NOTE 8 - CONVERTIBLE DEBENTURE/NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2013 |
Debt Disclosure [Abstract] | ' |
NOTE 8 - CONVERTIBLE DEBENTURE/NOTES PAYABLE | ' |
NOTE 8- CONVERTIBLE DEBENTURE/NOTES PAYABLE |
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Convertible debenture/notes payable consisted of the following: | | September 30,2013 | | December 31, |
2012 |
Convertible debenture issued on October 2, 2012, unsecured, interest included, due on October 2, 2015, convertible into common stock at 60% of the lowest closing bid price for the twenty trading days immediately preceding the date of conversion, (less unamortized debt discount of $-0- and $110,137, respectively) | | $ | — | | | $ | 9,863 | |
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Convertible Notes payable issued on March 12, 2012, unsecured, interest included, due on March 12, 2014,convertible into common stock at $1.00 per share (less unamortized debt discount of $60,748 and $151,869, respectively) | | | 189,252 | | | | 98,131 | |
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Convertible debenture issued on February 1, 2013 , unsecured, interest included, due on October 2, 2015, convertible into common stock at 60% of the lowest closing bid price for the twenty trading days immediately preceding the date of conversion, (less unamortized debt discount of $-0- and $-0-, respectively) | | | — | | | | — | |
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Convertible debenture issued on July 19, 2013 , unsecured, interest included, due on April 22, 2014, convertible into common stock at 60% of the average of the lowest three day trading price for the ten trading days immediately preceding the date of conversion, (less unamortized debt discount of $57,812 and $-0-, respectively) | | | 20,688 | | | | — | |
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Convertible debenture issued on August 26, 2013 , unsecured, interest included, due on May 27, 2014, convertible into common stock at 60% of the average of the lowest three day trading price for the ten trading days immediately preceding the date of conversion, (less unamortized debt discount of $46,230 and $-0-, respectively) | | | 6,770 | | | | — | |
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Total notes payable | | | 216,711 | | | | 107,994 | |
Less: current portion | | | (216,711 | ) | | | — | |
Long-term convertible debenture/notes payable | | $ | — | | | $ | 107,994 | |
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Convertible note issued March 12, 2012 |
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On March 12, 2012, the Company issued a $250,000 Convertible Promissory Note which is convertible into 250,000 shares of the Company’s common stock at the holder’s option, or $1.00 per share, and there is no fluctuation in this conversion rate. |
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In accordance with ASC 470-20, the Company recognized an embedded beneficial conversion feature present in the note. The Company allocated a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The Company recognized and measured an aggregate of $250,000 of the proceeds, which is equal to the intrinsic value of the embedded beneficial conversion feature, to additional paid-in capital and a discount against the note. The debt discount attributed to the beneficial conversion feature is charged to current period operations as interest expense using the effective interest method over the term of the note. |
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During the nine months ended September 30, 2013 and 2012, the Company amortized $91,121 and $-0-, respectively, beneficial debt discount to the operations as interest expense. During the three months ended September 30, 2013 and 2012, the Company amortized $30,708 and $-0-, respectively, beneficial debt discount to the operations as interest expense. In the year 2012, the holder of the promissory note made payments of $200,000 directly to vendors of the Company for purchase of fuel and paid $50,000 directly to the Company. As part of the joint venture agreement the Company has agreed to pay 37.5% of all the profits generated by all the fuel transactions in South Africa. As of September 30, 2013 and 2012, the Company has paid $-0- to the joint venture partner. |
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Convertible debenture |
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On October 2, 2012, the Company issued a $120,000 Convertible Promissory Note which bears interest at a rate of 6% and is convertible into the Company’s common stock at the holder’s option, at the conversion rate of 60% of the lowest closing bid price for the twenty trading days immediately preceding the date of conversion. During the year ended December 31, 2012 the Company also issued 30,000 of shares along with Note which valued at market rate for $75,000 and was charged to expenses. The Company received net $88,000 from the debenture holder and balance $32,000 were paid towards the legal expenses and due diligence fees. |
