Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Jun. 30, 2014 | Aug. 14, 2014 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'Digital Development Group Corp | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Jun-14 | ' |
Amendment Flag | 'false | ' |
Entity Central Index Key | '0001379699 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Common Stock, Shares Outstanding | ' | 179,524,843 |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Voluntary Filers | 'No | ' |
Entity Well-known Seasoned Issuer | 'No | ' |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q2 | ' |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Current Assets | ' | ' |
Cash | $100 | $6,371 |
Prepaid royalties | 245,132 | 217,287 |
Total current assets | 245,232 | 223,658 |
Debt issuance costs | 63,608 | 84,810 |
Total assets | 308,840 | 308,468 |
Current liabilities: | ' | ' |
Accounts payable | 320,993 | 340,864 |
Accrued liabilities (note 6) | 521,395 | 720,745 |
Judgment and accrued liabilities (note 9) | 1,143,678 | 0 |
Factor payable (note 3) | 94,533 | 84,407 |
Related party notes payable | 0 | 126,160 |
Convertible notes payable, net of discount (note 7) | 1,460,728 | 1,776,869 |
Note payable (note 7) | 510,000 | 510,000 |
Derivative liabilities (note 8) | 2,558,785 | 4,272,031 |
Total current liabilities | 6,610,112 | 7,831,076 |
Total liabilities | 6,610,112 | 8,968,784 |
Accrued contingencies | ' | 1,137,708 |
Stockholders' Deficit (note 10): | ' | ' |
Common stock, 500,000,000 shares authorized, par value $0.001, 152,411,771 and 81,280,441 shares issued and outstanding, respectively | 152,412 | 81,280 |
Common stock subscribed | 280,000 | 45,000 |
Additional paid-in capital | 5,933,097 | 3,369,583 |
Accumulated deficit | -12,666,781 | -12,156,179 |
Total stockholders' deficit | -6,301,272 | -8,660,316 |
Total liabilities and stockholders' deficit | $308,840 | $308,468 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS PARENTHETICALS (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Parentheticals | ' | ' |
Common Stock, par value | $0.00 | $0.00 |
Common Stock, shares authorized | 500,000,000 | 500,000,000 |
Common Stock, shares issued | 152,411,771 | 81,280,441 |
Common Stock, shares outstanding | 152,411,771 | 81,280,441 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Revenues: | ' | ' | ' | ' |
Net Revenue | $32,328 | $22,597 | $58,165 | $27,353 |
Operating expenses- | ' | ' | ' | ' |
General and administrative | 769,397 | 1,121,886 | 1,343,089 | 3,409,817 |
Total operating expenses | 769,397 | 1,121,886 | 1,343,089 | 3,409,817 |
Operating loss | -737,069 | -1,099,289 | -1,284,924 | -3,382,464 |
Other (income) expense: | ' | ' | ' | ' |
Interest expense | 1,067,928 | 263,779 | 1,347,788 | 556,789 |
Change in the fair value of derivative liabilities | 374,962 | -226,191 | -2,122,110 | 337,870 |
Total other (income) expense | 1,442,890 | 37,588 | -774,322 | 894,659 |
Net loss | ($2,179,959) | ($1,136,877) | ($510,602) | ($4,277,123) |
Loss per share - basic and dilutive | ($0.02) | ($0.02) | $0 | ($0.07) |
Weighted average shares outstanding - basic and dilutive | 119,836,790 | 61,989,216 | 107,380,719 | 60,467,025 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (USD $) | Common Stock Shares | Common Stock Amount | Common Stock Subscribed | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders' Deficit. |
USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | ||
Balance at Dec. 31, 2013 | 81,280,441 | 81,280 | 45,000 | 3,369,583 | -12,156,179 | -8,660,316 |
Common stock issued for conversion of debt | 40,279,774 | 40,280 | 0 | 558,629 | 0 | 598,909 |
Cancellation of derivative liabilities upon debt conversion | ' | $0 | $0 | $869,753 | $0 | $869,753 |
Stock-based compensation - options | ' | 0 | 0 | 146,388 | 0 | 146,388 |
Common stock issued to Chief Executive Officer | 20,095,000 | 20,095 | 0 | 584,323 | 0 | 604,418 |
Common stock issued for cash | 56,556 | 57 | 0 | 1,943 | 0 | 2,000 |
Common stock issued for services | 10,700,000 | 10,700 | 0 | 402,478 | 0 | 413,178 |
Common stock subscribed | ' | 0 | 235,000 | 0 | 0 | 235,000 |
Net loss | ' | $0 | $0 | $0 | ($510,602) | ($510,602) |
Balance at Jun. 30, 2014 | 152,411,771 | 152,412 | 280,000 | 5,933,097 | -12,666,781 | -6,301,272 |
CONDENSED_CONSOLIDATED_STATEME2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' |
Net loss | ($510,602) | ($4,277,123) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Depreciation & amortization expense | 0 | 46,844 |
Stock-based compensation | 726,040 | 983,503 |
Debt discount amortization | 1,002,101 | 481,776 |
Change in the fair value of derivative liabilities | -2,122,110 | 337,870 |
Changes in operating assets and liabilities: | ' | ' |
Other | 0 | 21,202 |
Prepaid expense | -27,845 | 130,631 |
Accounts payable | -19,438 | 67,342 |
Accrued liabilities | 191,366 | 1,157,429 |
Cash flows used in operating activities | -760,488 | -1,050,526 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ' | ' |
Purchase of intangible assets | 0 | -12,767 |
Purchase of equipment | 0 | -14,075 |
Net cash used in investing activities | 0 | -26,842 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' |
Bank overdraft | 6,037 | 22,445 |
Factor payable | 10,126 | 0 |
Proceeds from issuance of convertible notes payable | 673,000 | 931,291 |
Payments on convertible notes payable | -117,608 | -72,445 |
Net borrowings from related party note payable | -54,338 | 89,246 |
Common stock subscribed | 235,000 | 65,000 |
Common stock issued for cash | 2,000 | 41,199 |
Net cash provided by financing activities | 754,217 | 1,076,736 |
Change in cash during period | -6,271 | -632 |
Cash, beginning of period | 6,371 | 831 |
Cash, end of period | $100 | $199 |
ORGANIZATION
ORGANIZATION | 6 Months Ended |
Jun. 30, 2014 | |
ORGANIZATION | ' |
ORGANIZATION | ' |
1. ORGANIZATION | |
Digital Development Group Corp. (the “Company”) (originally Regency Resources Inc.) was incorporated under the laws of the State of Nevada on December 11, 2006, with authorized capital stock of 500,000,000 shares at $0.001 par value. The Company was originally organized for the purpose of acquiring and developing mineral properties. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2014 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | |
The accompanying unaudited condensed consolidated financial statements primarily reflect the financial position, results of operations and cash flows of the Company (as discussed above). The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) GAAP for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, these interim condensed financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014, or for any other period. | |
Principles of Consolidation | |
The condensed consolidated balance sheets include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. | |
Going Concern | |
The Company has minimal revenue, has incurred losses and has a significant capital deficiency. The Company's continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations, which it has not been able to accomplish to date, and /or obtain additional financing from its from third parties and work on conversions of certain notes into common stock. | |
These unaudited condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next fiscal year. The continuation of the Company as a going concern is dependent upon financial support from its stockholders and the ability of the Company to obtain necessary equity financing to continue operations. | |
There is no assurance that the Company will ever be profitable. The unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. | |
Use of Estimates | |
In preparing these unaudited condensed consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates and assumptions included in the Company’s condensed consolidated financial statements relate to the valuation assumptions related to stock-based compensation and the derivative liabilities related to the certain embedded conversion features in notes payable. | |
Per Share Information | |
The Company computes per share information in accordance with ASC 260, "Earnings per Share". ASC 260 requires presentation of both basic and diluted earnings (loss) per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. As of June 30, 2014, diluted EPS does not give effect to all dilutive potential common shares outstanding as their effects are anti-dilutive due to losses incurred by the Company. | |
Recent Accounting Pronouncements | |
In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity to reduce diversity in practice for reporting discontinued operations. Under the previous guidance, any component of an entity that was a reportable segment, an operating segment, a reporting unit, a subsidiary, or an asset group was eligible for discontinued operations presentation. The revised guidance only allows disposals of components of an entity that represent a strategic shift (e.g., disposal of a major geographical area, a major line of business, a major equity method investment, or other major parts of an entity) and that have a major effect on a reporting entity’s operations and financial results to be reported as discontinued operations. The revised guidance also requires expanded disclosure in the financial statements for discontinued operations as well as for disposals of significant components of an entity that do not qualify for discontinued operations presentation. The updated guidance is effective for periods beginning after December 15, 2014. | |
