except that the holder may elect at any time to convert any part or all of the $180,769 into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date. We reserved 18,000,000 shares of our common stock in connection with this transaction.
On January 3, 2013, Magna Group, LLC ("Magna") purchased $100,000 principal of a Promissory Note dated December 10, 2009 from a private investor. A new Convertible Promissory Note was issued to Magna on January 3, 2013 with a maturity date of September 3, 2013. Interest will accrue at 12% per annum. Any amount on principal or interest that remains unpaid when due shall bear an interest rate of 22% from the due date until paid. Magna may elect at any time to convert any part or all of the $100,000 plus interest into shares of our common stock at an Initial Conversion Price equal to 45% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice. We reserved 50,000,000 shares of our common stock in connection with this transaction.
On January 18, 2013, Redwood Management LLC ("Redwood") purchased $100,000 principal of a $100,000 Promissory Note originally dated December 14, 2009 from a private investor. Redwood may elect at any time to convert any part or all of the $100,000 into shares of our common stock at an Initial Conversion Price equal to 45% of the lowest closing bid price during the 15 trading days immediately prior to the date of the conversion notice. We reserved 100,000,000 shares of our common stock in connection with this transaction.
On January 8, 2010, we borrowed a total of $600,000 from a private investor pursuant to two short-term promissory notes. These notes were payable April 6, 2010 in the amount of
principal plus 15% premium, so that the total amount due was $690,000. In addition, we issued to the investor 31,363,63762,727 shares of restricted common stock as collateral. These shares are to be returned and cancelled upon payment of the notes. The original due date of April 6, 2010 was first extended to June 15, 2010, with a second extension to September 30, 2010 and a third extension to October 31, 2010. Further extensions of the notes were made through July 31, 2011 for 3% additional premium per month on each note. In January 2011, Southridge purchased a total of $600,000 in principal value of promissory notes from the private investor. As of the date of this report, Southridge has fully converted $600,000 principal and $340,099 premium into 384,456,103768,912 shares of our common stock of which 31,056,10862,112 shares were collateral shares and 353,399,995
706,800 new shares were issued pursuant to Rule 144. Although we arewere in technical default of these two notes, the holder, Southridge has elected to convert these notes into common shares. In connection with these prior extensions through June 30, 2012 and the accrual of the additional premiums through May 31, 2012, a total of $255,647 of additional premium was accrued for the January 2010 notes as of the date of this report.June 30, 2012.
On February 25, 2010, we borrowed $350,000 from a private investor pursuant to a short-term promissory note. We issued to the investor 35 shares of Series L Convertible Preferred Stock as collateral. This note had a maturity date of April 30, 2010; however, the investor gave us notice of conversion to the collateral shares on March 31, 2010. The Note was cancelled upon this conversion. The 35 shares of Series L Convertible Preferred Stock accrue dividends at an annual rate of 9% and are convertible into an aggregate of 16,587,690 shares of common stock (473,934 shares of common stock for each share of preferred stock). Pursuant to the Certificate of Designation, Rights and Preferences for the Series L Convertible Preferred Stock, we are obligated to reduce the conversion price and reserve additional shares for conversion if we sold or issued common shares below the price of $.0211 per share (the market price on the date of issuance of the Preferred Stock). In October 2010, we obtained a waiver from the private investor holding the 35 shares of Series L Convertible Preferred Stock in which the investor agreed to convert no more than the 16,587,690 common shares currently reserved as we do not have sufficient authorized common shares to reserve for further conversions pursuant to the Certificate of Designation, Rights and Preferences. The investor agreed to a conversion floor price of $.015, which required us to reserve an additional 6,745,64313,491 common shares.
On January 6, 2011, the investor converted 15 shares of the Series L Convertible Preferred Stock into 10,000,00020,000 shares of common stock. As of the date of this report, the investor holds 20 shares of the Series L Convertible Preferred Stock.
On December 13, 2010, we borrowed a total of $60,000 from a private investor pursuant to a short-term promissory note. The note is payable on or before January 31, 2011. As consideration for this loan, we were obligated to pay back his principal, $20,400$26,400 in premium and issue 3,000,0006,000 restricted shares of common stock upon the approval by our shareholders of an increase in authorized common stock at our annual meeting to be held on July 12, 2011. On September 9, 2011, we issued the 3,000,0006,000 common shares pursuant to Rule 144. We received an extension of maturity date to June 30,December 31, 2012 for this note. On September 5, 2012, the private investor sold $40,000 principal of the note to SGI Group. On December 17, 2012, the private investor sold the balance of his note totaling $46,400 ($20,000 principal and $26,400 premium) to WHC Capital LLC.
In November and December 2010, we received a total of $145,000 from Southridge pursuant to three short-term promissory notes. All three notes provide for a redemption premium of 15% of the principal amount on or before March 31, 2011. Interest will accrue at 8% per annum until maturity. Southridge may elect at an Event of Default any time to convert any part or all of the $145,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In January 2011, we received a total of $157,000 from Southridge pursuant to three short-term promissory notes. All three notes provide for a redemption premium of 15% of the principal amount on or before May 31, 2011. Interest will accrue at 8% per annum until maturity. Southridge may elect at an Event of Default any time to convert any part or all of the $157,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In February 2011, we received a total of $115,000 from Southridge pursuant to two short-term promissory notes. Both notes provide for a redemption premium of 15% of the principal amount on or before May 31, 2011. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Defaultany time to convert any part or all of the $115,000 Principal Amount of the Notes plus accrued interest into shares of
our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In March 2011, we received $60,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before May 31, 2011. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default any time to convert any part or all of the $60,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In April 2011, we received $165,000 from Southridge pursuant to two short-term promissory notes. The notes provide for a redemption premium of 15% of the principal amount on or before July 31, 2011. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default any time to convert any part or all of the $165,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In May 2011, we received $80,000 from Southridge pursuant to two short-term promissory notes. The notes provide for a redemption premium of 15% of the principal amount on or before July 31, 2011. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default any time to convert any part or all of the $80,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In July 2011, we received $150,000 from Southridge pursuant to a short-term promissory note. The note provided for a redemption premium of 15% of the principal amount on or before December 31, 2011. We received an extension of maturity date to February 29, 2012 for these notes. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default any time to convert any part or all of the $150,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 70% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In August 2011, we received $82,500 from Southridge pursuant to two short-term promissory notes of which the principal on these notes was $100,000 and $7,500, respectively. The $100,000 note provided for a $25,000 original issue discount and both notes provided for a redemption premium of 15% of the principal amount on or before December 31, 2011. We received an extension of maturity date to February 29, 201223, 2013 for these notes. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default any time to convert any part or all of the $107,500 principal amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 70% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. The $100,000 and the$7,500 note hashave been paid in full through the conversion to common stock pursuant to Rule 144.
In August 2011, we received $50,000 from OTC Global Partners, LLC pursuant to a short-term promissory note. The note provided for a redemption premium of 15% of the principal
amount on or before March 1, 2012. Interest will accrue at 8% per annum until maturity above and beyond the premium. OTC Global Partners, LLC may elect at an Event of Default any time to convert any part or all of the $50,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.014 or (b) 65% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In September 2011, we received $133,000 from Southridge pursuant to two short-term promissory notes of which the principal on these notes was $100,000 and $100,000, respectively. One of the $100,000 notes provided for a $33,000 original issue discount and the other $100,000 note provided a $34,000 original issue discount. The notes provided for a redemption premium of 15% of the principal amount on or before December 31, 2011. We received an extension of maturity date to June 30,December 31, 2012 for these notes. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default any time to convert any part or all of the $200,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.0075 or (b) 70% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. The $100,000 note has been paid in full through the conversion to common stock pursuant to Rule 144.
In October 2011, we received $67,000 from Southridge pursuant to a short-term promissory note of which the principal on the note was $100,000. The note provides for a $33,000 original issue discount. The note provided for a redemption premium of 15% of the principal amount on or before January 12, 2012. We received an extension of maturity date to June 30,December 31, 2012 for this note. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default any time to convert any part or all of the $100,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.0075 or (b) 70% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice.
In October 2011, we received $67,000 from Southridge pursuant to a short-term promissory note of which the principal on the note was $100,000. The note provides for a $33,000 original issue discount. The note provided for a redemption premium of 15% of the principal amount on or before January 26, 2012. We received an extension of maturity date to June 30,December 31, 2012 for this note. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default any time to convert any part or all of the $100,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.005 or (b) 70% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice.The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In October 2011, we received $78,500 from Asher Enterprises pursuant to a short-term promissory note due on or before July 26, 2012. Interest will accrue at 8% per annum until maturity above and beyond the premium. Asher Enterprises may elect at an Event of Default any time after 180 days to convert any part or all of the $78,500 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 58% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In November 2011, we received $20,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before December 31, 2012. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default any time to convert any part or all of the $20,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 62% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.The note has been paid in full through the conversion to common stock pursuant to Rule 144.
On November 21, 2011, Southridge sold their May 12, 2011 $60,000 short-term promissory note to Panache Capital, LLC (“Panache”("Panache"). The terms of the original note remain the same except that the maturity date is now November 21, 2012 and interest will accrue at 10% per annum until maturity above and beyond the premium.
In November 2011, we received $40,000 from Panache pursuant to a short-term promissory note. The note provides a maturity date of November 21, 2012. Interest will accrue at 10% per
annum until maturity. Panache may elect at an Event of Default any time to convert any part or all of the $40,000 Principal Amount of the Note plus accrued interest into
shares of our common stock at a conversion price equal to 62% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In November 2011, we received $53,000 from Asher Enterprises pursuant to a short-term promissory note due on or before September 5, 2012. Interest will accrue at 8% per annum until maturity above and beyond the premium. Asher Enterprises may elect at an Event of Default any time after 180 days to convert any part or all of the $53,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 58% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. This note has been paid in full through the conversion to common stock pursuant to Rule 144.
In December 2011, we received $17,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before December 18, 2012. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default any time to convert any part or all of the $17,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 62% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In December 2011, we received $12,000 from an unaffiliated third party investor pursuant to a short-term promissory note. The note provided for a redemption premium of 15% of the principal amount on or before March 8, 2012. Interest will accrue at 10% per annum until maturity above and beyond the premium. On January 6, 2012, we amended a promissory note in the principal amount of $12,000 dated December 9, 2011 held by an unaffiliated third-party investor. The note provided for a redemption premium of 15% of the principal amount on or before March 8, 2012. Interest will accrue at 10% per annum until maturity above and beyond the premium. The amendment provided for the issuance of three (3) restricted shares of Series P Preferred Stock having a stated value of $5,000 per share. These shares, having a total value of $15,000, will be used as collateral for the note held by the investor. We received an extension of maturity to June 4, 2012 for this note. Thereafter, a late fee premium of 1% per month will be due if unpaid. We have not yet received an extension of maturity date and are in technical default of the note. We are negotiating with the lender to extend the maturity date.
