Convertible Note Payable | 9 Months Ended |
Sep. 30, 2013 |
OPERATING EXPENSES (INCOME) [Abstract] | ' |
Convertible Note Payable | ' |
6. Convertible Note Payable |
|
Credit Facility – January 31, 2013 |
|
On January 31, 2013, we entered into a Note Purchase Agreement with an investor pursuant to which the investor agreed to lend the Company up to $400,000 in multiple installments in exchange for a senior secured convertible promissory note with a conversion price equal to 60% of the lowest trading price per share during the previous 25 trading days. The first installment of $55,000 was delivered less a fee of $5,000 on the date of the Purchase Agreement. The second installment of $25,000 was delivered in April 2013. The notes mature on January 31, 2014, or upon default, whichever is earlier and bear interest at an annual rate of 12%. As described in Note 5, the embedded conversion feature qualified for liability classification at fair value. As a result, the Company recorded a full discount of $55,000 to the note payable on issuance. |
|
On August 13, 2013, September 9, 2013 and September 26, 2013 the holder of the convertible note exercised a portion of the conversion rights of the note for 250,000, 300,000 and 600,000 shares of common respectively at stock prices of $0.03, $0.0265, and $0.01160 respectively for a total of $22,410 principal converted. |
|
As a result of the exercise of the conversion option of the note, the Company fully amortized the remaining balance of the associated debt discount of $55,000 recognizing interest expense for the same amount. |
|
Credit Facility – February 19, 2013 |
|
On February 19, 2013, we entered into a credit facility with an investor unrelated to the investor described above pursuant to which the investor lent $103,500 to us in a single installment in exchange for a convertible promissory note with a conversion price equal to the average lowest trading price per share during the previous 10 trading days. The embedded conversion option cannot be exercised until 180 days from the date of the note and as such, will not be priced until exercisable. The total number of conversion shares is calculated by dividing the amount of the notes by the conversion price. |
|
In May of 2013, we did not comply with the timely filing requirement on this loan. Pursuant to the promissory note, a penalty of 50% of the outstanding principal amount equaling $51,750 was added to the balance of the note. This additional sum will be eligible for conversion at the same terms as the original principal balance. |
|
On August 26, 2013, September 6, 2013 and September 26, 2013 the holder of the convertible note exercised a portion of the conversion rights of the note for 478,469, 840,336 and 1,034,483 shares of common respectively at stock prices of $0.0418, $0.0357, and $0.145 respectively for a total of $90,250 principal converted. |
|
As a result of the exercise of the conversion option of the note, the Company fully amortized the remaining balance of the associated debt discount of $155,250 recognizing interest expense for the same amount. |
|
Credit Facility – April 22, 2013 |
|
On April 22, 2013, we entered into a credit facility with an investor unrelated to the investor described above pursuant to which the investor lent $63,000 to us in a single installment in exchange for a convertible promissory note with a conversion price equal to the average lowest trading price per share during 5 of the previous 10 trading days. The embedded conversion option cannot be exercised until 180 days from the date of the note and as such, will not be priced until exercisable. The total number of conversion shares is calculated by dividing the amount of the notes by the conversion price. |
|
On September 23, 2013 the investor lent an additional $47,000 in a single installment under the same terms agreement and terms as the previous installment made April 22, 2013. |
|