| Note 6 - Debt | NOTE 6 DEBT Short-Term Debt (A) Related Parties On August 31, 2012, the Companys former Chief Financial Officer made an interest free demand advance of $30,000 to provide working capital, which remains outstanding at May 31, 2015. The Note was recorded at its estimated fair value of $27,778 at the acquisition date, and imputed interest was being accreted to non-cash interest expense to the maturity date, using an 8% interest rate. No demand for payment has been made and the note remains unpaid. On July 13, 2010, March 22, 2012 and October 25, 2012, the Company borrowed $60,000, $50,000 and $10,000, respectively, from a shareholder for use as operating capital. On September 12, 2012, the Company, the shareholder and an external party entered into an Assignment Agreement whereby the external party agreed to assume $30,000 of the $60,000 July 13, 2010 debt in exchange for a 8% convertible note maturing October 24, 2013 (see Short-term Convertible Debt with Ratchet Provisions noted below). The due date on the remaining balance of $30,000 of the $60,000 advance was extended to December 31, 2013 and bears interest at the rate of 15% per annum; the due date of the $50,000 advance was March 7, 2013 and it bears interest at the rates of 15% per annum through March 7, 2013 and 18% per annum interest thereafter if the repayment date is extended; and the $10,000 advance is payable on demand at an interest rate of 15% per annum. During the six months ended May 31, 2015, the Company incurred and accrued $6,816 in interest expense, respectively, related to this short-term debt. As of May 31, 2015, the Company has accrued a total of $60,416 of interest expense related to these notes. (B) Film Finance Agreements On May 11, 2012, the Company entered into an agreement with Coral Ridge Capital Partners, LLC (CRCP) under which CRCP agreed to provide $300,000 in equity financing towards the production of the motion picture currently entitled End of the Gun (the "Picture"). The initial $100,000 under this agreement was paid on June 12, 2012. While it was the Companys intent to commence filming of the Picture by September 1, 2012, certain casting delays postponed the commencement date. On January 25, 2013 the Company received a written notice of termination of agreement from CRCP. The termination was detrimental to the funding process. Accordingly, the Company has included the $100,000 advance within short-term debt and has accrued interest payable of $35,441 through May 31, 2015. Subsequently, the Company hired a new director, made new distribution deals for North America and international and hired Steven Seagal to star. The picture is currently in pre- production at the Castel Studios in Romania and has a start date of late August 2015. The Company is proceeding to arbitration regarding any amounts due and the arbitration proceeding originally scheduled for August 2014, has been rescheduled for late summer 2105. Through May 31, 2015, we have incurred cumulative expenses, both directly and indirectly, in excess of the initial funding in connection with the Picture, which have been recorded previously within operating expenses. As of May 31, 2015, $100,000 in principal and $35,441 interest remain outstanding. In October, 2014, the Company entered into a film finance agreement under which a lender loaned the Company $505,000 for co-production of the film Daughter of God. The promissory note was in the original principal amount of $505,000, including a $5,000 legal fee to the lenders legal counsel, and is due July 30, 2015 with interest at 8 percent per year due at maturity. The Note is convertible after 180 days at the lenders election into shares of the Companys common stock at a price equal to 50 percent of the average of the three lowest trading prices for the stock during the 30 day trading period prior to any conversion, with a limit of 4.99% of the total outstanding shares of common stock held by the lender at the time of any conversion. In addition, the lender was granted a warrant to purchase up to 1,262,500,000 shares of common stock at a conversion price of $0.0003 per share for a period of five years, subject to appropriate adjustment for certain capital changes. As of May 31, 2015, the remaining principal balance and interest is $531,786. With the funds from the above note, the Company invested in the film, "Daughter of God which is included as a cost investment within other assets in the accompanying balance sheet. For this investment, our financiers are to receive their money back plus 20% interest prior to any profits, if any, being distributed. We will receive 6.65% of the profits thereafter from the film and the funding source, operating as Remark Pictures; will receive 6.65% of the profits. In January 9, 2015, the Company entered into an agreement to provide $45,000 towards production of the motion picture entitled Devil In Pew Number Seven (the Picture). Funds were received and $14,685 have been expensed for script costs. The balance as of May 31, 2015 on the debt is $30,315. Short-term Convertible Debt with Ratchet Provisions (A) Short-term Convertible Debt On March 1, 2012, May 9, 2012, July 9, 2012, September 14, 2012 and September 28, 2012 the Company borrowed $10,000, $32,500, $30,000, $22,500 and $10,000, respectively (for a total of $105,000), from external parties for use as operating capital. See below for additional advances made by this party during the year ended November 30, 2013. The parties entered into convertible notes payable agreements, which make the Company liable for repayment of the principal and 8% annual interest by the various agreements expiration dates which range between October 6, 2012 and June 28, 2013. If a default is called by the lender (which occurred as noted below) after failure to repay principal or interest when due, among other default provisions including untimely filings with the SEC, a default interest rate of 22% per annum is triggered and retrospectively applied from the notes inception date on the unpaid amount, as well the principal balance is increased by 50% of the face amount of the note deemed in default. A portion of the notes has been converted and, as of May 31, 2015, approximately $8,189 in principal and interest remain outstanding. During December 2012, the Company issued an 8% convertible promissory note to raise $40,000 to pay legal services owed. The Note matured on September 21, 2013, and any unpaid principal or interest at that date accrues interest at the default rate of 22% annually. The note may be converted into common stock, at 41% discount off the average of the lowest three (3) trading prices for the Companys common stock within the ten (10) days preceding the conversion, at any time after 180 days from the issuance date until the maturity date, or, if later, until paid. A portion of the notes has been converted and, as of May 31, 2015, approximately $43,693 in principal and interest remain outstanding. On February 24, 2014, the Company issued a 10% convertible promissory note in the aggregate principal amount of $25,000. The note has a maturity date of February 24, 2015. The note is convertible into shares of our common stock at a conversion price of the lesser of $0.001 or fifty percent (50%) of the lowest trading day price during the twenty (20) trading days immediately preceding a conversion date at any time from the issuance date until the maturity date. If a default is called by the lender (which occurred as noted above) after failure to repay principal or interest when due, among other default provisions including untimely filings with the SEC, a default interest rate of 20% per annum is triggered and retrospectively applied from the notes inception date on the unpaid amount, as well the principal balance is increased by 50% of the face amount of the note deemed in default. On May 31, 2015, the note was partially converted through the issuance of shares of common stock leaving a remaining principal and interest outstanding of $13,782 as of May 31, 2015. On February 24, 2014, the holder of the $200,000 note agreed to sell up to $100,000 in principal of the convertible note to an unrelated third party, with $50,000 of principal to be acquired at that time, and an additional $50,000 in principal to be acquired on or before August 14, 2014. The Company agreed to restate that portion of the original note party in a new convertible note due February 25, 2015 with interest due at maturity at 10 percent, and convertible at the election of the holder into common stock at the lower of $0.01 or fifty percent of the lowest trading price of the stock for the previous 20 consecutive trading days. The same third party also invested an additional $25,000 in a new promissory note, on the same terms and both transactions closed in March 2014. Due to the change in the terms of the replacement note, for accounting purposes only, the partial purchase of the note has been treated as the payment of that portion of the old note and the issuance of a new note for the new principal amount. The second installment purchase of an additional $50,000 in principal of the original note was not exercised. During the three months ended May 31, 2015, the note was partially converted through the issuance of shares of common stock leaving a remaining principal balance of $12,010 as of May 31, 2015. On March 1, 2014, the Company issued an 8% convertible promissory note in the aggregate principal amount of $30,000 to pay payables that were owed. The note has a maturity date of March 31, 2015. The note is convertible into shares of our common stock at a conversion price of sixty percent (60%) of the average of the lowest closing price per share during the ten (10) trading days immediately preceding a conversion date at any time from the issuance date until the maturity date. As of May 31, 2015, approximately $33,295 in principal and interest remain outstanding. On March 24, 2014, the Company issued a 10% convertible promissory note in the aggregate principal amount of $26,500. The note has a maturity date of March 24, 2015. The note is convertible into shares of our common stock at a conversion price of fifty percent (50%) of