In December 2011, we borrowed a total of $21,604 from a private investor pursuant to two short-term promissory notes. The notes provided for a 2% premium per month. One of the notes was payable on or before December 16, 2011 and the other on or before January 6, 2012. We received an extension of maturity date to August 31, 2012 for these notes for 3% additional premium per month on each note.
In January 2012, we received a total of $175,200 from an unaffiliated third party investor pursuant to five short-term promissory notes with a maturity date ranging from March 5, 2012 to March 20, 2012. The notes provided for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 10% per annum until maturity above and beyond the premium. We issued a total of 38 Series P Preferred Stock to the investor as collateral with a total stated value of $190,000. We received an extension of maturity to June 4, 2012 for these notes. Thereafter, a late fee premium of 1% per month will be due if unpaid. We have not yet received an extension of maturity date and are in technical default of the note. We are negotiating with the lender to extend the maturity date. On March 20, 2013, the private investor sold $57,600 Principal of his $57,600 note to Tangiers Investment Group LLC. The full sale of the note was for $75,969 ($57,600 Principal, $8,640 Premium, $4,032 Late Fee Premium and $5,697 Interest). On March 20, 2013, we entered into a new Promissory Note with Tangiers Capital for $75,969 in Principal with a maturity date of March 19, 2014. Interest will accrue at 15% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $75,969 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In February 2012, we received a total of $42,000 from an unaffiliated third party investor pursuant to two short-term promissory notes with a maturity date ranging from April 13, 2012 to April 30, 2012. The notes provided for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 10% per annum until maturity above and beyond the premium. We issued a total of 9 Series P Preferred Stock to the investor as collateral with a total stated value of $45,000. We received an extension of maturity to June 4, 2012 for these notes. Thereafter, a late fee premium of 1% per month will be due if unpaid.
In February 2012, we We have not yet received $25,000 from Panache pursuant to a short-term promissory note. The note provides aan extension of maturity date of February 28, 2013. Interest will accrue at 10% per annum until maturity. Panache may elect at an Event of Default to convert any part or alland are in technical default of the $25,000 Principal Amount ofnote. We are negotiating with the Note plus accrued interest into shares of our common stock at a conversion price equallender to 55% ofextend the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.maturity date.
On February 23, 2012, Southridge sold their $100,000 short-term promissory note to Panache Capital, LLC (“Panache”("Panache") of which a balance of $70,000 principal was remaining after Southridge converted $30,000 principal in a debt to equity conversion on February 17, 2012. The terms of the original note remain the same except that the maturity date is now November 21, 2012 and interest will accrue at 10% per annum until maturity above and beyond the premium.The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In February 2012, we received $25,000 from Panache pursuant to a short-term promissory note. The note provides a maturity date of February 28, 2013. Interest will accrue at 10% per annum until maturity. Panache may elect at any time to convert any part or all of the $25,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 55% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice. The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In March 2012, we received $30,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before March 18, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default any time to convert any part or all of the $30,000
Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 62% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In April 2012, we received $11,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before December 31, 2012. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default any time to convert any part or all of the $11,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In April 2012, we received $2,500 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before April 25, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default any time to convert any part or all of the $2,500 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In May 2012, we received a total of $25,000 from an unaffiliated third party investor pursuant to a short-term promissory note with a maturity date of August 2, 2012. The note provides for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 10% per annum until maturity above and beyond the premium. We issued a total of 5 Series P Preferred Stock to the investor as collateral with a total stated value of $25,000. We have not yet received an extension of maturity date and are in technical default of the note. We are negotiating with the lender to extend the maturity date.
In May 2012, we received $8,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before May 14, 2013. Interest will accrue at 8% per
annum until maturity above and beyond the premium. Southridge may elect at an Event of Default any time to convert any part or all of the $8,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In May 2012, we received $13,000 from Linda Grable, our CEO and Chairman of the Board, pursuant to a short-term promissory note. Ms. Grable is deemed an affiliated party. The note provides for a redemption premium of 15% of the principal amount on or before May 21, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. Ms. Grable may elect at any time to convert any part or all of the $13,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice. The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In May 2012, we received $32,000 from a private investor pursuant to two short-term promissory notes with a maturity date ranging from May 17, 2013 to May 20, 2013. The notes provides for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $32,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.
In June 2012, we received $6,672 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before June 17, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at any time to convert any part or all of the $6,672 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice. The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In June 2012, we received $14,000 from a private investor pursuant to two short-term promissory notes with a maturity date ranging from June 6, 2013 to June 20, 2013. The notes provides for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $14,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.
In July 2012, we received $20,100 from a private investor pursuant to four short-term promissory notes with a maturity date ranging from July 9, 2013 to July 24, 2013. The notes provide for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $20,100 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.
In August 2012, we received $25,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before December 31, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at any time to convert any part or all of the $25,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice. We reserved 50,000,000 shares of our common stock in connection with this loan. The note has been paid in full through the conversion to common stock pursuant to Rule 144.
In August 2012, we received $95,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before December 31, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at any time to convert
any part or all of the $95,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date. We reserved 400,000,000 shares of our common stock in connection with this loan.
On August 20, 2012, Southridge sold $70,000 of their original $100,000 short-term promissory note dated October 12, 2011 to Levin Consulting Group. The terms of the original note remain the same except that the holder may elect at any time to convert any part or all of the $70,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date.
In August 2012, we received $35,000 from Levin Consulting Group pursuant to a short-term promissory note with a maturity date of August 20, 2013. The note provides for a redemption premium of 15% of the principal amount on or before November 18, 2012; 20% on or before December 18, 2012; 25% on or before January 17, 2013; and 30% on or before February 16, 2013. Interest will accrue at 10% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $35,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date.
On August 20, 2012, Southridge sold $30,000 of their original $100,000 short-term promissory note dated October 12, 2011 to SGI Group LLC ("SGI"). The terms of the original note remain the same except that the holder may elect at any time to convert any part or all of the $30,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date.
In August 2012, we received $15,000 from SGI pursuant to a short-term promissory note with a maturity date of August 20, 2013. The note provides for a redemption premium of 15% of the principal amount on or before November 18, 2012; 20% on or before December 18, 2012; 25% on or before January 17, 2013; and 30% on or before February 16, 2013. Interest will accrue at 10% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $15,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date.
In September 2012, we received $29,000 from Southridge pursuant to a short-term promissory note of which the principal on the note was $30,000. The note provides for a $1,000 original issue discount. The note provides for a redemption premium of 15% of the principal amount on or before December 31, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at any time to convert any part or all of the $30,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date. We reserved 150,000,000 shares of our common stock in connection with this loan.
In September 2012, we received $25,000 from Panache pursuant to a short-term promissory note of which the principal on the note was $30,000. The note provides for a $5,000 original issue discount. The note provides for a redemption premium of 15% of the principal amount on or before December 31, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. Panache may elect at any time to convert any part or all of the $30,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date. We reserved 200,000,000 shares of our common stock in connection with this loan.
In September 2012, we received $30,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 20% on or before December 17, 2012; 25% on or before March 17, 2013; and 30% on or before June 15, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $30,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date. We reserved 700,000,000 shares of our common stock in connection with this loan.
On September 26, 2012, a private investor sold $30,000 of its original $100,000 short-term promissory note dated November 23, 2009 to OTC Global Partners. The terms of the original note remain the same except that the new note provides for a new redemption premium of 15% of the principal amount on or before September 25, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. OTC Global Partners may elect at any time to convert any part or all of the $30,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the Initial closing bid price, then the Purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date.
In October 2012, we received $20,000 from Panache pursuant to a short-term promissory note. The note provides a maturity date of September 28, 2013. Interest will accrue at 10% per annum until maturity. Any amount on principal or interest that remains unpaid when due, shall bear an interest rate of 22% from the due date until paid. Panache may elect at any time to convert any part or all of the $20,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the initial closing bid price, then the purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date.
In October 2012, we received $38,500 from FLUX Carbon Starter pursuant to a short-term promissory note. The note provides a maturity date of October 3, 2013. We received net proceeds of $33,250 after deductions of $3,500 for legal fees and $1,750 for a finder's fee. Interest will accrue at 10% per annum until maturity. FLUX Carbon Starter may elect at any time to convert any part or all of the $38,500 principal amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the initial closing bid price, then the purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date.
In October 2012, we received $27,000 from Southridge pursuant to a short-term promissory note of which the principal on the note was $40,000 and the maturity date of the note is March 31, 2013. The note provides for a $13,000 original issue discount. The note provides for a redemption premium of 20% on or before January 7, 2013; 25% on or before April 7, 2013; and 30% on or before July 15, 2013. Interest will accrue at 8% per annum until
maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $40,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the initial closing bid price, then the purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date. We reserved 300,000,000 shares of our common stock in connection with this loan.
In October 2012, we received $1,000 from Southridge pursuant to a short-term promissory note. The note provides a maturity date of April 30, 2013. The note provides for a redemption premium of 20% on or before January 22, 2013; 25% on or before April 24, 2013; and 30% after April 24, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $40,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the initial closing bid price, then the purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date. We reserved 300,000,000 shares of our common stock in connection with this loan.
In November 2012, we received $6,250 from SGI Group pursuant to a short-term promissory note of which the principal on the note was $12,500 and the maturity date of the note is May 31, 2013. The note provides for a $6,250 original issue discount. The note provides for a redemption premium of 20% of the principal amount on or before February 10, 2013; 25% on or before May 11, 2013; and 30% after May 11, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $12,500 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the initial closing bid price, then the purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date. We reserved 125,000,000 shares of our common stock in connection with this loan.
In November 2012, we received $6,250 from Star City Capital pursuant to a short-term promissory note of which the principal on the note was $12,500 and the maturity date of the note is May 31, 2013. The note provides for a $6,250 original issue discount. The note provides for a redemption premium of 20% of the principal amount on or before February 10, 2013; 25% on or before May 11, 2013; and 30% after May 11, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $12,500 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the initial closing bid price, then the purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date. We reserved 125,000,000 shares of our common stock in connection with this loan.