Other recent pronouncements issued by FASB (including its Emerging Task Force), the American Institute of Certified Public Accountants, and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements. |
ACCOUNTS_RECEIVABLE_FACTORING
ACCOUNTS RECEIVABLE FACTORING | 6 Months Ended |
Jun. 30, 2014 | |
ACCOUNTS RECEIVABLE FACTORING | ' |
ACCOUNTS RECEIVABLE FACTORING | ' |
3. ACCOUNTS RECEIVABLE FACTORING | |
On October 1, 2013, the Company entered into an accounts receivable purchase agreement (the “Agreement”) with Summit Capital Investors, LLC (“Summit”), with an initial term of five years and renewing annually thereafter. The Company may obtain advances up to $300,000 from Summit and shall establish a separate merchant bank account in the name of Summit (the “Lockbox”) into which all of the Company’s monthly membership or accounts receivable shall be deposited. The funds in the lockbox account will be used to pay 120% of each advance received from Summit plus any other fees or costs. As of June 30, 2014 and December 31, 2013, the Company has payable related to this factoring agreement of $94,533 and $84,407, respectively, which was calculated based on 120% of advances received reduced by total accounts receivable deposited into the lockbox. All revenue from the Company will be paid directly into this bank account which is not under the Company’s ownership until the advances are paid off. |
PREPAID_EXPENSES
PREPAID EXPENSES | 6 Months Ended |
Jun. 30, 2014 | |
PREPAID EXPENSES | ' |
PREPAID EXPENSES | ' |
4. PREPAID EXPENSES | |
The Company incurs costs associated with licensing content from independent producers. Initially, costs may be prepaid in advance. Pre-payments are capitalized and amortized over the period under the terms of the contracts on a per-used basis. In the event management believes the Company will not recover the royalties advanced, such amounts are charged to expense. |
OTHER_ASSETS
OTHER ASSETS | 6 Months Ended |
Jun. 30, 2014 | |
OTHER ASSETS | ' |
OTHER ASSETS | ' |
5. OTHER ASSETS | |
The Company recorded an amount of $127,214 debt issuance cost from the issuance of a convertible promissory note payable to Stuart Subotnick of $240,000 which has been be amortized over the term of the note to interest expense. Amortization expense for the six months ended June 30, 2014 and 2013 amounted to $21,202 and $0, respectively. The balance of debt issuance costs as of June 30, 2014 and December 31, 2013 are $63,608 and $84,810, respectively. |
ACCRUED_LIABILITIES
ACCRUED LIABILITIES | 6 Months Ended | ||||||
Jun. 30, 2014 | |||||||
ACCRUED LIABILITIES | ' | ||||||
ACCRUED LIABILITIES | ' | ||||||
6. ACCRUED LIABILITIES | |||||||
The components of accrued liabilities were as follows: | |||||||
June 30, | December 31, | ||||||
2014 | 2013 | ||||||
Interest | $ | 301,055 | $ | 152,350 | |||
Payroll | 101,603 | 455,193 | |||||
Payroll taxes - delinquent | 93,584 | 93,584 | |||||
Other | 25,153 | 19,618 | |||||
Total accrued liabilities | $ | 521,395 | $ | 720,745 |
NOTES_PAYABLE_NET
NOTES PAYABLE, NET | 6 Months Ended | ||||||
Jun. 30, 2014 | |||||||
NOTES PAYABLE, NET | ' | ||||||
NOTES PAYABLE, NET | ' | ||||||
7. NOTES PAYABLE, NET | |||||||
Convertible notes payable consisted of the following: | |||||||
June 30, | December 31, | ||||||
2014 | 2013 | ||||||
Convertible notes payable to Coventry Capital, LLC, net of discount of $42,980, and $0, respectively | $ | 810,000 | $ | 960,000 | |||
Convertible note payable to Stuart Subotnick, net of discount of $99,599 and $132,799, respectively | 280,401 | 247,201 | |||||
Convertible notes payable to Asher Enterprises – In default | 111,421 | 183,000 | |||||
Convertible note payable to Tonaquint, net of discount of $0 and $26,906, respectively | 17,393 | 81,614 | |||||
Convertible note payable to Vista Capital Investments, net of discount of $50,000, and $0, respectively | - | - | |||||
Convertible notes payable to LG Capital, net of discount of $76,609 and $0, respectively | 20,141 | 25,000 | |||||
Convertible notes payable to Union Capital, net of discount of $41,857 and $0, respectively | 18,413 | 25,000 | |||||
Other notes payable, net of discount of $200,661 and $41,602, respectively | 202,959 | 255,054 | |||||
Total convertible notes payable, net of discount | $ | 1,460,728 | $ | 1,776,869 | |||
Note payable consists of the following -Note payable to Charlie Sheen | $ | 510,000 | $ | 510,000 | |||
Coventry Capital, LLC Notes | |||||||
During 2012, the Company issued a total of $950,000 convertible notes payable to Coventry Capital, LLC. These convertible promissory notes are payable on demand and carried an interest rate of 1% per month (simple interest), until the closing of the voluntary share exchange transaction contemplated under the letter of intent. Thereafter, the interest rate shall adjust to 3% per year, simple interest. Upon closing of the voluntary share exchange transaction contemplated under the letter of intent, the unpaid principal and any accrued and unpaid interest shall be immediately due and payable upon written demand by the holder at any time. | |||||||
At any time on or before the maturity date, the holder, at its sole discretion may elect to have all or part of the principal and the accrued and unpaid interest thereon, converted into a number of shares of common stock of the Company determined by dividing (i) the unpaid principal and any accrued and unpaid interest thereon, as of the conversion date, by (ii) the lower of (a) the price per share at which shares of capital stock of the Company are sold in any financing, or (b) $0.50 per share. A "financing" means the sale of shares of capital stock of the Company occurring within twenty four (24) months after the closing. The embedded conversion feature of these notes was recorded as a derivative liability due to the down-round protection of the conversion price. | |||||||
On June 17, 2013, the terms of the notes were amended to extend the maturity date to January 31, 2018 and set a floor to the conversion price at $0.08 per share. The Coventry notes were ultimately sold or assigned to other parties. On January 27, 2014, the Company entered into a debt conversion agreement with Cemblance LTD (“Cemblance”), holder of $300,000 of outstanding Coventry notes, for conversion of $150,000 of principal and interest into 4,000,000 shares of the Company’s common stock. | |||||||
On April 2, 2014, the Company entered into an additional convertible note with Coventry for $50,000. The note accrues interest at the rate of 10% per annum (default rate of 16%, per annum); is due and payable in one year; and may be converted by Coventry at any time after 180 days. The notes are convertible into shares of Company common stock at a conversion price equal to 60% of the lowest closing bid price of the Company’s common stock over the prior 20 trading days calculated at the time of conversion. The note also contain certain representations, warranties, covenants and events of default. | |||||||
Stuart Subotnick Notes | |||||||
On September 10, 2012, the Company issued a $240,000 convertible note payable to Stuart Subotnick. This note was issued with 800,000 warrants and exercisable into the Company’s common stock. The warrants have a three-year term and the exercise price is $0.30. At any time on or before the maturity date, the note holder, at its sole discretion, may elect to have all or part of the principal and the accrued and unpaid interest thereon, converted into a number of shares of common stock of the Company. The conversion price is $0.30 per share, subject to adjustment for issuances or sales of securities at a lower price per share. This convertible promissory note, and accrued and unpaid interest, are payable upon the earlier of i) at any time after three-year anniversary of the issue date of this note at the written request of the holder to the Company or ii) when, upon or after the occurrence of an event of default. The note carries an interest rate of 8% per annum (simple interest). | |||||||
The embedded conversion feature of this note was recorded as a derivative liability due to the down-round protection of the conversion prices. The Company also recorded a debt discount of $121,381 for the fair value of the warrants. On December 17, 2013, the holder of the note and the Company agreed to fix the conversion price of the note at $0.0261 per share or 9.9 million shares. | |||||||
During October and November 2012, the Company issued additional notes payable to Mr. Subotnick in the aggregate amount of $140,000. These notes accrue interest at rates ranging from 8% to 12% and are due by November 2013. The Company is currently in default of these $140,000 notes payable because the principal balance and accrued interest were not paid on the due date. | |||||||
QuickLoan Funding | |||||||
