Note 9 - Convertible Notes Payable | 3 Months Ended |
Sep. 30, 2013 |
Notes | ' |
Note 9 - Convertible Notes Payable | ' |
Note 9 – Convertible Notes Payable |
| September 30, | June 30, |
| 2013 | 2013 |
Note #2 | 8,500 | 20,500 |
Note #3 | 32,500 | 32,500 |
Note #4 | 37,500 | 37,500 |
Note #5 | 16,400 | 30,000 |
Note #6 | 25,000 | - |
Note #7 | 11,000 | - |
Note #8 | 11,000 | - |
Note #9 | 11,000 | - |
Note #10 | 46,215 | - |
| $ 199,115 | $ 120,500 |
Debt discount | (127,045) | (16,400) |
Accrued interest | 5,340 | 3,085 |
Convertible Notes Payable Total | $ 77,410 | $ 107,185 |
Asher Note #2 |
On December 12, 2012, the Company executed an Unsecured Promissory Note (the “Asher Note”) to Asher Enterprises, Inc. (“Asher”). Under the terms of the Asher Note, the Company has borrowed a total of $32,500 from Asher, which accrues interest at an annual rate of 8% and has a maturity date of September 14, 2013. The Asher Note also contains customary events of default. During the three month period ended September 30, 2013, the Company accrued $171 (three month period ended September 30, 2012 - $nil) in interest expense. |
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $66,237 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period. |
During the three month period ended September 30, 2013, the Company recorded a gain of $67,423 (three month period ended September 30, 2012 - $nil) due to the change in value of the derivative liability during the period, and debt discount of $16,400 (three month period ended September 30, 2012 - $nil) was accreted to the statement of operations. |
During the three month period ended September 30, 2013, the Company issued 5,217,391 common shares upon the conversion of $12,000 of the principal balance and $20,267 of the derivative liability was re-classified as additional paid in capital upon conversion. |
As at September 30, 2013, accrued interest of $1,512 (September 30, 2012 - $nil), debt discount of $nil (September 30, 2012 - $nil) and a derivative liability of $11,658 (September 30, 2012 - $nil) was recorded. |
Asher Note #3 |
On January 30, 2013, the Company executed an Unsecured Promissory Note (the “Asher Note”) to Asher Enterprises, Inc. (“Asher”). Under the terms of the Asher Note, the Company has borrowed a total of $32,500 from Asher, which accrues interest at an annual rate of 8% and has a maturity date of November 1, 2013. The Asher Note also contains customary events of default. During the three month period ended September 30, 2013, the Company accrued $655 (three month period ended September 30, 2012 - $nil) in interest expense. |
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $48,237 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period. |
During the three month period ended September 30, 2013, the Company recorded a gain of $3,663 (three month period ended September 30, 2012 - $nil) due to the change in value of the derivative liability during the period, and debt discount of $21,436 (three month period ended September 30, 2012 - $nil) was accreted to the statement of operations. |
As at September 30, 2013, accrued interest of $1,731 (September 30, 2012 - $nil), debt discount of $11,064 (September 30, 2012 - $nil) and a derivative liability of $44,574 (September 30, 2012 - $nil) was recorded. |
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Asher Note #4 |
On April 12, 2013, the Company executed an Unsecured Promissory Note (the “Asher Note”) to Asher Enterprises, Inc. (“Asher”). Under the terms of the Asher Note, the Company has borrowed a total of $37,500 from Asher, which accrues interest at an annual rate of 8% and has a maturity date of January 16, 2014. The Asher Note also contains customary events of default. During the three month period ended September 30, 2013, the Company accrued $756 (three month period ended September 30, 2012 - $nil) in interest expense. |
Gel Properties, LLC Note #5 |
On June 28, 2013, the Company issued a convertible promissory note to Gel Properties, LLC. Under the terms of the note, the Company has borrowed a total of $30,000 from Gel Properties, LLC, which accrues interest at an annual rate of 6% and has a maturity date of June 28, 2014. The note also contains customary events of default. During the three month period ended September 30, 2013, the Company accrued $454 (three month period ended September 30, 2012 - $nil) in interest expense. |
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $45,055 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period. |
During the three month period ended September 30, 2013, the Company recorded a loss of $5,778 (three month period ended September 30, 2012 - $nil) due to the change in value of the derivative liability during the period, and debt discount of $7,726 (three month period ended September 30, 2012 - $nil) was accreted to the statement of operations. |
During the three month period ended September 30, 2013, the Company issued 6,800,000 common shares upon the conversion of $13,600 of the principal balance and $27,072 of the derivative liability was re-classified as additional paid in capital upon conversion. |
As at September 30, 2013, accrued interest of $464 (September 30, 2012 - $nil), debt discount of $22,274 (September 30, 2012 - $nil) and a derivative liability of $23,761 (September 30, 2012 - $nil) was recorded. |
JMJ Financial Note #6 |