In November 2012, we received $20,000 from Southridge pursuant to a short-term promissory note of which the principal on the note was $40,000 and the maturity date of the note is May 31, 2013. The note provides for a $20,000 original issue discount. The note provides for a redemption premium of 20% on or before March 27, 2013; 25% on or before June 25, 2013; and 30% after June 25, 2013. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $40,000 Principal Amount of the Note plus accrued interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice; provided that if the closing bid price for the common stock on the Clearing Date is lower than the initial closing bid price, then the purchase price shall be adjusted such that the discount shall be taken from the Closing Bid Price on the clearing date. We reserved 400,000,000 shares of our common stock in connection with this loan.
In December 2012, we received $3,000 from a private investor pursuant to two short-term promissory notes with a maturity date ranging from December 5, 2013 to December 9, 2013. The notes provide for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $3,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In December 2012, we received $20,000 from a private investor pursuant to a short-term promissory note with a maturity date of December 19, 2013. The notes provide for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $20,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In December 2012, we received $12,000 from an unaffiliated third party investor pursuant to a short-term promissory note with a maturity date of June 13, 2013. The note provides for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 10% per annum until maturity above and beyond the premium. We issued a total of 3 Series P Preferred Stock to the investor as collateral with a total stated value of $15,000.
In December 2012, we received $15,000 from WHC Capital, LLC pursuant to a short-term promissory note with a maturity date of October 6, 2013. Interest will accrue at 12% per annum until maturity above and beyond the premium. Any amount on principal or interest that remains unpaid when due, shall bear an interest rate of 22% from the due date until paid. The holder may elect at any time to convert any part or all of the $15,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In January 2013, we received $31,500 from Hanover Holdings I, LLC ("Hanover") pursuant to a short-term promissory note. The note provides a maturity date of September 3, 2013. Interest will accrue at 12% per annum. Any amount on principal or interest that remains unpaid when due, shall bear an interest rate of 22% from the due date until paid. Hanover may elect at any time to convert any part or all of the $31,500 plus interest into shares of our common stock at an Initial Conversion Price equal to 45% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice. We reserved 20,000,000 shares of our common stock in connection with this transaction.
On January 3, 2013, Magna Group, LLC ("Magna") purchased $100,000 principal of a Promissory Note dated December 10, 2009 from a private investor. A new Convertible Promissory Note was issued to Magna on January 3, 2013 with a maturity date of September 3, 2013. Interest will accrue at 12% per annum. Any amount on principal or interest that remains unpaid when due, shall bear an interest rate of 22% from the due date until paid. Magna may elect at any time to convert any part or all of the $100,000 plus interest into shares of our common stock at an Initial Conversion Price equal to 45% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice. We reserved 50,000,000 shares of our common stock in connection with this transaction.
In January 2013, we received $5,850 from a private investor pursuant to two short-term promissory notes with a maturity date ranging from January 3, 2014 to January 8, 2014. The notes provide for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $5,850 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In January 2013, we received $30,000 from Black Arch Opportunity Fund LP ("Black Arch") pursuant to a short-term promissory note. The note provides a maturity date of November 9, 2013. Interest will accrue at 12% per annum. Any amount on principal or interest that remains unpaid when due, shall bear an interest rate of 22% from the due date until paid. Black Arch may elect at any time to convert any part or all of the $30,000 plus interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice.
In January 2013, we received $25,000 from Redwood Management LLC ("Redwood") pursuant to a $125,000 short-term promissory note dated January 18, 2013. The terms of the note provide that the Redwood will pay $25,000 every 30 days from execution of the note until the entire $125,000 is paid in full. The note provides a maturity date of January 18, 2014. Interest will accrue at 12% per annum on the aggregate unconverted outstanding principal amount. Redwood may elect at any time to convert any part or all of the outstanding balance plus interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the fifteen trading days immediately prior to the date of the conversion notice. We reserved 100,000,000 shares of our common stock in connection with this transaction.
In January 2013, Redwood agreed to purchase five promissory notes held by a private investor totaling $365,688 of which $213,600 in principal and $123,752 in premium; $17,040 is cash redemption premium and $11,296 is interest. Redwood may elect at any time to convert any part or all of the outstanding balance plus interest into shares of our common stock at an Initial Conversion Price equal to 45% of the lowest closing bid price during the fifteen trading days immediately prior to the date of the conversion notice. We reserved 60,000,000 shares of our common stock in connection with this transaction.
In January 2013, we received $19,500 from Hanover Holdings I, LLC ("Hanover") pursuant to a short-term promissory note. The note provides a maturity date of January 23, 2014. Interest will accrue at 12% per annum. Any amount on principal or interest that remains unpaid when due, shall bear an interest rate of 22% from the due date until paid. Hanover may elect at any time to convert any part or all of the $19,500 plus interest into shares of our common stock at an Initial Conversion Price equal to 45% of the lowest closing bid price during the five trading days immediately prior to the date of the conversion notice. We reserved 12,500,000 shares of our common stock in connection with this transaction.
In January 2013, we received $15,000 from WHC Capital, LLC pursuant to a short-term promissory note with a maturity date of January 25, 2014. Interest will accrue at 12% per annum until maturity above and beyond the premium. Any amount on principal or interest that remains unpaid when due, shall bear an interest rate of 22% from the due date until paid. The holder may elect at any time to convert any part or all of the $15,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In February 2013, we received $7,000 from a private investor pursuant to a short-term promissory note with a maturity date of February 7, 2014. The note provides for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $7,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In February 2013, we received $25,000 from Redwood Management LLC ("Redwood") pursuant to a $125,000 short-term promissory note dated January 18, 2013. The terms of the note provide that the Redwood will pay $25,000 every 30 days from execution of the note until the entire $125,000 is paid in full. The note provides a maturity date of January 18, 2014. Interest will accrue at 12% per annum on the aggregate unconverted outstanding principal amount. Redwood may elect at any time to convert any part or all of the outstanding balance plus interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the fifteen trading days immediately prior to the date of the conversion notice.
In February 2013, we received $15,000 from WHC Capital, LLC pursuant to a short-term promissory note with a maturity date of January 25, 2014. Interest will accrue at 12% per annum until maturity above and beyond the premium. Any amount on principal or interest that remains unpaid when due, shall bear an interest rate of 22% from the due date until paid. The holder may elect at any time to convert any part or all of the $15,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In March 2013, we received $78,500 from Asher Enterprises pursuant to a short-term promissory note due on or before December 5, 2013. We received net proceeds of $75,000 after deductions of $2,500 for legal fees. Interest will accrue at 8% per annum until maturity above and beyond the premium. Asher Enterprises may elect at any time after 180 days to convert any part or all of the $78,500 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 58% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. We reserved 209,000,000 shares of our common stock in connection with this loan.
In March 2013, we received $30,000 from Tangiers Investment Group, LLC ("Tangiers") pursuant to a short-term promissory note due on or before December 5, 2013. We received net proceeds of $25,000 after deductions of $2,500 for legal fees and $2,500 for a consulting fee. Interest will accrue at 15% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $30,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In March 2013, we received $20,000 from JMJ Financial pursuant to a short-term promissory note with a maturity date of March 26, 2014. During the first 90 days of the loan period, interest will be 0%. Interest will accrue at 12% per annum after 90 days until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $20,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to the lower of $0.0016 or 60% of the average of the lowest closing bid price during the 25 trading days immediately prior to the date of the conversion notice. We reserved 500,000,000 shares of our common stock in connection with this loan.
In March 2013, we received $7,500 from Redwood Management LLC ("Redwood") pursuant to a $125,000 short-term promissory note dated January 18, 2013. The terms of the note provide that the Redwood will pay $25,000 every 30 days from execution of the note until the entire $125,000 is paid in full. The note provides a maturity date of January 18, 2014. Interest will accrue at 12% per annum on the aggregate unconverted outstanding principal amount. Redwood may elect at any time to convert any part or all of the outstanding balance plus interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the fifteen trading days immediately prior to the date of the conversion notice.
In April 2013, we received $8,000 from Linda Grable, our CEO and Chairman of the Board, pursuant to a short-term promissory note. Ms. Grable is deemed an affiliated party. The note provides for a redemption premium of 15% of the principal amount on or before March 31, 2014. Interest will accrue at 8% per annum until maturity above and beyond the premium. Ms. Grable may elect at any time to convert any part or all of the $8,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the two lowest closing bid prices during the five trading days immediately prior to the date of the conversion notice.
In April 2013, we received $10,000 from a private investor pursuant to a short-term promissory note with a maturity date of April 2, 2014. The note provides for a redemption premium of 15% of the principal amount upon maturity. Interest will accrue at 8% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $10,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In April 2013, we received $32,500 from Asher Enterprises pursuant to a short-term promissory note due on or before January 14, 2014. We received net proceeds of $30,000 after deductions of $2,500 for legal fees. Interest will accrue at 8% per annum until maturity above and beyond the premium. Asher Enterprises may elect at any time after 180 days to convert any part or all of the $32,500 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 58% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice. We reserved 2,662,000,000 shares of our common stock in connection with this loan.
On April 25, 2013, the private investor sold $16,000 Principal of his $16,000 note to Tangiers Investment Group LLC. The full sale of the note was for $21,916 ($16,000 Principal, $4,000 Premium and $1,916 Interest). On April 25, 2013, we entered into a new Promissory Note with Tangiers Capital for $21,916 in Principal with a maturity date of April 24, 2014. Interest will accrue at 15% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $21,916 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
On April 25, 2013, the private investor sold $11,648 Principal of his $22,000 note to Tangiers Investment Group LLC. The full sale of the note was for $18,084 ($11,648 Principal, $3,947 Premium and $2,489 Interest). On April 25, 2013, we entered into a new Promissory Note with Tangiers Capital for $18,084 in Principal with a maturity date of April 24, 2014. Interest will accrue at 15% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $18,084 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In April 2013, we received $20,000 from Tangiers Investment Group, LLC ("Tangiers") pursuant to a short-term promissory note due on or before April 24, 2014. We received net proceeds of $15,000 after deductions of $2,500 for legal fees and $2,500 for a consulting fee. Interest will accrue at 15% per annum until maturity above and beyond the premium. The holder may elect at any time to convert any part or all of the $20,000 Principal Amount of the Note plus accrued interest into shares of our common stock at a conversion price equal to 50% of the average of the lowest closing bid price during the ten trading days immediately prior to the date of the conversion notice.
In April 2013, we received $5,000 from Redwood Management LLC ("Redwood") pursuant to a $125,000 short-term promissory note dated January 18, 2013. The terms of the note provide that the Redwood will pay $25,000 every 30 days from execution of the note until the entire $125,000 is paid in full. The note provides a maturity date of January 18, 2014. Interest will accrue at 12% per annum on the aggregate unconverted outstanding principal amount. Redwood may elect at any time to convert any part or all of the outstanding balance plus interest into shares of our common stock at an Initial Conversion Price equal to 50% of the lowest closing bid price during the fifteen trading days immediately prior to the date of the conversion notice.