On March 13, 2013, The Company, entered into a Convertible Promissory Note (the “Convertible Promissory Note”) with QuickLoan Funding, an accredited lender (the “Lender”). Under the terms of the Promissory Note, the Lender paid $110,000 to the Company upon execution of the Convertible Promissory Note, and the Lender may fund additional amounts in such amounts and at such dates as the Lender may choose in its sole discretion, up to an additional $150,000 above the initial $110,000 funded. Thereafter, the Lender may provide additional amounts only by mutual agreement with the Company, up to a total principal sum of $400,000. All amounts advanced by Lender are subject to a 20% original issue discount such that the total amount funded to the Company would be $360,000 if the Lender advances all funds under the Convertible Promissory Note. The maturity date is one year from the effective date of each payment by the Lender, and all outstanding principal and interest is due and payable by the Company on the maturity date. If the Company repays the Note in full within the first 90 days after the effective date, then the interest rate is zero percent. If the Company does not repay the Note in full within the first 90 days after the effective date, then a one-time interest charge of 12 percent shall be applied to the unpaid principal. | |||||||
During the six months ended June 30, 2014, QuickLoan Funding converted $55,160 of their notes into 3,233,333 shares of the Company’s common stock. In addition, the Company used the proceeds it received from the sale of shares of its common stock to pay $68,879 in principal due to QuickLoan Funding. | |||||||
In the six months ended June 30, 2014, the Company received additional $55,000 from the lender, less discounts and fees. The Lender has the right, at any time from 180 days after the effective date, at its election, to convert all or part of the outstanding and unpaid principal and accrued interest under the Convertible Promissory Note into shares of Company common stock at the conversion price. The conversion price is the lesser of $0.20 per share, or 60% of the lowest trade price of the Company’s common stock in the 25 trading days prior to the date of conversion. The Lender also has piggyback registration rights to have the shares it would receive upon conversion of the Promissory Note included within the next registration statement which the Company may file with the Securities and Exchange Commission. The Company recorded a full discount related to the derivative liability embedded in the note. The excess of $21,734 was recorded as the change in fair value of the derivative liability. | |||||||
Charlie Sheen | |||||||
On April 16, 2013, the Company executed a Promissory Note (the “Promissory Note”) in favor of celebrity actor, Charlie Sheen, pursuant to which Charlie Sheen has loaned the Company $150,000. Under the terms of the Promissory Note, the principal accrues interest at the rate of 6% per annum and is due and payable on April 10, 2015, with interest only payments of $750 per month to commence on November 1, 2013. During the prior year, the Company borrowed an additional $390,000 from Mr. Sheen and repaid $2,500 to Mr. Sheen under the same terms as the Promissory Note. | |||||||
Tonaquint Convertible note | |||||||
On April 3, 2013, the Company, entered into a Securities Purchase Agreement, Secured Convertible Promissory Note, Security Agreement, Warrant, Deed of Trust, Deed of Trust Notes, Confession of Judgment and ancillary agreements (the “Financing Documents”) with Tonaquint, Inc., (the “Buyer”). | |||||||
Under the terms of the Financing Documents, the Buyer entered into the Secured Convertible Promissory Note in the principal amount of $340,000 (the “Note”). The Company is obligated to commence repayment of the Note on the 180 th day after the Note issuance date by making monthly installments of $28,333. Provided certain equity conditions are met, the Company may repay the monthly installment payments through the issuance of Company common stock at the market price (the “Market Price”) defined as 90% of the arithmetic average of the three (3) lowest volume weighted average pricing “VWAP” of the shares of Common Stock during the twenty (20) consecutive trading day period immediately preceding the date of repayment. Additionally, if the Company pays the installment payment in Company common stock, then 23 days following the installment payment date the Buyer shall receive additional shares of Company common stock if the Market Price on the 23rd day is less than the Market Price on the installment payment date. The entire outstanding balance under the Note is due and payable 17 months after the date of issuance. The Note bears interest at the rate of eight percent (8%) per annum, provided that upon the occurrence of an event of default, interest shall accrue on the outstanding balance both before and after judgment at the rate of twenty-two percent (22%) per annum. The Note carries an original issue discount of $30,000. In addition, the Company agreed to pay $10,000 to the Buyer to cover the Buyer’s legal fees, accounting costs, due diligence, monitoring and other transaction costs, all of which amount is included in the initial principal balance of the Note. | |||||||
In consideration for the Note, the Buyer paid the Company (i) $100,000, and (ii) issued to the Company two Buyer Deed of Trust Notes in the amount of $100,000 each, one which will be prepaid by Buyer within 2 months and 4 months, respectively, of April 3, 2013 provided that an equity conditions failure has not occurred under the Note. The Note is secured by a Security Agreement executed by the Company and listing the Buyer Deed of Trust Notes as security for the Company’s obligations under the Financing Documents (the “Security Agreement”). Each of the Buyer Deed of Trust Notes is secured by a Deed of Trust (the “Deed of Trust”). The outstanding balance under the Note may be converted by the Buyer at any time into shares of Company common stock at the rate of $0.20 per share (the “Conversion Price”), subject to adjustment in the event of certain issuances of variable price or unrestricted securities by the Company after the date of the Note. Upon an event of default, the outstanding balance under the Note shall increase to 135% and will be immediately due and payable, and the Buyer may convert the outstanding balance into shares of Company common stock at the lower of the Conversion Price then in effect and the Market Price. | |||||||
The Company also issued Buyer a warrant to purchase up to 1,400,000 shares of Company common stock at an exercise price of $0.20 per share, subject to adjustment in the event of certain issuances of variable price and unrestricted securities by the Company after the date of the Note. The Warrants may be exercised for a term of 5 years and have a “cashless exercise” provision. The embedded conversion feature of this note and related warrants was recorded as a derivative liability due to the down-round protection of the conversion prices. | |||||||
During the six months ended June 30, 2014, Tonaquint converted $84,023 of their notes into 11,552,446 shares of the Company’s common stock. | |||||||
Asher Enterprises Notes | |||||||
During 2013, the Company entered into several Note Purchase Agreement and Convertible Promissory Note with Asher Enterprises, Inc. pursuant to which Asher purchased a $183,000 Convertible Promissory Note (the “Asher Notes”). The Asher Notes accrue interest at the rate of 8% per annum (default rate of 22%, per annum); is due and payable in several dates in 2014; and may be converted by Asher at any time after 180 days. The notes are convertible into shares of Company common stock at a conversion price equal to 60% of the market price (as determined in the Asher Note) calculated at the time of conversion. The Asher Note Purchase Agreement and Note also contain certain representations, warranties, covenants and events of default. In the event of default, the notes will increase 150% of the debt balance as of the date of default. | |||||||
In addition, during the six months ended June 30, 2014, the Company entered into two additional notes with Asher Enterprises for a total of $75,000. The notes have the same terms and conditions as previously issued notes to Asher. The Company is in default in this note because the Company did not file the 10-Q on time according to SEC filing requirements. The Company recorded an increase in the principal balance of $91,500 during the three months ended June 30, 2014. | |||||||
During the six months ended June 30, 2014, Asher Notes in the amount of $197,750 in principal and accrued interest, where converted into 10,556,538 shares of the Company’s common stock. | |||||||
Vista Capital Investments | |||||||