On July 18, 2013, the Company issued a convertible promissory note to JMJ Financial, LLC. Under the terms of the note, the Company has borrowed a total of $25,000 from JMJ Financial. In the event the Company does not repay note on or within 90 days of the issue date, a one-time interest charge of 12% will be applied to the principal balance. The note has a maturity date of July 18, 2014. The note also contains customary events of default. During the three month period ended September 30, 2013, the Company accrued $nil (three month period ended September 30, 2012 - $nil) in interest expense. |
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $44,824 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period. |
During the three month period ended September 30, 2013, the Company recorded a gain of $5,484 (three month period ended September 30, 2012 - $nil) due to the change in value of the derivative liability during the period, and debt discount of $5,068 (three month period ended September 30, 2012 - $nil) was accreted to the statement of operations. |
As at September 30, 2013, accrued interest of $nil (September 30, 2012 - $nil), debt discount of $19,932 (September 30, 2012 - $nil) and a derivative liability of $39,340 (September 30, 2012 - $nil) was recorded. |
Direct Capital Group Note #7 |
On July 31, 2013 the Company entered into a Convertible Promissory Note with Direct Capital Group in the sum of $11,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on February 1, 2014. The Conversion Price shall mean par .00001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three month period ended September 30, 2013, the Company accrued $147 (September 30, 2012 - $nil) in interest expense. |
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance. |
During the three month period ended September 30, 2013 interest expense relating to the beneficial conversion feature of this convertible note of $11,000 (September 30, 2012 - $nil) was recorded in the financial statements, with a corresponding increase to additional paid in capital. |
Direct Capital Group Note #8 |
On August 31, 2013 the Company entered into a Convertible Promissory Note with Direct Capital Group in the sum of $11,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on March 1, 2014. The Conversion Price shall mean par .00001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three month period ended September 30, 2013, the Company accrued $72 (September 30, 2012 - $nil) in interest expense. |
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance. |
During the three month period ended September 30, 2013 interest expense relating to the beneficial conversion feature of this convertible note of $11,000 (September 30, 2012 - $nil) was recorded in the financial statements, with a corresponding increase to additional paid in capital. |
Direct Capital Group Note #9 |
On September 30, 2013 the Company entered into a Convertible Promissory Note with Direct Capital Group in the sum of $11,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on April 1, 2014. The Conversion Price shall mean par .00001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three month period ended September 30, 2013, the Company accrued $nil (September 30, 2012 - $nil) in interest expense. |
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance. |
During the three month period ended September 30, 2013 interest expense relating to the beneficial conversion feature of this convertible note of $11,000 (September 30, 2012 - $nil) was recorded in the financial statements, with a corresponding increase to additional paid in capital. |
Direct Capital Group Note #10 |
On September 30, 2013 the Company entered into a Convertible Promissory Note with Direct Capital Group in the sum of $46,215. The promissory note is unsecured, bears interest at 8% per annum, and matures on February 1, 2014. The Conversion Price shall mean par .00001 multiplied by the number of Common Stock converted at the time. The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933. During the three month period ended September 30, 2013, the Company accrued $nil (September 30, 2012 - $nil) in interest expense. |
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance. |
During the three month period ended September 30, 2013 interest expense relating to the beneficial conversion feature of this convertible note of $46,215 (September 30, 2012 - $nil) was recorded in the financial statements, with a corresponding increase to additional paid in capital. |
Note 10 – Derivative Liabilities |
The Company issued financial instruments in the form of convertible notes with embedded conversion features. The convertible notes payable have conversion rates which are indexed to the market value of the Company’s commonstock price. |
During the three month period ending September 30, 2013, $25,600 of convertible notes payable were converted into common stock of the Company. |
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These derivative liabilities have been measured in accordance with fair value measurements, as defined by GAAP. The valuation assumptions are classified within Level 3 inputs. |
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The following table represents the Company’s derivative liability activity for the embedded conversion features discussed above: |
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| | September 30, |
| | 2013 |
Balance, beginning of year | | $ 99,348 |
Initial recognition of derivative liability | | 138,116 |
Fair value change in derivative liability | | (70,992) |
Conversion of derivative liability to APIC | | |
Note #2 | | (20,267) |
Note #5 | | (27,072) |
Balance as of September 30, 2013 | | $ 119,133 |
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