OID (Original Issue Discount) is included in debt discount and amortized ratably to interest expense over the term of the respective notes to which they relate.
Debt to Equity Conversions:
On May 11, 2011, Southridge executed a debt to equity conversion of a $80,000 short-term promissory note dated November 11, 2010 plus accrued interest of $3,174. We issued Southridge 11,089,82622,180 common shares pursuant to Rule 144 based on an agreed exchange price of $0.0075$3.75 per share. We canceled the $12,000 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On July 13, 2011, Southridge executed a debt to equity conversion of a $14,000 short-term promissory note dated December 16, 2010 plus accrued interest of $641. We issued Southridge 1,464,1322,928 common shares pursuant to Rule 144 based on an agreed exchange price of $0.01$5 per share. We canceled the $2,100 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On July 13, 2011, Southridge executed a debt to equity conversion of a $51,000 short-term promissory note dated December 22, 2010 plus accrued interest of $2,269. We issued Southridge 5,326,91510,654 common shares pursuant to Rule 144 based on an agreed exchange price of $0.01 per$5per share. We canceled the $7,650 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On July 21, 2011, Southridge executed a debt to equity conversion of a $55,000 short-term promissory note dated January 13, 2011 plus accrued interest of $2,278. We issued Southridge 5,727,83611,456 common shares pursuant to Rule 144 based on an agreed exchange price of $0.01$5 per share. We canceled the $8,250 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On July 21, 2011, Southridge executed a debt to equity conversion of a $22,000 short-term promissory note dated January 19, 2011 plus accrued interest of $882. We issued Southridge 2,288,2414,576 common shares pursuant to Rule 144 based on an agreed exchange price of $0.01$5 per share. We canceled the $3,300 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On August 24, 2011, Southridge executed a debt to equity conversion of a $80,000 short-term promissory note dated January 28, 2011 plus accrued interest of $3,647. We issued Southridge 8,364,71216,729 common shares pursuant to Rule 144 based on an agreed exchange price of $0.01$5 per share. We canceled the $12,000 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On August 24, 2011, Southridge executed a partial debt to equity conversion of a $80,000 short-term promissory note dated February 7, 2011 in which they converted $20,000 principal plus accrued interest of $868. We issued Southridge 2,086,7954,174 common shares pursuant to Rule 144 based on an agreed exchange price of $0.01$5 per share.
On September 27, 2011, Southridge executed a final debt to equity conversion of a $80,000 short-term promissory note dated February 7, 2011 in which they converted the remaining $60,000 principal plus accrued interest of $868. We issued Southridge 8,399,78116,780 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0075$3.75 per share. We canceled the $12,000 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On September 27, 2011, Southridge executed a debt to equity conversion of a $35,000 short-term promissory note dated February 15, 2011 plus accrued interest of $1,688. We issued Southridge 4,891,6899,783 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0075$3.75 per share. We canceled the $5,250 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On September 27, 2011, Southridge executed a debt to equity conversion of a $60,000 short-term promissory note dated March 31, 2011 plus accrued interest of $2,315. We issued Southridge 8,308,60316,617 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0075$3.75 per share. We canceled the $9,000 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On September 28, 2011, we amended the terms of all debt agreements with Southridge Partners II, LP and agreed to amend the conversion terms of the Notes such that the principal portion of the Notes, plus accrued interest, shall be convertible into shares of our common stock at a conversion price per share equal to the lesser of (a) $0.0075$3.75 or (b) ninety percent (90%) of the average of the three (3) lowest closing bid prices during the ten (10) trading days immediately prior to the date of the conversion notice.
On October 13, 2011, Southridge executed a debt to equity conversion of a $100,000 short-term promissory note dated April 14, 2011 plus accrued interest of $3,989. We issued Southridge 20,797,80841,596 common shares pursuant to Rule 144 based on an agreed conversion price of $0.005$2.50 per share. We canceled the $15,000 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On November 3, 2011, Southridge executed a debt to equity conversion of a $65,000 short-term promissory note dated April 26, 2011 plus accrued interest of $2,721. We issued Southridge 13,544,21927,088 common shares pursuant to Rule 144 based on an agreed conversion price of $0.005$2.50 per share. We canceled the $9,750 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On November 16, 2011, Southridge executed a debt to equity conversion of a $20,000 short-term promissory note dated May 6, 2011 plus accrued interest of $850. We issued Southridge 6,725,93913,452 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0031$1.55 per share. We canceled the $3,000 in premium associated with this note because the note was fully converted into common stock and was not redeemed for cash.
On December 15, 2011, Panache executed a partial debt to equity conversion of a $60,000 short-term promissory note dated May 12, 2011 in which they converted $14,415 principal. We issued Panache 5,000,00010,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.002883$1.4415 per share.
On January 3, 2012, Panache executed a partial debt to equity conversion of a $60,000 short-term promissory note dated May 12, 2011 in which they converted $12,896 principal. We issued Panache 8,000,00016,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.001612$0.806 per share.
On January 10, 2012, Panache executed a partial debt to equity conversion of a $60,000 short-term promissory note dated May 12, 2011 in which they converted $12,896 principal. We issued Panache 8,000,00016,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.001612$0.806 per share.
On January 18, 2012, Panache executed a partial debt to equity conversion of a $60,000 short-term promissory note dated May 12, 2011 in which they converted $12,710 principal. We issued Panache 10,000,00020,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.001271$0.6355 per share.
On January 27, 2012, Panache executed a debt to equity conversion of a $60,000 short-term promissory note dated May 12, 2011 in which they converted the final $7,083 in principal. We issued Panache 5,712,09711,424 common shares pursuant to Rule 144 based on an agreed conversion price of $0.001224$0.612 per share. We still owe Panache $3,139 in accrued interest associated with this note.
On January 23, 2012, Southridge executed a partial debt to equity conversion of a $150,000 short-term promissory note dated July 27, 2011 in which they converted $85,000 principal. We issued Southridge 66,390,690132,781 common shares with a restrictive legend based on an agreed conversion price of $0.0013$0.65 per share. The restrictive legend was removed on February 2, 2012 pursuant to Rule 144.
On January 27, 2012, Southridge executed a partial debt to equity conversion of a $150,000 short-term promissory note dated July 27, 2011 in which they converted $30,000 principal. We issued Southridge 24,193,54848,387 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0012$0.60 per share.
On February 7, 2012, Southridge executed a partial debt to equity conversion of a $150,000 short-term promissory note dated July 27, 2011 in which they converted $18,500 principal and $6,411 interest. We issued Southridge 24,277,32148,555 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00103$0.515 per share.
On February 10, 2012, Southridge executed a partial debt to equity conversion of a $150,000 short-term promissory note dated July 27, 2011 in which they converted $16,500 principal and $99 interest. We issued Southridge 17,272,24834,544 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00096$0.48 per share.
On February 17, 2012, Southridge executed a partial debt to equity conversion of a $100,000 short-term promissory note dated August 25, 2011 in which they converted $30,000 principal and $3,858 interest. We issued Southridge 34,237,57168,475 common shares on February 27, 2012 pursuant to Rule 144 based on an agreed conversion price of $0.00099$0.495 per share.
On February 23, 2012, Southridge executed a debt to equity conversion of a $7,500 short-term promissory note dated August 23, 2011 in which they converted $7,500 principal and $289 interest. We issued Southridge 7,545,59215,091 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00103$0.515 per share.
On February 28, 2012, Southridge executed a partial debt to equity conversion of a $100,000 short-term promissory note dated September 12, 2012 in which they converted $51,000 principal and $3,595 interest. We issued Southridge 60,728,054121,456 restricted common shares pursuant to Rule 144 based on an agreed conversion price of $0.0009$0.45 per share.
On March 5, 2012, OTC Global Partners executed a debt to equity conversion of a $50,000 short-term promissory note dated August 30, 2011 in which they converted $50,000 principal and $2,027 interest. We issued OTC Global Partners 72,765,035145,530 common shares pursuant to Rule 144 based on an agreed conversion price of $0.000715$0.3575 per share.
On April 13, 2012, Southridge executed a partial debt to equity conversion of a $100,000 short-term promissory note dated September 12, 2012 in which they converted $49,000 principal and $1,096 interest. We issued Southridge 123,693,557247,387 restricted common shares on April 24, 2012 pursuant to Rule 144 based on an agreed conversion price of $0.00041$0.205 per share.
On April 13, 2012, Southridge executed a partial debt to equity conversion of a $100,000 short-term promissory note dated September 28, 2012 in which they converted $4,000 principal and $4,340 interest. We issued Southridge 20,591,91641,184 restricted common shares on April 24, 2012 pursuant to Rule 144 based on an agreed conversion price of $0.00041$0.205 per share.
On May 1, 2012, Panache executed a partial debt to equity conversion of a $100,000 short-term promissory note dated August 25, 2011 in which they converted $9,765 principal. We issued Panache 21,000,00042,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.000465$0.2325 per share.
On May 1, 2012, Asher executed a partial debt to equity conversion of a $78,500 short-term promissory note dated October 24, 2011 in which they converted $12,000 principal. We issued Asher 26,086,95752,174 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00046$0.23 per share.
On May 2, 2012, Asher executed a partial debt to equity conversion of a $78,500 short-term promissory note dated October 24, 2011 in which they converted $15,000 principal. We issued Asher 44,117,64788,235 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00034$0.17 per share.
On May 10, 2012, Asher executed a partial debt to equity conversion of a $78,500 short-term promissory note dated October 24, 2011 in which they converted $13,000 principal. We issued Asher 68,421,053136,842 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00019$0.095 per share.
On May 10, 2012, Panache executed a partial debt to equity conversion of a $100,000 short-term promissory note dated August 25, 2011 in which they converted $7,440 principal. We issued Panache 30,000,00060,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.000248$0.124 per share.
On May 15, 2012, Panache executed a partial debt to equity conversion of a $100,000 short-term promissory note dated August 25, 2011 in which they converted $9,330 principal. We issued Panache 50,000,000100,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0001866$0.0933 per share.
On May 21, 2012, Asher executed a partial debt to equity conversion of a $78,500 short-term promissory note dated October 24, 2011 in which they converted $18,500 principal. We issued Asher 205,556 common shares pursuant to Rule 144 based on an agreed conversion price of $0.09 per share.
On May 22, 2012, Panache executed a partial debt to equity conversion of a $100,000 short-term promissory note dated August 25, 2011 in which they converted $9,330 principal. We issued Panache 100,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.093 per share.