On May 7, 2014, the Company entered into a Convertible Promissory Note with Vista Capital Investments, LLC (“Vista”) in the original principal amount of $150,000 (the “Note”), pursuant to which Vista funded $50,000. The Note has a one-time interest charge of 12%; is due and payable one year after the date of issuance; and may be converted by Vista at any time after 180 days of the date of issuance into shares of Company common stock at a conversion price equal to 60% of the market price (as determined in the Note) calculated at the time of conversion. The Note also contains certain representations, warranties, covenants and events of default, and is collateralized by the issuance of 20,000,000 shares of Company common stock. The foregoing is only a brief description of the material terms of the Note, and does not purport to be a complete description of the rights and obligations of the parties thereunder and such descriptions are qualified in their entirety by reference to the agreements and their exhibits which are filed as an exhibit to this Quarterly Report. The issuance of the Note was made in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) for the offer and sale of securities not involving a public offering, and Regulation D promulgated under the Securities Act. The Company’s reliance upon Section 4(2) of the Securities Act in issuing the securities was based upon the following factors: (a) the issuance of the securities was an isolated private transaction by us which did not involve a public offering; (b) there was only one recipient; (c) there were no subsequent or contemporaneous public offerings of the securities by the Company; (d) the securities were not broken down into smaller denominations; (e) the negotiations for the issuance of the securities took place directly between the individual and the Company; and (f) the recipient of the Note was an accredited investor. | |||||||
LG Capital Funding | |||||||
On December 10, 2013, the Company entered into Securities Purchase Agreement with LG Capital Funding (“LG”) pursuant to which the Company issued two convertible promissory notes in the aggregate principal amount of $50,000 (the “Notes”), pursuant to which LG funded $25,000 at that date and an additional $25,000 on June 10, 2014, less discounts and fees, The Notes bears interest at the rate of 10% per annum; are due and payable twelve months after the date of issuance; and may be converted by LG at any time after 180 days of the date of issuance into shares of Company common stock at a conversion price equal to 55% of the market price (as determined in the Note) calculated at the time of conversion. | |||||||
On March 4, 2014, May 9, 2014 and June 24, 2014, the Company entered into Convertible Promissory Notes with LG in the original principal amounts of $32,000, $26,500 and $36,750, respectively, less discounts and fees (the “Notes”). The Notes bears interest at the rate of 8% or 10% per annum; are due and payable twelve months after the date of issuance; and may be converted by LG at any time after 180 days of the date of issuance into shares of Company common stock at a conversion price equal to 55% of the market price (as determined in the Note) calculated at the time of conversion. | |||||||
The foregoing is only a brief description of the material terms of the Notes, and does not purport to be a complete description of the rights and obligations of the parties thereunder and such descriptions are qualified in their entirety by reference to the agreements and their exhibits which are filed as an exhibit to this Quarterly Report. The issuance of the Note was made in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) for the offer and sale of securities not involving a public offering, and Regulation D promulgated under the Securities Act. The Company’s reliance upon Section 4(2) of the Securities Act in issuing the securities was based upon the following factors: (a) the issuance of the securities was an isolated private transaction by us which did not involve a public offering; (b) there was only one recipient; (c) there were no subsequent or contemporaneous public offerings of the securities by the Company; (d) the securities were not broken down into smaller denominations; (e) the negotiations for the issuance of the securities took place directly between the individual and the Company; and (f) the recipient of the Note was an accredited investor. | |||||||
During the six months ended June 30, 2014, LG converted a total balance of note principal and accrued interest of $51,062 into 5,825,642 shares of the Company's common stock. | |||||||
Union Capital | |||||||
On March 4, 2014, the Company entered into Securities Purchase Agreement with Union Capital LLC (“Union”) pursuant to which the Company issued three convertible promissory notes in the aggregate principal amount of $90,000 (the “Notes”), pursuant to which Union funded $30,000 at that date and an additional $30,000 on May 12, 2014,less discounts and fees,. The Notes accrue interest at the rate of 10% per annum; are due and payable 12 months after their date of issuance; and may be converted by Union at any time into shares of Company common stock at a conversion price equal to 56% of the market price (as determined in the Note) calculated at the time of conversion. The Securities Purchase Agreement and Notes also contain certain representations, warranties, covenants and events of default. The foregoing is only a brief description of the material terms of the Securities Purchase Agreement and Notes, and does not purport to be a complete description of the rights and obligations of the parties thereunder and such descriptions are qualified in their entirety by reference to the agreements and their exhibits which are filed as an exhibit to this Quarterly Report. The issuance of the Note was made in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) for the offer and sale of securities not involving a public offering, and Regulation D promulgated under the Securities Act. The Company’s reliance upon Section 4(2) of the Securities Act in issuing the securities was based upon the following factors: (a) the issuance of the securities was an isolated private transaction by us which did not involve a public offering; (b) there was only one recipient; (c) there were no subsequent or contemporaneous public offerings of the securities by the Company; (d) the securities were not broken down into smaller denominations; (e) the negotiations for the issuance of the securities took place directly between the individual and the Company; and (f) the recipient of the Note was an accredited investor. | |||||||
Gel Properties | |||||||
On December 10, 2013, the Company entered into Securities Purchase Agreement with Gel Properties, Inc. (“Gel”) pursuant to which the Company issued two convertible promissory notes in the aggregate principal amount of $50,000 (the “Notes”), pursuant to which Gel funded $25,000 at that date and an additional $25,000 on June 11, 2014, less discounts and fees, The Notes bears interest at the rate of 10% per annum; is due and payable twelve months after the date of issuance; and may be converted by Gel at any time after 180 days of the date of issuance into shares of Company common stock at a conversion price equal to 55% of the market price (as determined in the Note) calculated at the time of conversion. | |||||||
The foregoing is only a brief description of the material terms of the Securities Purchase Agreement and Notes, and does not purport to be a complete description of the rights and obligations of the parties thereunder and such descriptions are qualified in their entirety by reference to the agreements and their exhibits which are filed as an exhibit to this Quarterly Report. The issuance of the Note was made in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) for the offer and sale of securities not involving a public offering, and Regulation D promulgated under the Securities Act. The Company’s reliance upon Section 4(2) of the Securities Act in issuing the securities was based upon the following factors: (a) the issuance of the securities was an isolated private transaction by us which did not involve a public offering; (b) there was only one recipient; (c) there were no subsequent or contemporaneous public offerings of the securities by the Company; (d) the securities were not broken down into smaller denominations; (e) the negotiations for the issuance of the securities took place directly between the individual and the Company; and (f) the recipient of the Note was an accredited investor. | |||||||
During the six months ended June 30, 2014, Gel converted a total balance of note principal and accrued interest of $51,362 into 5,111,815 shares of the Company's common stock. | |||||||
Other Convertible Notes Payable | |||||||
Not including notes described above, the Company has entered into notes with balances as of June 30, 2014 of $202,959, net of discounts and fees. These notes are a mix of non-convertible and convertible notes, with interest rates between 6%-9% and maturity dates between June 30, 2014 and June 24, 2015. The convertible notes are convertible at rates between 55%-60% of the market value of the Company's common stock over a range of preceding dates. | |||||||
Related Party Note Payable | |||||||
Effective January 30, 2013, the Company entered into a Promissory Note with Martin W. Greenwald, the Company’s Chief Executive Officer, pursuant to which Mr. Greenwald has agreed to loan the Company up to $250,000 to fund Company operations. The Promissory Note provides that Mr. Greenwald may advance funds to the Company from to time to time, up to the amount of $250,000. The amounts advanced shall be due within one year from the date of the promissory note and shall accrue interest at 3% per annum. The Company had $126,160 outstanding under the loan agreement as of December 31, 2013. Amounts were repaid during the six months ended June 30, 2014 totaling approximately $54,000. The balance due, including accrued salaries, was settled through the issuance of common stock as discussed in Note 10. No amounts are due at June 30, 2014. |
