NOTE 8 - CONVERTIBLE DEBENTURE/NOTES PAYABLE | 6 Months Ended |
Jun. 30, 2014 |
Debt Disclosure [Abstract] | ' |
NOTE 8 - CONVERTIBLE DEBENTURE/NOTES PAYABLE | ' |
NOTE 8 - CONVERTIBLE DEBENTURE/NOTES PAYABLE |
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| | June 30, | | December 31, |
2014 | 2013 |
Notes payable issued on March 21, 2012, unsecured, interest included, due on March 21, 2014,convertible into common stock at $1.00 per share (less unamortized debt discount of $-0- and $12,616, respectively) | | $ | — | | | $ | 92,384 | |
| | | 10,000 | | | | 10,000 | |
Convertible note issued on March 2013, unsecured, interest at 8%, due on October 05, 2013, in default. |
| | | 19,575 | | | | 81,989 | |
Convertible note issued on January 2014, unsecured, interest at 8%, due on November 3, 2014. Unamortized debt discount of $16,375 and $92,011, respectively |
| | | 6,543 | | | | 4,918 | |
Convertible note issued on October 2013, December 2013 and February 2014, unsecured, zero interest if paid on or before 90 days otherwise one time interest charge of 12%, due on October 2, 2015 December 9, 2015 and February 20, 2016. Unamortized debt discount of $25,977 and $50,082, respectively |
| | | 5,059 | | | | 6,493 | |
Convertible note issued on October 2013, unsecured, interest at 6%, due on October 13, 2014. Unamortized debt discount of $4,854 and $23,507, respectively |
| | | 229,207 | | | | 3,201 | |
Convertible note issued on December 2013 and January 2014, unsecured, interest at 8%, due on December 12, 2014, July 20, 2014 and January 30, 2015. Unamortized debt discount of $60,793 and $58,299, respectively |
| | | 11,701 | | | | 32,183 | |
Convertible note issued on December 2013, unsecured, interest at 6%, due on December 12, 2014. Unamortized debt discount of $8,799 and $100,317, respectively |
| | | 11,209 | | | | — | |
Convertible note issued on January 2, 2014, unsecured, interest at 10%, due on June 2, 2014, convertible into common stock at 60% of the bid price on the date of conversion, (less unamortized debt discount of $-0- and $-0-, respectively) |
| | | 6,669 | | | | — | |
Convertible note issued on April 1, 2014, unsecured, interest at 10%, due on April 10, 2014. Unamortized debt discount of $-0- and $-0-, respectively. |
| | | 2,679 | | | | — | |
Convertible note issued on April 4, 2014, unsecured, interest at 10%, due on May 4, 2014. Unamortized debt discount of $-0- and $-0-, respectively. |
| | | 24,718 | | | | — | |
Convertible note issued on March 31, 2014, unsecured, interest at 8%, due on January 2, 2015. Unamortized debt discount of $58,782 and $-0-, respectively. |
| | | 63,023 | | | | — | |
Convertible note issued on April 1, 2014, unsecured, interest at 10%, due on September 1, 2014. Unamortized debt discount of $29,977 and $-0-, respectively. |
| | | 25,000 | | | | — | |
Convertible note issued on June 4, 2014, unsecured, interest at 16%, due on April 1, 2000. Unamortized debt discount of $-0- and $-0-, respectively. |
| | | 25,000 | | | | — | |
Convertible note issued on June 1, 2014, unsecured, interest at 10%, due on December 1, 2014. Unamortized debt discount of $-0- and $-0-, respectively. |
| | | 9,325 | | | | — | |
Convertible note issued on April 1, 2014, unsecured, interest at 10%, due on December 1, 2014. Unamortized debt discount of $15,676 and $-0-, respectively. |
| | | 923 | | | | — | |
Convertible note issued on May 16, 2014, unsecured, interest at 8%, due on November 16, 2014. Unamortized debt discount of $1,051 and $-0-, respectively. |
| | | 512 | | | | — | |
Convertible note issued on June 30, 2014, unsecured, interest at 8%, due on December 30, 2014. Unamortized debt discount of $1,417 and $-0-, respectively. |
| | | 451,143 | | | | 231,168 | |
Total notes payable |
| | | (451,143 | ) | | | (226,250 | ) |
Less: current portion |
| | $ | — | | | $ | 4,918 | |
Long-term convertible debenture/notes payable |
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Convertible note issued March 21, 2012 |
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On March 21, 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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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 50% of all the profits generated by all the fuel transactions in South Africa. |
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On December 12, 2013, the Note holder assigned $145,000 of its note to another note holder. |
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Convertible debenture July 2013 August 2013, October 2013 and January 2014 |
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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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On October 23, 2013, the Company issued a $42,500 Convertible Promissory Note which bears interest at a rate of 8%, due on July 25,2014 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. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid(“Default Interest”) and the note also has prepayment penalty clause. |
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On January 30, 2014, the Company issued a $78,500 Convertible Promissory Note which bears interest at a rate of 8%, due on November 3, 2014 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. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”) and the note also has prepayment penalty clause. |