On May 29, 2012, Asher executed a partial debt to equity conversion of a $78,500 short-term promissory note dated October 24, 2011 in which they converted $12,000 principal. We issued Asher 133,333 common shares pursuant to Rule 144 based on an agreed conversion price of $0.09 per share.
On May 30, 2012, Panache executed a partial debt to equity conversion of a $100,000 short-term promissory note dated August 25, 2011 in which they converted $9,330 principal. We issued Panache 100,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.093 per share.
On June 4, 2012, Asher executed a partial debt to equity conversion of a $78,500 short-term promissory note dated October 24, 2011 in which they converted $8,000 principal and $3,140 in interest. We issued Asher 171,385 common shares pursuant to Rule 144 based on an agreed conversion price of $0.065 per share.
On June 5, 2012, Panache executed a partial debt to equity conversion of a $100,000 short-term promissory note dated August 25, 2011 in which they converted $9,920 principal. We issued Panache 160,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.062 per share.
On June 8, 2012, Asher executed a partial debt to equity conversion of a $53,000 short-term promissory note dated November 29, 2011 in which they converted $12,000 principal. We issued Asher 171,385 common shares pursuant to Rule 144 based on an agreed conversion price of $0.07 per share.
On June 12, 2012, Asher executed a partial debt to equity conversion of a $53,000 short-term promissory note dated November 29, 2011 in which they converted $14,000 principal. We issued Asher 200,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.07 per share.
On June 15, 2012, Asher executed a partial debt to equity conversion of a $53,000 short-term promissory note dated November 29, 2011 in which they converted $13,000 principal. We issued Asher 136,842 common shares pursuant to Rule 144 based on an agreed conversion price of $0.095 per share.
On June 20, 2012, Asher executed a partial debt to equity conversion of a $53,000 short-term promissory note dated November 29, 2011 in which they converted $14,000 principal and $2,120 in interest. We issued Asher 189,647 common shares pursuant to Rule 144 based on an agreed conversion price of $0.085 per share.
On July 17, 2012, Ms. Grable, our CEO and Chairman of the Board, executed a full debt to equity conversion of a $13,000 short-term promissory note in which she converted $13,000 principal and $148 in interest. We issued Ms. Grable 87,654 restricted common shares pursuant to Rule 144 based on an agreed conversion price of $0.15 per share. Ms. Grable is deemed an affiliated party.
On July 17, 2012, a private investor executed a partial debt to equity conversion of five of her notes in which she converted $19,583 principal into 200,000 restricted common shares pursuant to Rule 144 based on an agreed conversion price of $0.0885 per share.
On July 25, 2012, a private investor executed a full debt to equity conversion of a $3,000 short-term promissory note in which she converted $3,000 principal into 20,000 restricted common shares pursuant to Rule 144 based on an agreed conversion price of $0.15 per share.
On July 30, 2012, a private investor executed a partial debt to equity conversion of a $10,000 short-term promissory note in which she converted $6,900 principal into 46,000 restricted common shares pursuant to Rule 144 based on an agreed conversion price of $0.15 per share.
On August 7, 2012, a private investor sold their December 2011 short-term promissory notes totaling $21,604 in principal and $5,334 in premium to OTC Global Partners. A new short-term promissory note was issued to OTC Global Partners dated August 7, 2012 with a taking period back to December 7, 2011. OTC Global Partners may elect at an Event of Default to convert any part or all of the $21,604 Principal Amount of the Note plus accrued premium into shares of our common stock at a conversion price $0.16.
On August 7, 2012, OTC Global Partners executed a partial debt to equity conversion of the $21,604 short-term promissory note in which they converted $21,604 principal and $2,396 in premium. We issued OTC Global Partners 150,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.16 per share.
On September 5, 2012, Southridge executed a partial debt to equity conversion of a $100,000 short-term promissory note dated September 28, 2011 in which they converted $85,582 principal. We issued Southridge 760,727 common shares pursuant to Rule 144 based on an agreed conversion price of $0.115 per share.
On September 10, 2012, Levin Consulting Group executed a partial debt to equity conversion of the $70,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $20,000 principal. We issued Levin Consulting Group 160,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.125 per share. On September 21, 2012 we issued Levin Consulting Group an additional 240,000 shares because the closing bid price on the clearing date fell below the Initial closing bid price.
On September 10, 2012, Panache executed a partial debt to equity conversion of a $100,000 short-term promissory note dated August 25, 2011 in which they converted $14,885 principal. We issued Panache 160,054 common shares pursuant to Rule 144 based on an agreed conversion price of $0.093 per share.
On September 11, 2012, Southridge executed a final debt to equity conversion of a $100,000 short-term promissory note dated September 28, 2011 in which they converted $10,418 principal and $3,004 in interest. We issued Southridge 178,958 common shares pursuant to Rule 144 based on an agreed conversion price of $0.075 per share.
On September 11, 2012, Southridge executed a partial debt to equity conversion of a $100,000 short-term promissory note dated October 26, 2011 in which they converted $32,500 principal and $7,036 in interest. We issued Southridge 527,142 common shares pursuant to Rule 144 based on an agreed conversion price of $0.075 per share.
On September 12, 2012, Southridge executed a partial debt to equity conversion of a $100,000 short-term promissory note dated October 26, 2011 in which they converted $4,150 principal. We issued Southridge 55,333 common shares pursuant to Rule 144 based on an agreed conversion price of $0.075 per share.
On September 12, 2012, Panache executed a partial debt to equity conversion of a $40,000 short-term promissory note dated November 21, 2011 in which they converted $23,250 principal. We issued Panache 250,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.093 per share.
On September 19, 2012, Panache executed a final debt to equity conversion of a $40,000 short-term promissory note dated November 21, 2011 in which they converted $16,750 principal and $3,244 in interest. We issued Panache 257,983 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0775 per share.
On September 20, 2012, Southridge executed a partial debt to equity conversion of a $100,000 short-term promissory note dated October 26, 2011 in which they converted $47,300 principal and $153 in interest. We issued Southridge 759,255 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0625 per share.
On September 27, 2012, OTC Global Partners executed a partial debt to equity conversion of the $30,000 short-term promissory note in which they converted $18,000 in principal. We issued OTC Global Partners 360,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.05 per share.
On September 28, 2012, Panache executed a partial debt to equity conversion of a $25,000 short-term promissory note dated February 28, 2012 in which they converted $13,200 principal. We issued Panache 240,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.055 per share.
On October 1, 2012, Southridge executed a final debt to equity conversion of a $100,000 short-term promissory note dated October 26, 2011 in which they converted $16,050 principal and $219 in interest. We issued Southridge 325,384 common shares pursuant to Rule 144 based on an agreed conversion price of $0.05 per share.
On October 1, 2012, Southridge executed a partial debt to equity conversion of a $20,000 short-term promissory note dated November 14, 2011 in which they converted $10,900 principal and $1,398 in interest. We issued Southridge 245,967 common shares pursuant to Rule 144 based on an agreed conversion price of $0.05 per share.
On October 2, 2012, Southridge executed a final debt to equity conversion of a $20,000 short-term promissory note dated November 14, 2011 in which they converted $9,100 principal and $18 in interest. We issued Southridge 182,351 common shares pursuant to Rule 144 based on an agreed conversion price of $0.05 per share.
On October 3, 2012, SGI Group executed a partial debt to equity conversion of the $30,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $9,000 principal and $106 in interest. We issued SGI Group 364,248 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On October 4, 2012, Panache executed a partial debt to equity conversion of a $25,000 short-term promissory note dated February 28, 2012 in which they converted $6,600 principal. We issued Panache 240,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0275 per share.
On October 10, 2012, FLUX Carbon Starter Fund executed a partial debt to equity conversion of a $38,500 short-term promissory note dated October 4, 2012 in which they converted $15,000 principal. We issued FLUX Carbon Starter 300,000 restricted common shares pursuant to Rule 144 based on an agreed conversion price of $0.05 per share.
On October 11, 2012, OTC Global Partners executed a final debt to equity conversion of the $30,000 short-term promissory note in which they converted $18,000 in principal. We issued OTC Global Partners 240,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.05 per share.
On October 18, 2012, Southridge executed a partial debt to equity conversion of a $17,000 short-term promissory note dated December 19, 2011 in which they converted $15,900 principal and $1,125 in interest. We issued Southridge 681,010 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On October 23, 2012, Panache executed a final debt to equity conversion of a $25,000 short-term promissory note dated February 28, 2012 in which they converted $5,200 principal and $1,512 in interest. We issued Panache 244,061 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0275 per share.
On October 24, 2012, Levin Consulting Group executed a partial debt to equity conversion of the $70,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $12,200 principal and $214 in interest. We issued Levin Consulting Group 496,417 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On October 24, 2012, SGI Group executed a partial debt to equity conversion of the $30,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $5,100 principal and $88 in interest. We issued SGI Group 207,528 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On November 6, 2012, Southridge executed a final debt to equity conversion of a $17,000 short-term promissory note dated December 19, 2011 in which they converted $1,100 principal and $26 in interest. We issued Southridge 45,043 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On November 6, 2012, Southridge executed a debt to equity conversion of a $30,000 short-term promissory note dated March 19, 2012 in which they converted $30,000 principal and $1,433 in interest. We issued Southridge 1,257,337 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On November 6, 2012, Southridge executed a partial debt to equity conversion of an $11,000 short-term promissory note dated April 9, 2012 in which they converted $2,750 principal and $475 in interest. We issued Southridge 128,998 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On November 21, 2012, Southridge executed a final debt to equity conversion of an $11,000 short-term promissory note dated April 9, 2012 in which they converted $8,250 principal and $53 in interest. We issued Southridge 332,122 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On November 21, 2012, Southridge executed a debt to equity conversion of a $2,500 short-term promissory note dated April 26, 2012 in which they converted $2,500 principal and $111 in interest. We issued Southridge 1,104,427 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On November 21, 2012, Southridge executed a debt to equity conversion of an $8,000 short-term promissory note dated May 15, 2012 in which they converted $8,000 principal and $321 in interest. We issued Southridge 332,835 common shares pursuant to Rule 144 based on an agreed conversion price of $0.025 per share.
On December 18, 2012, Levin Consulting Group executed a partial debt to equity conversion of the $70,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $10,000 principal and $315 in interest. We issued Levin Consulting Group 1,085,800 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0095 per share. On January 10, 2013 we issued Levin Consulting Group an additional 633,383 shares because the closing bid price on the clearing date fell below the Initial closing bid price.
On December 18, 2012, SGI Group executed a partial debt to equity conversion of the $30,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $10,000 principal and $315 in interest. We issued SGI Group 1,085,800 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0095 per share.