DERIVATIVE_LIABILITY
DERIVATIVE LIABILITY | 6 Months Ended | |||
Jun. 30, 2014 | ||||
DERIVATIVE LIABILITY | ' | |||
DERIVATIVE LIABILITY | ' | |||
NOTE 8 – DERIVATIVE LIABILITIES | ||||
The following table represents the Company’s derivative liabilities activity, classified as level 3 financial instruments, for both the embedded conversion features and the warrants for the six months ended June 30, 2014: | ||||
Amount | ||||
Derivative liabilities balance, January 1, 2014 | $ | 4,272,031 | ||
Issuance of derivative financial instruments in 2014 | 1,278,618 | |||
Cancellation - conversions of notes in 2014 | -869,754 | |||
Change in fair value of derivative liabilities | -2,122,110 | |||
Derivative liabilities balance, June 30, 2014 | $ | 2,558,785 |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2014 | |
COMMITMENTS AND CONTINGENCIES | ' |
COMMITMENTS AND CONTINGENCIES | ' |
NOTE 9 – COMMITMENTS AND CONTINGENCIES | |
Contingent liability | |
On December 19, 2011, the Company entered into two promissory notes with an accredited investor pursuant to which the Company issued two 14% convertible promissory notes (the "Notes") to advance of up to $280,000 to the Company. As of this date, the Company has only received $118,000 of the agreed upon $280,000. | |
The Notes were offered and sold in reliance on the exemption from registration afforded by Rule 506 of Regulation D promulgated under Section 4(2) of the Securities Act of 1933, as amended. The Notes have a six-month term due June 16, 2012, and are convertible by the holder into Common Stock of a contemplated merger or acquisition and a subsequent newly formed company ("Acquireco") at a price of $0.10 per share. The Company may prepay all or a portion of the outstanding principal and interest under the Notes upon 10 days' written notice without penalty. The amount due under the Notes will become immediately due and payable if the Company fails to pay unpaid principal on the maturity date of June 16, 2012, any representation or warranty made by the Company is false, incorrect, incomplete or misleading, or the Company dissolves, liquidates, ceases operations, is unable to pay its debts when due, a receiver or trustee is appointed or bankruptcy proceedings are instituted. While any amount of the Note is outstanding, the borrower is obligated to the covenants of (i) paying no dividends. | |
The Company is in default of these notes because it did not repay principal and accrued interest on the maturity date of June 16, 2012. Due to the default provisions of the Note, the Company accrued interest at the default rate of 29% per annum from the maturity date going forward. In July 2012, the Company tried to begin negotiations with the investor; however, it has been unsuccessful in contacting the investor to date. The Company has recorded a contingent liability of $194,678 as of June 30, 2014, to reflect the obligation that it believes it owes to investor. The investor is claiming that the Company owes an additional $162,000 plus accrued interest but the Company never received the additional funds as described under the Notes and intends to defend against any position that the investor takes pertaining to the additional $162,000. The Company has treated this matter as a contingent liability because at this time the Company is uncertain as to how and when this matter will be resolved. The Company believes it has accrued its estimate in the condensed consolidated financial statements of the most likely amount to be settled with the investor. | |
Judgment liability | |
Effective December 19, 2012, the Company terminated the Securities Purchase Agreement, Registration Rights Agreement and Debenture dated November 6, 2012 (the “Financing Documents”) with Ironridge Media Co., a division of Ironridge Global IV, Ltd. (“Ironridge”), for the sale of up to $3,000,000 of Convertible Subordinated Debentures and Series A Preferred Stock. On January 11, 2013, Ironridge submitted a claim with JAMS, Inc. in Santa Monica, California for binding arbitration under the Financing Documents and requested that it be awarded damages relating to the termination of the Financing Documents. The Company submitted counter-claims in the JAMS arbitration claiming that it was fraudulently induced to enter into the Financing Documents, and that a fully performed oral stock purchase agreement caused the Financing Documents to be abandoned by the parties, justifying rescission of the financing documents. In May 2013, the Arbitrator in the JAMS arbitration announced an interim award to Ironridge shall recover from the Company in the amount of $850,000 plus attorney fees and costs. On July 10, 2013, the Arbitrator made the interim award final, and awarded Ironridge an additional $110,168 in attorneys’ fees and costs. The Company does not have adequate cash to pay the final arbitration award. The judgment resulting from the arbitration award would adversely affect the business, future operations and the financial condition of the Company, and may cause the Company to default under its existing loan obligations which would provide the lenders with the right for immediate repayment. The Company recorded an accrual of $960,000 under contingent liability in the accompanying condensed consolidated balance sheet as of June 30, 2014 and December 31, 2013 related to this case, as well as accrued interest on the outstanding balance of $96,000 as of June 30, 2014. | |
Sheen Agreement | |
On March 25, 2013, the Company entered into an Agreement with celebrity actor, Charlie Sheen, pursuant to which he has agreed to work with the Company to develop and promote his own channel and original content, and to promote and endorse the Company and its channels through various media. Under the terms of the Agreement, Mr. Sheen’s involvement with the Company is to include his creation of original content; his promotion and endorsement of the Company’s channels and the creation and promotion of the Charlie Sheen Channel; his personal appearances; the use of Mr. Sheen’s name, voice and likeness for promotional purposes; and the promotion of the Company and its channels across social media, including postings on Facebook and Twitter. The Agreement has a term of 12 months, unless extended as provided in the Agreement. | |
In consideration for his services, the Company has agreed to pay Charlie Sheen a $300,000 fee payable in installments. In addition, the Company has agreed to pay Mr. Sheen a percentage of Company gross revenues generated by the distribution and sale of original programming featuring Mr. Sheen and his affiliates, including gross revenues from the Charlie Sheen Channel and other pay per view events and episodes. In consideration of Mr. Sheen’s obligations, the Company has also agreed to issue to Mr. Sheen options to purchase up to seven million shares of the Company’s common stock as follows: options to purchase one million shares of the Company’s common stock vested upon the date of the Agreement, and options to purchase the remaining six million shares of the Company’s common stock shall vest in equal installments of one million shares every six months after the date of the Agreement, each exercisable at an exercise price of $0.10 per share. | |
The Parties to the Agreement have agreed to void the Agreement as neither Party performed. This obligation has not been recorded on the Company’s financial statements. No shares have been earned by Charlie Sheen nor issued to Charlie Sheen or any entity connected with Charlie Sheen relating to this Agreement. | |
Operating lease | |
The Company leases office space under an operating lease, which began on July 1, 2012, expired on November 15, 2013 and is now month to month. The average rental payment including utilities and operating expenses for the facility is approximately $5,935 per month. Rent expense for the periods ended June 30, 2014 and 2013 amounted to $41,335 and $34,310, respectively. |
STOCKHOLDERS_DEFICIT
STOCKHOLDERS' DEFICIT | 6 Months Ended | ||||||||||
Jun. 30, 2014 | |||||||||||
STOCKHOLDERS' DEFICIT | ' | ||||||||||
STOCKHOLDERS' DEFICIT | ' | ||||||||||
NOTE 10 – STOCKHOLDERS’ DEFICIT | |||||||||||
Common Stock | |||||||||||
From January 1, 2014 to June 30, 2014, the Company issued 10,700,000 common shares for services provided valued at $413,178 to various service providers, of which $11,250 reduced accounts payable and the balance of $401,928 charged to expense. The Company issued 20,095,000 shares valued at $604,418 for unpaid salary and advances totaling $455,193, and additional compensation to its Chief Executive Officer totaling $149,445 and charged to expense. | |||||||||||
In addition, the Company issued 56,556 common shares for cash of $2,000, and issued 40,279,774 common shares upon conversion of notes payable of $598,909. | |||||||||||