the average of the lowest closing bid during the fifteen (15) trading days immediately preceding a conversion date at any time from the issuance date until the maturity date. If a default is called by the lender after failure to repay principal or interest when due, among other default provisions including untimely filings with the SEC, a default interest rate of 22% per annum is triggered and retrospectively applied from the notes inception date on the unpaid amount, as well the principal balance is increased by 50% of the face amount of the note deemed in default. The remaining principal and interest balance on this note is $29,680 as of May 31, 2015. On March 24, 2014, a second unrelated party agreed with the original note holder of the $200,000 note to purchase up to $100,000 in note principal and $5,000 in accrued interest and also agreed to invest an additional $26,500 in the Company. Under the terms of the agreement, the third party agreed to purchase the $105,000 in principal and accrued interest in three installments, with $42,000 due at signing, $31,500 due 45 days thereafter, and a final $31,500 due 45 days after the second installment payment. The Company agreed to restate the portion of the original note acquired by the third party and to issue a new convertible note in the amounts of $42,000, due March 24, 2015, with interest due at maturity at 10 percent, and convertible at the election of the holder into common stock at fifty percent of the lowest closing bid price of the stock for the previous 15 consecutive trading days. Due to the substantial change in the terms of the replacement note, for accounting purposes only, the partial purchase of the note has been treated as an extinguishment of that portion of the old note and the issuance of a new note for the new principal amount. The actual closing and funding of the initial transaction occurred on May 4, 2014. The second and third installments were not made. The note was partially converted into shares of common stock leaving a remaining principal balance of $16,236 as of May 31, 2015. On May 16, 2014, the Company issued a 10% convertible promissory note in the aggregate principal amount of $50,000. The note has a maturity date of August 16, 2015. The note is convertible into shares of our common stock at a conversion price of fifty percent (50%) of the average of the lowest closing bid during the ten (10) trading days immediately preceding a conversion date at any time from the issuance date until the maturity date. If a default is called by the lender after failure to repay principal or interest when due, among other default provisions including untimely filings with the SEC, a default interest rate of 22% per annum is triggered and retrospectively applied from the notes inception date on the unpaid amount, as well the principal balance is increased by 50% of the face amount of the note deemed in default. The remaining principal and interest balance on this note is $55,220 as of May 31, 2015. On June 1, 2014, the Company issued an 8% convertible promissory note in the aggregate principal amount of $30,000 to pay payables that were owed. The note has a maturity date of June 30, 2015. The note is convertible into shares of our common stock at a conversion price of sixty percent (60%) of the average of the lowest closing price per share during the ten (10) trading days immediately preceding a conversion date at any time from the issuance date until the maturity date. The remaining principal and interest balance on this note is $32,533 as of May 31, 2015. On August 11, 2014, the Company issued an 8% convertible promissory note in the aggregate principal amount of $103,500. The note has a maturity date of August 13, 2015. The note is convertible into shares of our common stock at a conversion price of fifty percent (50%) of the average of the lowest three (3) trading prices during the thirty (30) trading days immediately preceding a conversion date at any time from the issuance date until the maturity date. If a default is called by the lender after failure to repay principal or interest when due, among other default provisions including untimely filings with the SEC, a default interest rate of 22% per annum is triggered and retrospectively applied from the notes inception date on the unpaid amount, as well the principal balance is increased by 50% of the face amount of the note deemed in default. The remaining principal balance on this note is $23,286 as of May 31, 2015. On September 1, 2014, the Company issued an 8% convertible promissory note in the aggregate principal amount of $30,000 to pay payables that were owed. The note has a maturity date of September 30, 2015. The note is convertible into shares of our common stock at a conversion price of sixty percent (60%) of the average of the lowest closing price per share during the ten (10) trading days immediately preceding a conversion date at any time from the issuance date until the maturity date. As of May 31, 2015, approximately $31,945 in principal and interest remain outstanding. On December 1, 2014, the Company