On December 21, 2012, WHC Capital LLC executed a partial debt to equity conversion of the $46,400 short-term promissory note originally dated December 10, 2010 and purchased on August 20, 2012 from a private investor, in which they converted $9,329 principal. We issued WHC Capital LLC 982,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0095 per share.
On January 8, 2013, ASC Recap executed a partial debt to equity conversion of the $180,769 balance of a short-term promissory originally dated December 15, 2009 and purchased on December 12, 2012 from a private investor, in which they converted $11,115 principal. We issued ASC Recap 1,852,500 common shares pursuant to Rule 144 based on an agreed conversion price of $0.006 per share.
On January 8, 2013, SGI Group executed a partial debt to equity conversion of the $30,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $5,900 principal and $4,400 in interest. We issued SGI Group 1,716,672 common shares pursuant to Rule 144 based on an agreed conversion price of $0.006 per share.
On January 10, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $10,000 principal. We issued Magna 1,554,002 common shares pursuant to Rule 144 based on an agreed conversion price of $0.006435 per share.
On January 15, 2013, WHC Capital LLC executed a partial debt to equity conversion of the $46,400 short-term promissory note originally dated December 10, 2010 and purchased on August 20, 2012 from a private investor, in which they converted $5,945 principal. We issued WHC Capital LLC 1,033,900 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00575 per share.
On January 18, 2013, ASC Recap executed a partial debt to equity conversion of the $180,769 balance of a short-term promissory originally dated December 15, 2009 and purchased on December 12, 2012 from a private investor, in which they converted $11,100 principal. We issued ASC Recap 1,850,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.006 per share.
On January 18, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $13,600 principal. We issued Magna 1,766,234 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0077 per share.
On January 23, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $12,500 principal. We issued Redwood 2,192,982 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0057 per share.
On January 28, 2013, WHC Capital LLC executed a partial debt to equity conversion of the $46,400 short-term promissory note originally dated December 10, 2010 and purchased on August 20, 2012 from a private investor, in which they converted $4,726 in principal and $5,019 in premium. We issued WHC Capital LLC 1,949,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.005 per share.
On January 28, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $9,900 principal. We issued Magna 1,766,234 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0055 per share.
On January 28, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $12,500 principal. We issued Redwood 2,272,727 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0055 per share.
On February 1, 2013, Levin Consulting Group executed a partial debt to equity conversion of the $70,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $7,000 principal and $248 in interest. We issued Levin Consulting Group 1,767,771 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0041 per share. On February 22, 2013 we issued Levin Consulting Group an additional 3,409,271 shares because the closing bid price on the clearing date fell below the Initial closing bid price.
On February 1, 2013, SGI Group executed a partial debt to equity conversion of the $30,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $2,857 in interest. We issued SGI Group 696,878 common shares pursuant to Rule 144 based on an agreed conversion price of $0.006 per share. On February 11, 2013 we issued SGI Group an additional 446,002 shares because the closing bid price on the clearing date fell below the Initial closing bid price.
On February 6, 2013, Southridge executed a debt to equity conversion of a $6,672 short-term promissory note dated June 18, 2012 in which they converted $6,672 principal and $338 in interest. We issued Southridge 2,046,658 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00343 per share.
On February 6, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $6,500 principal. We issued Magna 4,166,667 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00156 per share.
On February 6, 2013, WHC Capital LLC executed a partial debt to equity conversion of the $46,400 short-term promissory note originally dated December 10, 2010 and purchased on August 20, 2012 from a private investor, in which they converted $5,843 in premium. We issued WHC Capital LLC 2,050,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00285 per share.
On February 6, 2013, ASC Recap executed a partial debt to equity conversion of the $180,769 balance of a short-term promissory originally dated December 15, 2009 and purchased on December 12, 2012 from a private investor, in which they converted $5,375 principal. We issued ASC Recap 1,628,788 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0033 per share.
On February 6, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $3,500 principal. We issued Redwood 2,121,212 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00165 per share.
On February 12, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $5,000 principal. We issued Redwood 3,030,303 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00165 per share.
On February 12, 2013, Southridge executed a partial debt to equity conversion of a $25,000 short-term promissory note dated August 2, 2012 in which they converted $7,475 principal and $1,058 in interest. We issued Southridge 4,162,212 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00205 per share.
On February 14, 2013, Southridge executed a partial debt to equity conversion of a $25,000 short-term promissory note dated August 2, 2012 in which they converted $2,185 principal and $11 in interest. We issued Southridge 1,626,636 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00135 per share.
On February 15, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $6,100 principal. We issued Magna 6,931,819 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00088 per share.
On February 18, 2013, Black Arch executed a partial debt to equity conversion of a $95,000 Promissory Note originally dated August 15, 2012 which they purchased $15,000 Principal from Southridge on February 11, 2013, in which they converted $7,500 principal. We issued Black Arch 5,555,556 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00135 per share.
On February 19, 2013, WHC Capital LLC executed a partial debt to equity conversion of the $46,400 short-term promissory note originally dated December 10, 2010 and purchased on August 20, 2012 from a private investor, in which they converted $4,083 in premium. We issued WHC Capital LLC 3,711,600 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0011 per share.
On February 20, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $3,400 principal. We issued Redwood 3,863,636 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00088 per share.
On February 20, 2013, a private investor executed a partial debt to equity conversion of a $95,000 Promissory Note originally dated August 15, 2012 which they purchased $5,000 Principal from Southridge on February 11, 2013, in which they converted $3,000 principal. We issued the private investor 2,736,273 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0011 per share.
On February 22, 2013, Southridge executed a partial debt to equity conversion of a $25,000 short-term promissory note dated August 2, 2012 in which they converted $6,325 principal and $49 in interest. We issued Southridge 5,794,832 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0011 per share.
On February 26, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $3,500 principal. We issued Redwood 3,977,272 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00088 per share.
On February 27, 2013, WHC Capital LLC executed a partial debt to equity conversion of the $46,400 short-term promissory note originally dated December 10, 2010 and purchased on August 20, 2012 from a private investor, in which they converted $10,800 in premium. We issued WHC Capital LLC 12,000,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0009 per share.
On March 5, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $3,950 principal. We issued Redwood 4,488,636 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00088 per share.
On March 5, 2013, Black Arch executed a final debt to equity conversion of a $95,000 Promissory Note originally dated August 15, 2012 which they purchased $15,000 Principal from Southridge on February 11, 2013, in which they converted $7,500 principal and $44 in interest. We issued Black Arch 8,382,648 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0009 per share. On March 21, 2013 we issued Black Arch Group an additional 3,224,096 shares because the closing bid price on the clearing date fell below the Initial closing bid price.
On March 5, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $6,100 principal. We issued Magna 6,931,819 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00088 per share.
On March 5, 2013, Southridge executed a partial debt to equity conversion of a $25,000 short-term promissory note dated August 2, 2012 in which they converted $4,865 principal and $60 in interest. We issued Southridge 5,794,440 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00085 per share.
On March 7, 2013, a private investor executed a partial debt to equity conversion of a $95,000 Promissory Note originally dated August 15, 2012 which they purchased $5,000 Principal from Southridge on February 11, 2013, in which they converted $2,000 principal and $11 in interest. We issued the private investor 2,365,882 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00085 per share.
On March 13, 2013, Southridge executed a final debt to equity conversion of a $25,000 short-term promissory note dated August 2, 2012 in which they converted $4,150 principal. We issued Southridge 6,384,615 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00065 per share.
On March 13, 2013, Southridge executed a partial debt to equity conversion of a $30,000 short-term promissory note dated September 5, 2012 in which they converted $4,755 principal and $1,243 in interest. We issued Southridge 9,227,292 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00065 per share.
On March 13, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $4,620 principal. We issued Magna 7,000,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00066 per share.
On March 13, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $6,400 principal. We issued Redwood 8,311,688 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00077 per share.
On March 13, 2013, WHC Capital LLC executed a partial debt to equity conversion of the $46,400 short-term promissory note originally dated December 10, 2010 and purchased on August 20, 2012 from a private investor, in which they converted $656 premium and $643 in interest. We issued WHC Capital LLC 1,998,308 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00065 per share.
On March 14, 2013, SGI Group executed a partial debt to equity conversion of a $95,000 Promissory Note originally dated August 15, 2012 which they purchased $10,000 Principal from Southridge on February 11, 2013, in which they converted $6,700 principal and $70 in interest. We issued SGI Group 10,416,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00065 per share.
On March 14, 2013, Levin Consulting Group executed a partial debt to equity conversion of the $70,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $6,500 principal and $294 in interest. We issued Levin Consulting Group 10,452,215 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00065 per share.
On March 20, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $5,250 principal. We issued Redwood 8,750,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0006 per share.
On March 20, 2013, Panache executed a partial debt to equity conversion of a $25,000 short-term promissory note dated September 6, 2012 in which they converted $3,900 principal. We issued Panache 6,500,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0006 per share.
On March 21, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $3,616 principal. We issued Tangiers 6,026,789 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0006 per share.
On March 22, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $5,005 principal. We issued Magna 7,000,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.000715 per share.
On March 27, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $7,049 principal. We issued Tangiers 12,817,145 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00055 per share.
On April 1, 2013, Southridge executed a partial debt to equity conversion of a $30,000 short-term promissory note dated September 5, 2012 in which they converted $14,990 principal and $66 in interest. We issued Southridge 23,163,689 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00065 per share.
On April 1, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $5,500 principal. We issued Redwood 9,166,667 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0006 per share.
On April 2, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $4,628 principal. We issued Tangiers 9,256,920 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0005 per share.
On April 4, 2013, WHC Capital LLC executed a partial debt to equity conversion of the $10,000 short-term promissory note originally dated November 20, 2009 and purchased on March 22, 2013 from a private investor, in which they converted $6,864 in premium. We issued WHC Capital LLC 17,160,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.004 per share.
On April 5, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $8,169 principal. We issued Tangiers 32,676,600 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0005 per share.
On April 5, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $2,600 principal. We issued Redwood 9,454,545 common shares pursuant to Rule 144 based on an agreed conversion price of $0.000275 per share.
On April 5, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $4,015 principal. We issued Magna 14,600,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.000275 per share.
On April 8, 2013, Southridge executed a partial debt to equity conversion of a $30,000 short-term promissory note dated September 5, 2012 in which they converted $9,240 principal and $25 in interest. We issued Southridge 23,161,811 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0004 per share. On April 24, 2013 we issued Southridge an additional 13,897,087 shares because the closing bid price on the clearing date fell below the Initial closing bid price.
On April 9, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $4,380 principal. We issued Magna 19,909,091 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00022 per share.
On April 9, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $7,626 principal. We issued Tangiers 38,129,900 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0002 per share.