During the six months ended June 30, 2014, the Company has received $235,000 in stock subscription for the purchase of 13,421,053 of its common stock. | |||||||||||
As of June 30, 2014, the Company has notes payable which are convertible into approximately 56 million shares common stock under various convertible note agreements, as well as approximately 10 million shares under various options and warrants. | |||||||||||
Stock Options | |||||||||||
On January 3, 2013, our board of directors approved the adoption of The Digital Development Group Corp. 2013 Equity Incentive Plan (the "2013 Plan”). The 2013 Plan is intended to aid the Company in recruiting and retaining key employees, directors or consultants and to motivate them by providing incentives through the granting of awards of stock options or other stock-based awards. The 2013 Plan is administered by the board of directors. Directors, officers, employees and consultants of the Company and its affiliates are eligible to participate under the 2013 Plan. | |||||||||||
On March 25, 2013 and in connection with the Sheen Agreement, the Company has agreed to issue to Mr. Sheen options to purchase up to seven million shares of the Company’s common stock as follows: options to purchase one million shares of the Company’s common stock vested upon the date of the Agreement, and options to purchase the remaining six million shares of the Company’s common stock shall vest in equal installments of one million shares every six months after the date of the Agreement, each exercisable at an exercise price of $0.10 per share and have a 5 year term. This Agreement has also been mutually terminated by the Parties. | |||||||||||
The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model and the assumptions in the following table. The expected volatility is based on the daily historical volatility of comparative companies, measured over the expected term of the option. The risk-free rate is based on the implied yield on a U.S. Treasury zero-coupon issue with a remaining term closest to the expected term of the option. The dividend yield reflects that the Company has not paid any cash dividends since inception and does not intend to pay any cash dividends in the foreseeable future. | |||||||||||
The following assumptions were used to determine the fair value of the options at date of grant: | |||||||||||
Expected volatility (%) | 95%-306% | ||||||||||
Risk free rate | 0.27%-0.38% | ||||||||||
Expected term | 2-3 years | ||||||||||
Dividend yield | 0% | ||||||||||
The expected volatility has increased to 306% during the six months ended June 30, 2014. Such volatility and other assumptions were used in 2014 since the Sheen options vest over a period of three years and are valued at each vesting date. Total stock-based compensation expense included in general and administrative expense for the period from January 1, 2014 to June 30, 2014 was $146,388 related to all stock options previously granted. | |||||||||||
As of June 30, 2014, there was $303,200 of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of 7.96 years. The Company’s current practice is to issue new shares to satisfy option exercises. Compensation expense for all stock-based compensation awards is recognized using the straight-line method. | |||||||||||
Weighted- | Average | ||||||||||
Average | Remaining | Aggregate | |||||||||
Exercise | Contractual | Intrinsic | |||||||||
Options | Price | Life (Years) | Value | ||||||||
Outstanding at December 31, 2013 | 11,320,000 | $ | 0.1 | 5.97 | $ | - | |||||
Granted | - | - | - | - | |||||||
Exercised | - | - | - | - | |||||||
Forfeited or expired | - | - | - | - | |||||||
Outstanding at June 30, 2014 | 11,320,000 | $ | 0.1 | 5.47 | $ | - | |||||
Exercisable at June 30, 2014 | 6,774,167 | $ | 0.1 | 6.5 | $ | - |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2014 | |
SUBSEQUENT EVENTS | ' |
SUBSEQUENT EVENTS | ' |
NOTE 11—SUBSEQUENT EVENTS | |
On July 18, 2014, the Company entered into an Exchange Agreement with Tonaquint, Inc. (“Tonaquint”) pursuant to which the Company exchanged a previously issued warrant for a Convertible Promissory Note in the principal amount of $115,000 (the “Note”). The Note accrues interest at the rate of 8% per annum; is due and payable 17 months after the date of issuance; and may be converted by Tonaquint at any time into shares of Company common stock at a conversion price equal to 90% of the market price (as determined in the Note) calculated at the time of conversion, up to $28,000 per month. The Note Purchase Agreement and Note also contain certain representations, warranties, covenants and events of default. The foregoing is only a brief description of the material terms of the Exchange Agreement and Note, and does not purport to be a complete description of the rights and obligations of the parties thereunder and such descriptions are qualified in their entirety by reference to the agreements and their exhibits which are filed as an exhibit to this Quarterly Report. The issuance of the Note was made in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) for the offer and sale of securities not involving a public offering, and Regulation D promulgated under the Securities Act. The Company’s reliance upon Section 4(2) of the Securities Act in issuing the securities was based upon the following factors: (a) the issuance of the securities was an isolated private transaction by us which did not involve a public offering; (b) there was only one recipient; (c) there were no subsequent or contemporaneous public offerings of the securities by the Company; (d) the securities were not broken down into smaller denominations; (e) the negotiations for the issuance of the securities took place directly between the individual and the Company; and (f) the recipient of the Note was an accredited investor. | |
On August 19, 2014, the Company entered into a Securities Purchase Agreement, Convertible Promissory Note and ancillary agreements (the “Financing Documents”) with Tonaquint (the “Buyer”). | |
Under the terms of the Financing Documents, the Buyer entered into the Convertible Promissory Note in the principal amount of $115,000 (the “Note”). The Company is obligated to commence repayment of the Note six (6) months after the date of payment of the Purchase Price (as defined below) in monthly installments in an amount equal to the greater of (i) $19,166.67 plus accrued and unpaid interest and late charges, if any and (ii) the then outstanding principal amount divided by the number of monthly installment dates remaining prior to the Maturity Date. Provided certain equity conditions are met, the Company may repay the monthly installment payments through the issuance of Company common stock (the “Conversion Shares”) at the market price (the “Installment Conversion Price”) which means the lesser of (i) the Buyer Conversion Price (as defined below) and (ii) 60% (the “Conversion Factor”) of the arithmetic average of the three (3) lowest closing bid prices of Company common stock during the twenty (20) consecutive trading day period immediately preceding the date of repayment, provided that if at any time the average of the three (3) lowest closing bid prices of the Company’s common stock immediately preceding the date of repayment is below $0.02, then the then current Conversion Factor shall be reduced to 55% for all future conversions. The entire outstanding balance under the Note is due and payable eleven (11) months after the date of payment of the Purchase Price (the “Maturity Date”). The Company may elect to pay to the buyer the monthly installment payment partly in cash and partly in Conversion Shares, provided that if the Company elects to pay more than half of monthly installment payment in cash, the Company shall pay to the Buyer 125% of the cash portion of such payment. The Note bears interest at the rate of ten percent (10%) per annum, provided that upon the occurrence of an event of default, interest shall accrue on the outstanding balance both before and after judgment at the rate of twenty-two percent (22%) per annum. The Note carries an original issue discount of $11,500.00. In addition, the Company agreed to pay $3,500.00 to the Buyer to cover the Buyer’s legal fees, accounting costs, due diligence, monitoring and other transaction costs, all of which amount is included in the initial principal balance of the Note. | |
In consideration for the Note, the Buyer paid the Company $100,000.00 (the “Purchase Price”). The Company delivered to the Transfer Agent an irrevocable letter of instructions to provide for the issuance of shares to the Buyer in the event of default and conversion of the Note. | |
The outstanding balance under the Note may be converted by the Buyer following the date which is six (6) months after the Effective Date into shares of Company common stock at the rate of $0.03 per share (the “Buyer Conversion Price”), subject to adjustment in the event of certain subdivisions or combinations of Company common stock. |
ACCOUNTING_POLICIES_Policies
ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2014 | |
ACCOUNTING POLICIES | ' |
Basis of Presentation | ' |
Basis of Presentation | |