issued an 8% convertible promissory note in the aggregate principal amount of $30,000 to pay payables that were owed. The note has a maturity date of December 31, 2015. The note is convertible into shares of our common stock at a conversion price of sixty percent (60%) of the average of the lowest closing price per share during the ten (10) trading days immediately preceding a conversion date at any time from the issuance date until the maturity date. As of May 31, 2015, approximately $31,190 in principal and interest remain outstanding. On January 19, 2015, the Company issued a 10% convertible promissory note in the aggregate principal amount of $31,500. The note has a maturity date of January 9, 2016. The note is convertible into shares of our common stock at a conversion price of fifty percent (50%) of the average of the lowest closing bid during the ten (10) trading days immediately preceding a conversion date at any time from the issuance date until the maturity date. If a default is called by the lender after failure to repay principal or interest when due, among other default provisions including untimely filings with the SEC, a default interest rate of 22% per annum is triggered and retrospectively applied from the notes inception date on the unpaid amount, as well the principal balance is increased by 50% of the face amount of the note deemed in default. The remaining principal and interest balance on this note is $32,820 as of May 31, 2015. On February 26, 2015, the Company issued a 10% convertible promissory note in the aggregate principal amount of $15,000. The note has a maturity date of February 26, 2016. The note is convertible into shares of our common stock at a conversion price of fifty percent (50%) of the average of the lowest closing bid during the ten (10) trading days immediately preceding a conversion date at any time from the issuance date until the maturity date. If a default is called by the lender after failure to repay principal or interest when due, among other default provisions including untimely filings with the SEC, a default interest rate of 22% per annum is triggered and retrospectively applied from the notes inception date on the unpaid amount, as well the principal balance is increased by 50% of the face amount of the note deemed in default. The remaining principal and interest balance on this note is $15,501 as of May 31, 2015. On March 1, 2015, the Company issued a 8% convertible promissory note in the aggregate principal amount of $32,500. The note has a maturity date of December 4, 2015. The note is convertible into shares of our common stock at a conversion price of fifty percent (50%) of the average of the three (3) lowest trading prices during the thirty (30) trading days immediately preceding a conversion date at any time from the issuance date until the maturity date. If a default is called by the lender after failure to repay principal or interest when due, among other default provisions including untimely filings with the SEC, a default interest rate of 22% per annum is triggered and retrospectively applied from the notes inception date on the unpaid amount, as well the principal balance is increased by 50% of the face amount of the note deemed in default. The remaining principal and interest balance on this note is $33,155 as of May 31, 2015. On March 25, 2015, the Company issued a 10% convertible promissory note in the aggregate principal amount of $13,500. The note has a maturity date of March 25, 2016. The note is convertible into shares of our common stock at a conversion price of forty percent (40%) of the lowest closing bid during the twenty (20) trading days immediately preceding a conversion date at any time from the issuance date until the maturity date. If a default is called by the lender after failure to repay principal or interest when due, among other default provisions including untimely filings with the SEC, a default interest rate of 22% per annum is triggered and retrospectively applied from the notes inception date on the unpaid amount, as well the principal balance is increased by 50% of the face amount of the note deemed in default. The remaining principal and interest balance on this note is $13,752 as of May 31, 2015. On March 30, 2015, the Company issued a 10% convertible promissory note in the aggregate principal amount of $24,000. The note has a maturity date of March 30, 2016. The note is convertible into shares of our common stock at a conversion price of fifty percent (50%) of the lowest closing bid during the twenty (20) trading days immediately preceding a conversion date at any time from the issuance date until the maturity date. If a default is called by the lender after failure to repay principal or interest when due, among other default provisions including untimely filings with the SEC, a default interest rate of 22% per annum is triggered and retrospectively applied from the notes inception date on the unpaid amount, as well the principal balance is increased by 50% of the face amount of the note deemed in default. The remaining principal and interest