On April 15, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $7,577 principal. We issued Tangiers 50,513,800 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00015 per share.
On April 18, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $3,200 principal. We issued Redwood 29,090,909 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00011 per share.
On April 19, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $6,600 principal. We issued Magna 60,000,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00011 per share.
On April 19, 2013, Panache executed a partial debt to equity conversion of a $25,000 short-term promissory note dated September 6, 2012 in which they converted $5,920 principal. We issued Panache 59,200,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0006 per share.
On April 22, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $5,396 principal. We issued Tangiers 53,964,900 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0001 per share.
On April 23, 2013, Levin Consulting Group executed a partial debt to equity conversion of the $70,000 short-term promissory note originally dated October 12, 2011 and purchased on August 20, 2012 from Southridge, in which they converted $6,500 principal and $349 in interest. We issued Levin Consulting Group 68,493,200 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0001 per share.
On April 23, 2013, SGI Group executed a final debt to equity conversion of a $95,000 Promissory Note originally dated August 15, 2012 which they purchased $10,000 Principal from Southridge on February 11, 2013, in which they converted $3,300 principal and $85 in interest. We issued SGI Group 33,853,200 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0001 per share. On April 24, 2013 we issued SGI Group an additional 33,835,200 shares because the closing bid price on the clearing date fell below the Initial closing bid price.
On April 23, 2013, SGI Group executed a partial debt to equity conversion of a $15,000 short-term promissory note dated August 20, 2012 in which they converted $3,250 principal and $220 in interest. We issued SGI Group 34,698,300 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0001 per share. On April 24, 2013 we issued SGI Group an additional 34,698,300 shares because the closing bid price on the clearing date fell below the Initial closing bid price.
On April 24, 2013, Southridge executed a final debt to equity conversion of a $30,000 short-term promissory note dated September 5, 2012 in which they converted $1,015 principal and $2 in interest. We issued Southridge 5,086,123 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0002 per share.
On April 24, 2013, Southridge executed a partial debt to equity conversion of a $30,000 short-term promissory note dated September 19, 2012 in which they converted $3,485 principal and $1,427 in interest. We issued Southridge 49,118,493 common shares pursuant to Rule 144 based on an agreed conversion price of $0.0001 per share.
On April 24, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $4,300 principal. We issued Redwood 39,090,909 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00011 per share.
On April 26, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $4,000 principal. We issued Tangiers 79,995,200 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00005 per share.
On April 29, 2013, Linda Grable, our CEO and Chairman of the Board, executed a debt to equity conversion of an $8,000 short-term promissory note dated April 1, 2013 in which she converted $8,000 principal. We issued Linda Grable 80,000,000 restricted common shares pursuant to Rule 144 based on an agreed conversion price of $0.0001 per share. Ms. Grable is deemed an affiliated party.
On April 30, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $6,600 principal. We issued Magna 120,000,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.000055 per share.
On April 30, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $5,485 principal. We issued Tangiers 109,696,200 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00005 per share.
On May 3, 2013, WHC Capital LLC executed a final debt to equity conversion of the $10,000 short-term promissory note originally dated November 20, 2009 and purchased on March 22, 2013 from a private investor, in which they converted $3,136 in premium and $56 in interest. We issued WHC Capital LLC 63,847,600 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00005 per share.
On May 6, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $6,633 principal. We issued Tangiers 132,663,600 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00005 per share.
On May 8, 2013, Southridge executed a partial debt to equity conversion of a $30,000 short-term promissory note dated September 19, 2012 in which they converted $4,065 principal and $46 in interest. We issued Southridge 82,229,841 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00005 per share.
On May 9, 2013, Redwood executed a partial debt to equity conversion of a $100,000 Promissory Note originally dated December 14, 2009 which they purchased from a private investor on January 18, 2013, in which they converted $3,998 principal. We issued Redwood 79,960,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00005 per share.
On May 9, 2013, Magna executed a partial debt to equity conversion of the $100,000 Promissory Note originally dated December 10, 2009 which was issued as a new Convertible Promissory Note to Magna on January 3, 2013 in which they converted $11,000 principal. We issued Magna 200,000,000 common shares pursuant to Rule 144 based on an agreed conversion price of $0.000055 per share.
On May 10, 2013, Tangiers Capital LLC executed a partial debt to equity conversion of the $57,600 Promissory Note originally dated January 12, 2012 which was issued as a new $75,969 Convertible Promissory Note to Tangiers on March 20, 2013 in which they converted $9,221 principal. We issued Tangiers 184,425,800 common shares pursuant to Rule 144 based on an agreed conversion price of $0.00005 per share.
All debt conversions were consummated at the contractual terms agreed upon for each loan. Accordingly, there was no gain/loss on conversions.
From January 2011 to April 2011, Southridge acquired promissory notes from a private investor totaling $800,000 in principal and 55,363,907110,728 shares of common stock which were issued as collateral. Southridge proposed that we amend the conversion terms of the notes permitting the holder to convert the notes and we agreed to the amendment. From January 12, 2011 to May 18, 2012, Southridge issued notices of conversion to settle $700,000 in principal
plus accrued premiums totaling $395,699 into 405,202,769810,406 shares of our common stock, of which 51,802,774103,606 shares were collateral shares and 353,399,995706,800 new shares were issued pursuant to Rule 144.
As of the date of this report, we owe a total of $1,882,356$1,760,386 of short term debt of which $1,320,269$1,129,436 is principal, $526,562$571,018 is accrued premium and $35,525$59,931 is accrued interest. Eight promissory notes totaling $756,000 in principal have been extended to June 30, 2012; two promissory notes totaling $21,604 in principal have been extended to June 30, 2012; one promissory note with $38,500 in principal has a maturity date of July 26, 2012; one promissory note with $20,000 in principal has a maturity date of December 31, 2012; one promissory note with $40,000 in principal has a maturity date of November 21, 2012; one promissory note with $43,465 in principal has a maturity date of November 21, 2012; one promissory note with $53,000 in principal has a maturity date of September 5, 2012; one promissory note with $17,000 in principal has a maturity date of December 18, 2012; one promissory note with $25,000 in principal has a maturity date of February 28, 2013; one promissory note with $30,000 in principal has a maturity date of March 18, 2013; one promissory note with $11,000 in principal has a maturity date of December 31, 2012; one promissory note with $2,500 in principal has a maturity date of April 25, 2013; one promissory note with $25,000 in principal has a maturity date of August 2, 2012; one promissory note with $8,000 in principal has a maturity date of May 14, 2013; and eight promissory notes totaling $229,200 have maturity dates from March 6, 2012 to April 30, 2012. We have repaid aggregate principal and premium in the amount of $173,376 on these short-term notes and a total of $1,830,035$2,964,632 principal, $395,699$450,830 in
premium, and $46,178$91,701 in interest has been converted into 1,232,252,5512,159,559,970 shares of our common stock of which 51,802,774103,606 shares were collateral shares and 1,180,449,7772,159,559,970 new shares were issued pursuant to Rule 144. Out of the original 55,363,637103,606 shares of common stock held as collateral, a balance of 3,561,1337,122 shares remains on the $300,000$85,985 principal of the remaining notes.
There can be no assurances that we will be able to pay our short-term loans when due. If we default on any or all of the notes due to the lack of new funding, the holders could exercise their right to sell the remaining 3,561,133103,606 collateral shares and could take legal action to collect the amount due which could materially adversely affect IDSI and the value of our stock.
Issuance of Stock in Connection with Long-Term Loans
On February 23, 2011, we entered into a Convertible Promissory Note Agreement with an unaffiliated third party, JMJ Financial (the “Lender”"Lender" or “JMJ”"JMJ"), relating to a private placement of a total of up to $1,800,000 in principal amount of a Convertible Promissory Note (the “Note”"Note") providing for advances of a gross amount of $1,600,000 in seven tranches. Pursuant to the terms of a Registration Rights Agreement (the “Rights Agreement”"Rights Agreement") dated February 23, 2011, between the Company and JMJ, we are required to file within 10 days from the effective date of an increase of authorized shares approved by our shareholders, an S-1 Registration Statement (the “Registration Statement”"Registration Statement") covering 130,000,000 shares of Company common stock to be reserved for conversion of the Note.
Although our shareholders on July 12, 2011, voted to increase our authorized shares to 2,000,000,000, we have not filed the registration statement as required by the Rights Agreement.
The Note provides for funding in seven tranches as stipulated in the Funding Schedule attached. The first tranche of $300,000 was closed on February 24, 2011, and we received $258,000 after deductions of $30,000 for a 10% Finder’sFinder's Fee and $12,000 for an Origination Fee. The second tranche of $100,000 closed on May 20, 2011, and we received $93,000 after deduction of $7,000 for a 7% Finder’sFinder's Fee. A partial closing on the third tranche of $35,000 closed on October 7, 2011 and we received $32,250 after deduction of $2,750 for a 7% Finder’sFinder's Fee. A partial closing on the third tranche of $25,000 closed on February 8, 2012 and we received $25,000. In connection with this partial third tranche we will pay a 7% Finder’sFinder's Fee, which is $1,750. A partial closing on the third tranche of $25,000 closed on February 29, 2012 and we received $25,000. In connection with this partial third tranche we will pay a 7% Finder’sFinder's Fee, which is $1,750. A final closing on the third tranche of $15,000 closed on April 4, 2012 and we received $15,000. In connection with this final third tranche we will pay a 7% Finder’sFinder's Fee, which is $1,050. The remaining four tranchesA partial closing on the fourth tranche of $10,000 closed on October 3, 2012 and we received $10,000. In connection with this partial fourth tranche we will pay a 7% Finder's Fee, which is $700. Although we are to benot being funded based on the on achievement of milestones relating to the Registration Statement, withwe continue to draw funds from the final tranche of $300,000 being available 150 days after effectiveness ofPromissory Note from time to time based on the Registration Statement, which must be effective 120 days after the date of the Agreement.lender's ability to fund us. For the remaining fourthree tranches, we are obligated to pay a Finder’sFinder's Fee equal to 7% in cash at each closing date. We may cancel the unfunded portion of the Agreement at a fee of 20% of the unfunded amount. As of the date of this report, $1,300,000$1,290,000 in principal amount remains unfunded and if we choose to cancel we will have to pay JMJ $260,000$258,000 to terminate the agreement.
The Note, after the seven tranches are drawn, would generate net proceeds of $1,467,000 after payment of the Origination Fee and a 7% Finder’sFinder's Fee. JMJ has the option to provide an additional $1,600,000 of funding on substantially the same terms as the first Agreement; however, we have the right to cancel, without penalty, the Note Agreement within five days of JMJ’sJMJ's execution. Once executed and accepted by both parties and five days has passed, cancellation of unfunded payments is permitted at a fee of 20% of the unfunded amount. Cancellation of funded portions is not permitted.