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The Company received a net of $185,000 from the debenture holder, $6,500 was paid towards the accrued legal expenses and due diligence fees and $36,000 toward legal and professional fees and $25,000 was paid toward accrued professional fees. |
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During the six months ended June 30, 2014, the Company paid $174,000 for July 2013, August 2013 and October 2013 note. |
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The Company identified embedded derivatives related to the Convertible Promissory Note entered into in January 2014. 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 $130,485 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 | | | 268.98 | % | | | | |
Risk free rate: | | | 0.08 | % | | | | |
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The initial fair value of the embedded debt derivative of $130,485 was allocated as a debt discount up to the proceeds of the note ($78,500) with the remainder ($51,985) charged to current period operations as interest expense for the six months ended June 30, 2014. |
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Convertible debenture December 2013 and January 2014 |
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During the six months ended June 30, 2014, the Company issued two notes of total a $228,500 Convertible Promissory Note which bears interest at a rate of 8%, due on July 20, 2014 and January 30, 2015 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. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”) and the note also has prepayment penalty clause. |
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The Company identified embedded derivatives related to the Convertible Promissory Note entered into in January 2014. 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 $383,457 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 | | | 267.19%-268.98 | % | | | | |
Risk free rate: | | | 0.07%-0.10 | % | | | | |
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The initial fair value of the embedded debt derivative of $383,457 was allocated as a debt discount up to the proceeds of the note ($228,500) with the remainder ($154,957) charged to current period operations as interest expense for the six months ended June 30, 2014. |
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Convertible debenture October 2013, December 2013 and February 2014 |
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During the six months ended June 30, 2014, the Company issued notes of total a $25,000 Convertible Promissory Note which bears interest at a rate of 8%, due on February 20, 2016 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. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”) and the note also has prepayment penalty clause. |
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The Company identified embedded derivatives related to the Convertible Promissory Note entered into in January 2014. 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 $39,722 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 | | | 270.02 | % | | | | |
Risk free rate: | | | 0.34 | % | | | | |
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The initial fair value of the embedded debt derivative of $39,722 was allocated as a debt discount up to the proceeds of the note ($25,000) with the remainder ($14,722) charged to current period operations as interest expense for the six months ended June 30, 2014. |
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Convertible debenture January 2014 |
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During the six months ended June 30, 2014, the Company issued notes of total a $11,209 Convertible Promissory Note which bears interest at a rate of 8%, due on June 2, 2014 and is convertible into the Company’s common stock at the maker’s option, at the conversion rate of 40% of the lowest three day trading price for ten trading days immediately preceding the date of conversion. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the lesser of i) 10 percent (10%) per annum or ii) the maximum rate allowed under the applicable law until paid in full or until the Note is reinstated. |
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The Company analyzed the convertible debts for derivative accounting consideration under ASC 815 “Derivatives and Hedging” and determined that derivative accounting is not applicable. The Company further analyzed the convertible debts for a beneficial conversion feature under ASC 470-20 on the date of the notes and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $7,473 and was recorded as debt discount. |
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The fair value of the described embedded derivative for all the convertible note is of $873,831 at June 30, 2014 was determined using the Binomial Lattice Model with the following assumptions: |
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Dividend yield: | | | -0- | % | | | | |
Volatility | | | 266.94 | % | | | | |
Risk free rate: | | | 0.05%-0.41 | % | | | | |
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At June 30, 2014, the Company adjusted the recorded fair value of the derivative liability to market on both notes resulting in non-cash, non-operating loss of $238,381for the six months ended June 30, 2014. |
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During the six months ended June 30, 2014 and 2013 the Company amortized $335,021 and $45,864, respectively,of beneficial debt discount to the operations as interest expense |