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On February 1, 2013, the Company issued a $100,000 Convertible Promissory Note which bears interest at a rate of 6% and is convertible into the Company’s common stock at the holder’s option, at the conversion rate of 60% of the lowest closing bid price for the twenty trading days immediately preceding the date of conversion. The Company received net $90,000 from the debenture holder and balance $10,000 were paid towards the legal expenses. |
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The Company identified embedded derivatives related to the Convertible Promissory Note entered into on February 1, 2013. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $206,062 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions: |
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Dividend yield: | | | -0- | % | | | | |
Volatility | | | 200.33 | % | | | | |
Risk free rate: | | | 0.4 | % | | | | |
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The initial fair value of the embedded debt derivative of $206,062 was allocated as a debt discount up to the proceeds of the note ($100,000) with the remainder ($106,062) charged to current period operations as interest expense for the nine months ended September 30, 2013. |
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During the nine months ended September 30, 2013, the Company issued common stock for converting $142,000 of a convertible note payable by issuance of 4,081,788 shares of common stock of the Company and the balance of the convertible note of $78,000 along with accrued interest of $7,795 was paid in cash. Derivative liability as of date of conversion of $334,082 was transferred to additional paid in capital. Excess value of shares over the converted value of note for $24,235 was charged to interest expenses. |
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At September 30, 2013, the Company adjusted the recorded fair value of the derivative liability to market on both notes resulting in non-cash, non-operating gains of $-0- and $137,570 for the three and nine months ended September 30, 2013, respectively. |
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During the nine months ended September 30, 2013 and 2012, the Company amortized $210,136 and $-0-, respectively, of beneficial debt discount to the operations as interest expense. During the three months ended September 30, 2013 and 2012, the Company amortized $174,987 and $-0-, respectively, beneficial debt discount to the operations as interest expense |
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Convertible debenture July 2013 and August 2013 |
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On July 19, 2013, the Company issued a $78,500 Convertible Promissory Note which bears interest at a rate of 8% and is convertible into the Company’s common stock at the holder’s option, at the conversion rate of 60% of the lowest three day trading price for ten trading days immediately preceding the date of conversion. |
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On August 26, 2013, the Company issued a $53,000 Convertible Promissory Note which bears interest at a rate of 8% and is convertible into the Company’s common stock at the holder’s option, at the conversion rate of 60% of the lowest three day trading price for ten trading days immediately preceding the date of conversion. |
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The Company received a net of $100,000 from the debenture holder, $6,500 was paid towards the accrued legal expenses and due diligence fees and $25,000 was paid toward accrued professional fees. |
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The Company identified embedded derivatives related to the Convertible Promissory Note entered into in July, 2013 and August, 2013. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $334,639 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions: |
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Dividend yield: | | | -0- | % | | | | |
Volatility | | | 243%-312 | | | | % | |
Risk free rate: | | | 0.07 | % | | | | |
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The initial fair value of the embedded debt derivative of $334,639 was allocated as a debt discount up to the proceeds of the note ($131,500) with the remainder ($203,139) charged to current period operations as interest expense for the three and nine months ended September 30, 2013. |
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The fair value of the described embedded derivative of $264,110 at September 30, 2013 was determined using the Binomial Lattice Model with the following assumptions: |
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Dividend yield: | | | -0- | % | | | | |
Volatility | | | 319.3 | % | | | | |
Risk free rate: | | | 0.04 | % | | | | |
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At September 30, 2013, the Company adjusted the recorded fair value of the derivative liability to market on both notes resulting in non-cash, non-operating gain of $70,530 for both the three and nine months ended September 30, 2013. |
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During the nine months ended September 30, 2013 and 2012, the Company amortized $27,458 and $-0-, respectively, of beneficial debt discount to the operations as interest expense. During the three months ended September 30, 2013 and 2012, the Company amortized $27,458 and $-0-, respectively, beneficial debt discount to the operations as interest expense. |