The funding schedule of the seven tranches is as follows:
§ | $300,000 paid to Borrower within 2 business days of execution and closing of the agreement. |
§ | $100,000 paid to Borrower within 5 business days of filing of Definitive Proxy to increase authorized shares to 2,000,000,000 or more. |
§ | $100,000 paid to Borrower within 5 business days of effective increase in authorized shares to 2,000,000,000 or more. |
§ | $100,000 paid to Borrower within 5 business days of filing of registration statement, and that registration statement must be filed no later than 10 days from the effective increase of authorized shares. |
§ | $400,000 paid to Borrower within 5 business days of notice of effective registration statement, and that registration statement must be effective no later than 120 days from the execution of the agreement. |
§ | $300,000 paid to Borrower within 90 business days of notice of effective registration statement, and that registration statement must be effective no later than 120 days from the execution of the agreement. |
§ | $300,000 paid to Borrower within 150 business days of notice of effective registration statement, and that registration statement must be effective no later than 120 days from the execution of the agreement. |
The conditions to funding each payment are as follows:
§ | At the time of each payment interval, the Conversion Price calculation on Borrower’sBorrower's common stock must yield a Conversion Price equal to or greater than $0.015 per share (based on the Conversion Price calculation, regardless of whether a conversion is actually completed or not). |
§ | At the time of each payment interval, the total dollar trading volume of Borrower’sBorrower's common stock for the previous 23 trading days must be equal to or greater than $1,000,000. The total dollar volume will be calculated by removing the three highest dollar volume days and summing the dollar volume for the remaining 20 trading days. |
§ | At the time of each payment interval, there shall not exist an event of default as described within any of the agreements between Borrower and Holder. |
Prior to the maturity date of February 2, 2014, JMJ may convert both principal and interest into our common stock at 75% of the average of the three lowest closing prices in the 20 days previous to the conversion. We have the right to enforce a conversion floor of $0.015 per share; however, if we receive a conversion notice in which the Conversion Price is less than $0.015 per share, JMJ will incur a conversion loss [(Conversion Loss = $0.015 – Conversion Price) x number of shares being converted] which we must make whole by either of the following options: pay the conversion loss in cash or add the conversion loss to the balance of principal due. Prepayment of the Note is not permitted.
The Note has a 9% one-time interest charge on the principal sum. No interest or principal payments are required until the Maturity Date, but both principal and interest may be included in conversions prior to the maturity date.
On August 24, 2011, JMJ executed a debt to equity conversion of $36,015 in principal of the first tranche of $300,000 which we closed on February 24, 2011. We issued JMJ 3,500,0007,000 common shares pursuant to Rule 144 based on a conversion price of $0.0103$5.15 per share.
On August 31, 2011, JMJ executed a debt to equity conversion of $41,160 in principal of the first tranche of $300,000 which we closed on February 24, 2011. We issued JMJ 4,000,0008,000 common shares pursuant to Rule 144 based on a conversion price of $0.01029$5.15 per share.
On September 15, 2011, JMJ executed a debt to equity conversion of $37,597 in principal of the first tranche of $300,000 which we closed on February 24, 2011. We issued JMJ 4,100,0008,200 common shares pursuant to Rule 144 based on a conversion price of $0.00917$4.59 per share.
On September 28, 2011, JMJ executed a debt to equity conversion of $40,950 in principal of the first tranche of $300,000 which we closed on February 24, 2011. We issued JMJ 5,000,00010,000 common shares pursuant to Rule 144 based on a conversion price of $0.00819$4.10 per share.
On October 12, 2011, JMJ executed a debt to equity conversion of $36,750 in principal of the first tranche of $300,000 which we closed on February 24, 2011. We issued JMJ 5,000,00010,000 common shares pursuant to Rule 144 based on a conversion price of $0.00735$3.68 per share.
On December 15, 2011, JMJ executed a debt to equity conversion of $63,840 in principal of the first tranche of $300,000 which we closed on February 24, 2011. We issued JMJ 20,000,00040,000 common shares pursuant to Rule 144 based on a conversion price of $0.003192$1.60 per share.
On January 24, 2012, JMJ executed a debt to equity conversion totaling $44,100 of which $43,688 was principal and $412 was consideration for the first tranche of $300,000, which we closed on February 24, 2011. We issued JMJ 30,000,00060,000 common shares pursuant to Rule 144 based on a conversion price of $0.00147$0.74 per share.
On February 9, 2012, JMJ executed a debt to equity conversion totaling $44,100 of which $37,088 was consideration and $7,012 was interest for the first tranche of $300,000, which we closed on February 24, 2011. We issued JMJ 35,000,00070,000 common shares pursuant to Rule 144 based on a conversion price of $0.00126$0.63 per share.
On February 29, 2012, JMJ executed a debt to equity conversion totaling $39,550 of which $19,988 was interest for the first tranche of $300,000, which we closed on February 24, 2011 and $19,562 was principal for the second tranche of $100,000, which we closed on May 20, 2011. We issued JMJ 50,000,000100,000 common shares pursuant to Rule 144 based on a conversion price of $0.000791$0.40 per share.
On April 24, 2012, JMJ executed a debt to equity conversion of $29,120 in principal of the second tranche of $100,000 which we closed on May 20, 2012. We issued JMJ 52,000,000104,000 common shares pursuant to Rule 144 based on a conversion price of $0.00056$0.28 per share.
On May 9, 2012, JMJ executed a debt to equity conversion of $28,980 in principal of the second tranche of $100,000 which we closed on May 20, 2012. We issued JMJ 69,000,000138,000 common shares pursuant to Rule 144 based on a conversion price of $0.00042$0.21 per share.
On May 14, 2012, JMJ executed a debt to equity conversion of $4,389 in principal of the second tranche of $100,000 which we closed on May 20, 2011. We issued JMJ 19,000,00038,000 common shares pursuant to Rule 144 based on a conversion price of $0.000231$0.12 per share.
On May 24, 2012, JMJ executed a debt to equity conversion of $22,260 in principal of the second tranche of $100,000 which we closed on May 20, 2011. We issued JMJ 212,000 common shares pursuant to Rule 144 based on a conversion price of $0.11 per share.
On May 31, 2012, JMJ executed a debt to equity conversion of $2,940 in principal of the second tranche of $100,000 which we closed on May 20, 2011. We issued JMJ 28,000 common shares pursuant to Rule based on a conversion price of $0.11 per share.
On June 6, 2012, JMJ executed a debt to equity conversion totaling $19,551 of which $14,249 was interest for the second tranche of $100,000, which we closed on May 20, 2011 and $5,302 was principal for the third tranche of $35,000, which we closed on October 7, 2011. We issued JMJ 210,000 common shares pursuant to Rule 144 based on a conversion price of $0.093 per share.
On September 7, 2012, JMJ executed a debt to equity conversion of $19,572 in principal of the third tranche of $35,000, which we closed on October 7, 2011. We issued JMJ 240,000 common shares pursuant to Rule 144 based on a conversion price of $0.082 per share.
On October 3, 2012, JMJ executed a debt to equity conversion totaling $42,000 of which $14,501 was principal and $3,150 was interest for the third tranche of $35,000, which we closed on October 7, 2011; and $24,349 was principal of the fourth tranche of $25,000, which we closed on February 8, 2012. We issued JMJ 600,000 common shares pursuant to Rule 144 based on a conversion price of $0.07 per share.
On October 24, 2012, JMJ executed a debt to equity conversion totaling $10,500 of which $3,776 was principal and $2,250 was interest for the fourth tranche of $25,000, which we closed on February 8, 2012; and $4,474 was principal of the fifth tranche of $25,000, which we closed on February 29, 2012. We issued JMJ 300,000 common shares pursuant to Rule 144 based on a conversion price of $0.035 per share.
On January 16, 2013, JMJ executed a debt to equity conversion of $7,455 in principal of the fifth tranche of $25,000, which we closed on February 29, 2012. We issued JMJ 895,000 common shares pursuant to Rule 144 based on a conversion price of $0.00833 per share.
On January 29, 2013, JMJ executed a debt to equity conversion of $6,334 in principal of the fifth tranche of $25,000, which we closed on February 29, 2012. We issued JMJ 890,000 common shares pursuant to Rule 144 based on a conversion price of $0.007117 per share.
On February 11, 2013, JMJ executed a debt to equity conversion of $10,083 in principal of the fifth tranche of $25,000, which we closed on February 29, 2012. We issued JMJ 2,900,000 common shares pursuant to Rule 144 based on a conversion price of $0.003477 per share.
On February 20, 2013, JMJ executed a debt to equity conversion of $2,028 in principal of the fifth tranche of $25,000, which we closed on February 29, 2012; and $3,335 in principal of the sixth tranche of $15,000, which we closed on April 5, 2012. We issued JMJ 2,910,000 common shares pursuant to Rule 144 based on a conversion price of $0.001843 per share.
On February 27, 2013, JMJ executed a debt to equity conversion of $5,226 in principal of the sixth tranche of $15,000, which we closed on April 5, 2012. We issued JMJ 3,500,000 common shares pursuant to Rule 144 based on a conversion price of $0.001493 per share.
On March 5, 2013, JMJ executed a debt to equity conversion of $7,425 in principal of the sixth tranche of $15,000, which we closed on April 5, 2012. We issued JMJ 5,400,000 common shares pursuant to Rule 144 based on a conversion price of $0.001377 per share.
On March 5, 2013, JMJ executed a debt to equity conversion of $2,229 in principal and interest of the sixth tranche of $15,000, which we closed on April 5, 2012; and $5,625 was the balance owed of consideration on the principal from the prior six tranches. We issued JMJ 7,829,800 common shares pursuant to Rule 144 based on a conversion price of $0.001003 per share.
All debt conversions were consummated at the contractual terms agreed upon for each loan. Accordingly, there was no gain/loss on conversions.
As of the date of this report, we owe JMJ a total of $160,949 $12,263 in long-term debtdebt. Of the $12,263 we owe a total of which $117,949 is$10,000 in principal, $25,000$1,250 is consideration on the principal and $18,000$1,013 is interest.
As of the date of this report, if all of the outstanding convertible promissory notes totaling $1,772,649 were converted based on the closing bid price of $0.0001, we would be required to issue approximately 25 billion shares. Based on the 2,124,402,540 current issued and outstanding shares and our current authorized of 10 billion shares, we would require an additional 17 billion authorized shares to satisfy the potential conversions.