The accompanying unaudited condensed consolidated financial statements primarily reflect the financial position, results of operations and cash flows of the Company (as discussed above). The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) GAAP for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, these interim condensed financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014, or for any other period. | |
Principles of Consolidation | ' |
Principles of Consolidation | |
The condensed consolidated balance sheets include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. | |
Going Concern | ' |
Going Concern | |
The Company has minimal revenue, has incurred losses and has a significant capital deficiency. The Company's continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations, which it has not been able to accomplish to date, and /or obtain additional financing from its from third parties and work on conversions of certain notes into common stock. | |
These unaudited condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next fiscal year. The continuation of the Company as a going concern is dependent upon financial support from its stockholders and the ability of the Company to obtain necessary equity financing to continue operations. | |
There is no assurance that the Company will ever be profitable. The unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. | |
Use of Estimates | ' |
Use of Estimates | |
In preparing these unaudited condensed consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates and assumptions included in the Company’s condensed consolidated financial statements relate to the valuation assumptions related to stock-based compensation and the derivative liabilities related to the certain embedded conversion features in notes payable. | |
Per Share Information Policy | ' |
Per Share Information | |
The Company computes per share information in accordance with ASC 260, "Earnings per Share". ASC 260 requires presentation of both basic and diluted earnings (loss) per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. As of June 30, 2014, diluted EPS does not give effect to all dilutive potential common shares outstanding as their effects are anti-dilutive due to losses incurred by the Company. | |
Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements | |
In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity to reduce diversity in practice for reporting discontinued operations. Under the previous guidance, any component of an entity that was a reportable segment, an operating segment, a reporting unit, a subsidiary, or an asset group was eligible for discontinued operations presentation. The revised guidance only allows disposals of components of an entity that represent a strategic shift (e.g., disposal of a major geographical area, a major line of business, a major equity method investment, or other major parts of an entity) and that have a major effect on a reporting entity’s operations and financial results to be reported as discontinued operations. The revised guidance also requires expanded disclosure in the financial statements for discontinued operations as well as for disposals of significant components of an entity that do not qualify for discontinued operations presentation. The updated guidance is effective for periods beginning after December 15, 2014. | |
Other recent pronouncements issued by FASB (including its Emerging Task Force), the American Institute of Certified Public Accountants, and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements. |
ACCRUED_LIABILITIES_Tables
ACCRUED LIABILITIES (Tables) | 6 Months Ended | ||||||
Jun. 30, 2014 | |||||||
ACCRUED LIABILITIES | ' | ||||||
ACCRUED LIABILITIES | ' | ||||||
The components of accrued liabilities were as follows: | |||||||
June 30, | December 31, | ||||||
2014 | 2013 | ||||||
Interest | $ | 301,055 | $ | 152,350 | |||
Payroll | 101,603 | 455,193 | |||||
Payroll taxes - delinquent | 93,584 | 93,584 | |||||
Other | 25,153 | 19,618 | |||||
Total accrued liabilities | $ | 521,395 | $ | 720,745 |
NOTES_PAYABLE_Tables
NOTES PAYABLE (Tables) | 6 Months Ended | ||||||
Jun. 30, 2014 | |||||||
NOTES PAYABLE | ' | ||||||
NOTES PAYABLE | ' | ||||||
Convertible notes payable consisted of the following: | |||||||
June 30, | December 31, | ||||||
2014 | 2013 | ||||||
Convertible notes payable to Coventry Capital, LLC, net of discount of $42,980, and $0, respectively | $ | 810,000 | $ | 960,000 | |||
Convertible note payable to Stuart Subotnick, net of discount of $99,599 and $132,799, respectively | 280,401 | 247,201 | |||||
Convertible notes payable to Asher Enterprises – In default | 111,421 | 183,000 | |||||
Convertible note payable to Tonaquint, net of discount of $0 and $26,906, respectively | 17,393 | 81,614 | |||||
Convertible note payable to Vista Capital Investments, net of discount of $50,000, and $0, respectively | - | - | |||||
Convertible notes payable to LG Capital, net of discount of $76,609 and $0, respectively | 20,141 | 25,000 | |||||
Convertible notes payable to Union Capital, net of discount of $41,857 and $0, respectively | 18,413 | 25,000 | |||||
Other notes payable, net of discount of $200,661 and $41,602, respectively | 202,959 | 255,054 | |||||
Total convertible notes payable, net of discount | $ | 1,460,728 | $ | 1,776,869 | |||
Note payable consists of the following -Note payable to Charlie Sheen | $ | 510,000 | $ | 510,000 |
Derivative_liability_activity_
Derivative liability activity (Tables) | 6 Months Ended | |||
Jun. 30, 2014 | ||||
Derivative liability activity | ' | |||
Derivative liability activity | ' | |||
The following table represents the Company’s derivative liabilities activity, classified as level 3 financial instruments, for both the embedded conversion features and the warrants for the six months ended June 30, 2014: | ||||
Amount | ||||
Derivative liabilities balance, January 1, 2014 | $ | 4,272,031 | ||
Issuance of derivative financial instruments in 2014 | 1,278,618 | |||
Cancellation - conversions of notes in 2014 | -869,754 | |||
Change in fair value of derivative liabilities | -2,122,110 | |||
Derivative liabilities balance, June 30, 2014 | $ | 2,558,785 |
Assumptions_were_used_to_deter
Assumptions were used to determine the fair value (Tables) | 6 Months Ended | |
Jun. 30, 2014 | ||
Assumptions were used to determine the fair value | ' | |
Assumptions were used to determine the fair value | ' | |
The following assumptions were used to determine the fair value of the options at date of grant: | ||
Expected volatility (%) | 95%-306% | |
Risk free rate | 0.27%-0.38% | |
Expected term | 2-3 years | |
Dividend yield | 0% |
A_summary_of_stock_option_acti
A summary of stock option activity is as follows (Tables) | 6 Months Ended | ||||||||||
Jun. 30, 2014 | |||||||||||
Summary of stock option activity as follows | ' | ||||||||||
A summary of stock option activity is as follows | ' | ||||||||||
Compensation expense for all stock-based compensation awards is recognized using the straight-line method. | |||||||||||
Weighted- | Average | ||||||||||
Average | Remaining | Aggregate | |||||||||
Exercise | Contractual | Intrinsic | |||||||||
Options | Price | Life (Years) | Value | ||||||||
Outstanding at December 31, 2013 | 11,320,000 | $ | 0.1 | 5.97 | $ | - | |||||
Granted | - | - | - | - | |||||||
Exercised | - | - | - | - | |||||||
Forfeited or expired | - | - | - | - | |||||||
Outstanding at June 30, 2014 | 11,320,000 | $ | 0.1 | 5.47 | $ | - | |||||
Exercisable at June 30, 2014 | 6,774,167 | $ | 0.1 | 6.5 | $ | - |
Organization_Consists_of_the_f
Organization Consists of the following (Details) | Dec. 11, 2006 |
Organization Consists of the following: | ' |
Authorized capital stock shares | 500,000,000 |
Capital stock shares par value | 0.001 |
OTHER_ASSETS_Details
OTHER ASSETS (Details) (USD $) | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | |
Other Assets as Follows: | ' | ' | ' |
Recorded debt issuance cost as other assets | $127,214 | ' | $127,214 |
Convertible promissory note payable to Stuart Subotnik | 240,000 | ' | 240,000 |
Balance of debt issuance costs | 63,608 | ' | 84,810 |
Amortization expense | $21,202 | $0 | ' |
ACCRUED_LIABILITIES_Details
ACCRUED LIABILITIES (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Components of accrued liabilities | ' | ' |
Interest | $301,055 | $152,350 |
Payroll | 101,603 | 455,193 |
Payroll taxes - delinquent | 93,584 | 93,584 |
Other | 25,153 | 19,618 |
Total accrued liabilities | $521,395 | $720,745 |
NOTES_PAYABLE_NET_Details
NOTES PAYABLE, NET (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Notes payable consisted of the following | ' | ' |
Convertible notes payable to Coventry Capital, LLC, net of discount | $810,000 | $960,000 |
Convertible note payable to Stuart Subotnik, net of discount | 280,401 | 247,201 |
Convertible notes payable to Asher Enterprises - In default | 111,421 | 183,000 |
Convertible note payable to Tonaquint, net of discount | 17,393 | 81,614 |
Convertible note payable to Vista Capital Investments, net of discount | 0 | 0 |
Convertible notes payable to LG Capital, net of discount | 20,141 | 25,000 |
Convertible notes payable to Union Capital, net of discount | 18,413 | 25,000 |