balance on this note is $24,414 as of May 31, 2015. The Company discounts the notes by the fair market value of the derivative liability upon inception of each note. These discounts are accreted back to the face value of the notes over the note term using the effective interest method. Former Related Party At November 30, 2013, the Company had convertible notes totaling $453,061 due to a former affiliate and significant stockholder of the Company. The notes were convertible into common shares, based on $40 to $80 share price, most of which were at the higher price. The convertible notes bore interest at 6% per annum and were due May 31, 2015. As of November 30, 2013, the Company had accrued $109,304 of interest expense related to these notes. In May 2014, these notes were sold to an unrelated party and restated in a single note dated May 16, 2014 in the amount of $573,982, due May 16, 2015 with interest at 10 percent due at maturity, and convertible into common stock at 50 percent of the lowest closing bid price for the stock for any of the ten prior trading days. During the six months ended May 31, 2015, the note was partially converted through the issuance of shares of common stock leaving a remaining principal balance of $398,335 as of May 31, 2015. (B) Determination of Derivative Liability The Company calculated the derivative liabilities using the Black-Scholes pricing model for each note upon inception and recorded the fair market value of the derivative liability as a discount to the note. When a derivative liability associated with a convertible note is in excess of the face value of the convertible note, the excess of fair value of derivative is charged to the statement of operations. The derivative liabilities associated with these convertible notes were revalued during the period as principal was converted, using the Black-Scholes Model with the below range of inputs. Upon conversion of all or a portion of the convertible notes, the derivative liability associated with the principal converted is valued immediately before conversion using the Black-Scholes model. The change in fair value of the derivative liability associated with the principal converted is recorded as a gain/loss on fair value of derivative liability in the accompanying statement of operation, with the remaining value of that portion of the derivative liability written off with a corresponding credit to additional paid-in capital. As of May 31, 2015 and November 30, 2014, the Company has outstanding principal amounts on short term convertible debt, excluding unamortized discount, of $1,263,332 and $1,374,508, respectively. At the inception of these notes, they were fully discounted due to the associated derivative liabilities. Aggregate remaining discounts on convertible notes to be accreted over the life of each respective note on an effective interest method are $211,510 and $859,483 as of May 31, 2015 and November 30, 2014, respectively. For the six months ending May 31, 2015 and 2014, interest expense from accretion of the discount, including converted notes, was $625,026 and $101,286, respectively. Aggregate derivative liabilities associated with remaining convertible notes were $1,989,938 as of May 31, 2015 and $4,263,200 as of November 30, 2014. Based on this revaluation at six months end and the revaluation of derivative liabilities measured during the period immediately before extinguishment of associated convertible notes, the Company recognized a net gain in fair value of derivative liability of $1,980,783 during the three months ended May 31, 2015 and a net gain in fair value of derivative liability of $1,419,798 for the six months ended May 31, 2014. The range of inputs used to calculate derivative liabilities noted above were as follows: May 31, 2015 November 30, 2014 Annual dividend rate 0.0 % 0.0 % Expected life (years) .01 1.01 years .01 1.1 years Risk-free interest rate .03% - .16 % .01% - .10 % Expected volatility 382% - 536.5 % 431.3% - 537 % Long-term Convertible Debt On March 31, 2011, the Company borrowed $200,000 from an external party for use as operating capital. The parties entered into a long-term convertible note agreement, which makes the Company liable for repayment of the principal and 2% annual interest by the agreements expiration date of December 28, 2014. Beginning September 27, 2011, the note is convertible into shares of our common stock at a fixed conversion price of $16.00 per share. As a result, the Company will be liable to issue up to 12,500 shares common stock upon conversion. Based on a $22 closing price on the day of note agreement, we recorded a discount of $75,000 as a result of the beneficial conversion feature (BCF). As such, the Company discounted the note by the value of the BCF upon inception of the note. During the six months ended May 31, 2015, interest expense from accretion of the discount was $2,626, leaving a remaining discount of $0. The discount being amortized approximates the effective interest method over the term of the note. As of May 31, 2015, the balance on this note payable is $108,000. |