Other notes payable, net of discount | 202,959 | 255,054 |
Total convertible notes payable, net of discount | 1,460,728 | 1,776,869 |
Total notes payable, net of discount | $510,000 | $510,000 |
Coventry_Capital_LLC_Note_Deta
Coventry Capital, LLC Note (Details) (USD $) | Apr. 02, 2014 | Jan. 27, 2014 | Dec. 31, 2012 |
Coventry Capital, LLC Note: | ' | ' | ' |
Issued a total of convertible note payable | ' | ' | $950,000 |
Convertible notes carry an interest rate per month | ' | ' | 1.00% |
Convertible notes interest rate adjustment per year | ' | ' | 3.00% |
Debt conversion agreement with Cemblance LTD | ' | 300,000 | ' |
Borrowed an additional from Coventry Capital, LLC | 50,000 | ' | ' |
Recognized of interest expense for the amortization of the discount | 178,819 | ' | ' |
Debt conversion agreement agreed to convert debt | ' | $150,000 | ' |
Debt conversion agreement agreed to convert debt shares of Company common stock | ' | 4,000,000 | ' |
Stuart_Subotnik_Note_Details
Stuart Subotnik Note (Details) (USD $) | Jun. 30, 2014 | Sep. 10, 2012 |
Stuart Subotnik Note: | ' | ' |
Convertible note payable to Stuart Subotnik | ' | $240,000 |
Note issued with warrants and exercisable into common stock | ' | 800,000 |
Recorded a discount | ' | 118,619 |
Warrants have a term of years | ' | 3 |
Warrants exercise price | ' | $0.30 |
Embedded conversion feature and additional debt discount | ' | 121,381 |
Note carry an interest rate per annum | ' | 8.00% |
Conversion price per share | ' | $0.30 |
Volume Weighted Average Pricing of common stock per share | $1 | ' |
Additional Notes payabel to Mr.Subotnik | $140,000 | ' |
Minimum accrued interest at rates due by November 2013. | 8.00% | ' |
Maximum accrued interest at rates due by November 2013. | 12.00% | ' |
Quick_Loan_Funding_Details
Quick Loan Funding (Details) (USD $) | Jun. 30, 2014 |
Quick Loan Funding: | ' |
Lender paid upon execution | $110,000 |
Total principal sum | 400,000 |
Original issue discount | 10.00% |
Total amount funded | 360,000 |
Additional funding agreed upon | 150,000 |
Additional funding received | $55,000 |
Conversion price per share as per the right of conversion | $0.20 |
Fixed percentage of the lowest trade price of the Company's common stock in the 25 trading days prior to the date of conversion. | 60.00% |
Charlie_Sheen_Notes_Payable_De
Charlie Sheen Notes Payable (Details) (USD $) | 6 Months Ended |
Jun. 30, 2014 | |
Charlie Sheen Notes Payable | ' |
Prommissory notes payable | $150,000 |
Interest rate | 6.00% |
Interest payment per month | 750 |
Additional borrowing from Mr.Sheen | 390,000 |
Repayment during the period | $2,500 |
Tonaquint_Convertible_note_Det
Tonaquint Convertible note (Details) (USD $) | Jun. 30, 2014 | Apr. 03, 2013 |
Tonaquint Convertible note | ' | ' |
Under the terms of the Financing Documents, the Buyer entered into the Secured Convertible Promissory Note in the principal amount | ' | $340,000 |
The Note bears interest at the rate per annum | ' | 8.00% |
Upon the occurrence of an event of default, interest shall accrue on the outstanding balance at the rate per annum | ' | 22.00% |
The Note carries an original issue discount | ' | 30,000 |
In addition, the Company agreed to pay to the Buyer to cover the Buyer's legal fees, accounting costs | ' | 10,000 |
In consideration for the Note, the Buyer paid the Company | 100,000 | ' |
Issued to the Company two Buyer Deed of Trust Notes in the amount each consisting | 100,000 | ' |
Upon an event of default, the outstanding balance under the Note shall increase to and will be immediately due and payable | 135.00% | ' |
Obligated to commence repayment of Note issuance date by making monthly installments | 28,333 | ' |
The Company also issued Buyer a warrant to purchase shares of Company common stock | 1,400,000 | ' |
Exercise price per share of common stock | $0.20 | ' |
Tonaquint converted note into shares of shares of the Company's common stock | 11,552,446 | ' |
Tonaquint converted note into shares of shares of the Company's common stock value | $84,023 | ' |
Asher_Enterprises_Note_and_Oth
Asher Enterprises Note and Other Notes Payable (Details) (USD $) | 3 Months Ended | 6 Months Ended |
Jun. 30, 2014 | Jun. 30, 2014 | |
Asher Enterprises Note and Other Notes Payable | ' | ' |
Asher purchased a Convertible Promissory Note | ' | $183,000 |
The Company recorded an increase in the principal balance | 91,500 | ' |
The Asher Notes accrues interest at the rate per annum | ' | 8.00% |
Two additional notes with Asher Enterprises for a total | ' | 75,000 |
Asher Notes converted note into shares of shares of the Company's common stock | ' | 10,556,538 |
Asher converted note into shares of shares of the Company's common stock value | ' | $197,750 |
Related_Party_Note_Payable_Det
Related Party Note Payable (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Related Party Note Payable | ' | ' |
Greenwald has agreed to loan | $250,000 | ' |
Advance funds up to the amount | 250,000 | ' |
Outstanding under loan agreement | $54,000 | $126,160 |
Accrued Interest Rate Per Annum | 3.00% | ' |
Derivative_Liability_conversio
Derivative Liability conversion features and the warrants for the period (Details) (USD $) | 6 Months Ended |
Jun. 30, 2014 | |
Derivative Liability conversion features and the warrants for the period: | ' |
Derivative Liability balance, January 1, 2014 | $4,272,031 |
Issuance of derivative financial instrument in 2014 | 1,278,618 |
Cancellation - conversions of notes in 2014 | -869,754 |
Change in fair value of derivative liabilities | -2,122,110 |
Derivative liabilities balance, June 30, 2014 | $2,558,785 |
Commitments_And_Contingencies_
Commitments And Contingencies Consists of the following (Details) (USD $) | Jun. 30, 2014 | Jul. 10, 2013 | Jun. 16, 2012 | Dec. 19, 2011 |
Commitments And Contingencies Consists of the following: | ' | ' | ' | ' |
Issued two convertible promissory notes | ' | ' | ' | $280,000 |
Aggregate principal amount received | ' | ' | ' | 118,000 |
Advance amount agreed | ' | ' | ' | 280,000 |
Accruing interest at the default rate per annum | ' | ' | 29.00% | ' |
Contingent liability | ' | ' | 194,678 | ' |
Owes an additional plus accrued interest | ' | ' | 162,000 | ' |
Ironridge: | ' | ' | ' | ' |
Agreement and Debenture dated November 6, 2012 (the "Financing Documents") with Ironridge Media Co., for the sale of up to | 3,000,000 | ' | ' | ' |
Attorney Fees and costs (Ironridge) | 850,000 | ' | ' | ' |
Additional attorney's fees and costs | ' | 110,168 | ' | ' |
Recorded an accrual under accrued expenses | 960,000 | ' | ' | ' |
Sheen Agreement: | ' | ' | ' | ' |
Agreed to pay Charlie Sheen a fee payable in installments | $300,000 | ' | ' | ' |
Options issued to Charlie Sheen | 7,000,000 | ' | ' | ' |
Options vest in equal installments of one million shares every six months aggregate | 1,000,000 | ' | ' | ' |
Exercise price per share (options) | $0.10 | ' | ' | ' |
Operating_lease_Details
Operating lease (Details) (USD $) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | |
Operating lease | ' | ' |
Operating expenses for the facility per month | $5,935 | ' |
Rent expense | $41,335 | $34,310 |
CAPITAL_STOCK_TRANSACTIONS_Det
CAPITAL STOCK TRANSACTIONS (Details) (USD $) | Jun. 30, 2014 |
CAPITAL STOCK TRANSACTIONS | ' |
Common shares for services provided | 10,700,000 |
Common shares for services provided valued | $413,178 |
Common shares issued | 20,095,000 |
Common shares issued valued for unpaid salary | 604,418 |
Shares issued valued for advances totaling | 455,193 |
Additional compensation to Chief Executive Officer totaling | 149,445 |
Stock based compensation | 56,556 |
Common shares for cash valued | 2,000 |
Common shares upon conversion of notes payable | 40,279,774 |
Common shares upon conversion of notes payable valued | 598,909 |
Stock options previously granted | 146,388 |
Unrecognized compensation cost related to unvested stock options | $303,200 |
Assumptions_used_to_determine_
Assumptions used to determine fair value of options at date of grant (Details) | 6 Months Ended |
Jun. 30, 2014 | |
Assumptions used to determine fair value of options at date of grant | ' |
Expected volatility (%) minimum | 95.00% |
Expected volatility (%) maximum | 306.00% |
Risk free rate minimum | 0.27% |
Risk free rate maximum | 0.38% |
Expected term | '2-3 years |
Dividend yield. | 0.00% |
Summary_of_stock_option_activi
Summary of stock option activity as follows (Details) | Options | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value |
Outstanding at Dec. 31, 2013 | 11,320,000 | 0.1 | 5.97 | 0 |
Granted | 0 | ' | ' | ' |
Exercised | 0 | ' | ' | ' |
Forfeited or expired | 0 | ' | ' | ' |
Exercisable at Jun. 30, 2014 | 6,774,167 | 0.1 | 6.5 | 0 |
Outstanding at Jun. 30, 2014 | 11,320,000 | 0.1 | 5.47 | 0 |
Subsequent_transactions_Detail
Subsequent transactions (Details) (USD $) | Aug. 19, 2014 | Jul. 18, 2014 |
Subsequent transactions | ' | ' |
Convertible Promissory Note in the principal amount | $115,000 | $115,000 |
Note bears interest at the rate | 8.00% | 8.00% |
Note carries an original issue discount | 11,500 | ' |
Company agreed to pay to the Buyer to cover the Buyer's legal fees | 3,500 | ' |
In consideration for the Note, the Buyer paid the Company | $100,000 | ' |