Convertible Payables- | 12 Months Ended |
Dec. 31, 2013 |
Notes | ' |
Convertible Payables- | ' |
NOTE 5 - CONVERTIBLE PAYABLES |
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The Company had the following notes payable outstanding as of December 31, 2013 and December 31, 2012: |
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| 31-Dec-13 | | 31-Dec-12 |
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Asher Enterprises T8 (C-1) | | 2,630 | | | 29,000 |
Dated - January 30, 2012 | | | | | |
| | | | | |
Benison Note 7 (C-2) | | 250,000 | | | 250,000 |
Dated - December 28, 2011 (Related Party) | | | | | |
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Benison Note 8 (C-3) | | -- | | | 54,000 |
Dated - January 27, 2012 (Related Party) | | | | | |
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Mike Myrick (C-4) | | 15,000 | | | 15,000 |
Dated - May 13, 2011 | | | | | |
| | | | | |
Benison IRA (C-5) | | 10,000 | | | 10,000 |
Dated - November 7, 2012 (Related Party) | | | | | |
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Coventry Note (C-6) | | -- | | | 1,250 |
Dated - July, 2011 | | | | | |
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Bershert LLC (C-7) | | 10,800 | | | -- |
Dated - October 2, 2013 | | | | | |
| | | | | |
Naxin LLC (C-8) | | 10,800 | | | -- |
Dated - October 2, 2013 | | | | | |
| | | | | |
Raff Family Trust (C-9) | | 10,800 | | | -- |
Dated - October 2, 2013 | | | | | |
| | | | | |
Nina Treiman (C-10) | | 10,800 | | | -- |
Dated - October 2, 2013 | | | | | |
| | | | | |
WWFD LLC (C-11) | | 10,800 | | | -- |
Dated - October 2, 2013 | | | | | |
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Total Notes payable | $ | 331,630 | | $ | 359,250 |
Less: discount | | -- | | | -- |
Less: current portion of long-term debt | | -331,630 | | | -359,250 |
Long-term debt | $ | -- | | $ | -- |
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C-1 Asher Enterprises Note T8: In January 2012, the Company issued a convertible note for $53,000 to one entity. The note bears interest at 8% per annum and is due November 1, 2012. The Company converted $47,927 on this note with a balance of $5,073. The conversion price is 50% of the average of the lowest three closing bid prices in the 10 trading days ending one day before notice of conversion is given. The sale was made to one entity in a private, negotiated transaction without any public solicitation. This note is in default. |
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C-2 Benison Note 7: In December, 2011, a convertible note for $250,000 was issued to an individual with an interest rate of 20% that is due June, 29, 2012. The note, plus accrued interest, is convertible into common stock, at the note holder's discretion, at $0.10 per share to be adjusted downward in the case of new issuances which it can convert at $.0008 as of September 30, 2013. The note holder will also receive one warrant for each share of common stock issued upon conversion. The warrants can be converted into common stock at $0.20 per share and are valid for two years from issuance. The maturity date has been extended to December 31, 2013. |
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C-3 Benison Note 8: In January 2012, the Company issued a convertible note for $54,000 to one individual. The note bears interest at 8% per annum and was due October 29, 2012. The conversion price is $0.0008. The sale was made to an individual in a private, negotiated transaction without any public solicitation. The maturity date has been extended to December 31, 2013. This note was acquired by five parties (C7 - C11) on October 2, 2013. |
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C-4 Mike Myrick Notes: In May and June 2011, the Company issued convertible notes for a total $15,000. The notes bear interest at 20% per annum and are due June 13 and July 30, 2011. The conversion price is $0.15. This note is in default. |
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C-5 Benison: In November 7, 2012, the Company issued convertible notes for a total $10,000. The note bears interest at 5% per annum and due November 7, 2013. The conversion price is $0.002 to be adjusted downward in the case of new issuances which it can convert at $.0008 as of September 30, 2013. The note holder has a right to convert the note at the maturity date of the note. The maturity date of this note has been extended to December 31, 2013. |
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C-6 Coventry: In July 2011, the Company issued a convertible note for $25,000 to one entity. The note bears interest at 12% per annum and is due July 14, 2012. The conversion price shall be the lower of $0.05 or 65% of the average of the lowest three closing bid prices in the 15 trading days ending one day before notice of conversion is given. The note, plus accrued interest, was partially repaid in October, 2011 with the balance converted in 2013. The sale was made to one entity in a private, negotiated transaction without any public solicitation. |
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On May 9, 2013 Asher Enterprises and Jeff Benison have called their notes for certain provision or action by the Company such as a change in control of the Company or late filing of SEC required filings. The note was called for the Company’s failure to file timely SEC filings. This note has been paid in full. |
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C-7 - Bershert LLC: |
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1. On October 2, 2013, the Company issued convertible notes for a total of $10,800. The notes bear interest at 20% per annum and are due December 31, 2013. Lender may opt to convert the principal and interest due at maturity into shares of the Borrower’s common stock December 31, 2013, “and the Company agrees and acknowledges that such debt obligations but may, at the discretion of current successor Lender, be converted into Common shares of the Company at any time prior to the modified Maturity Date at an exercise price of $.0008/share”. |
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In addition, “The Company agrees to secure the remaining balance of common shares held in Treasury by placing a ‘reserve’ on the balance of Treasury shares, in favor of the required terms of this Agreement, effective the date of the original Agreement until such time as the notes are converted or the obligation is paid in full;” |
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2. 4.1 2nd Amendment. On January 2, 2014, pursuant to the Amendment, the Maturity Date was deemed to be April 3, 2014, “and the Company agrees and acknowledges that such debt obligations but may, at the discretion of the current successor Lender, be converted into Common shares of the Company at any time prior to the modified Maturity Date at an exercise price of $.0008/share”. Place of Payment. All amounts payable hereunder shall be payable at the office of Lender, unless another place of payment shall be specified in writing by Lender. |
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C-8 - Naixin, LLC: |
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1. On October 2, 2013, the Company issued convertible notes for a total of $10,800. The notes bear interest at 20% per annum and are due December 31, 2013. Lender may opt to convert the principal and interest due at maturity into shares of the Borrower’s common stock December 31, 2013, “and the Company agrees and acknowledges that such debt obligations but may, at the discretion of current successor Lender, be converted into Common shares of the Company at any time prior to the modified Maturity Date at an exercise price of $.0008/share”. |
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In addition, “The Company agrees to secure the remaining balance of common shares held in Treasury by placing a ‘reserve’ on the balance of Treasury shares, in favor of the required terms of this Agreement, effective the date of the original Agreement until such time as the notes are converted or the obligation is paid in full;” |
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2. 4.1 2nd Amendment. On January 2, 2014, pursuant to the Amendment, the Maturity Date was deemed to be April 3, 2014, “and the Company agrees and acknowledges that such debt obligations but may, at the discretion of the current successor Lender, be converted into Common shares of the Company at any time prior to the modified Maturity Date at an exercise price of $.0008/share”. Place of Payment. All amounts payable hereunder shall be payable at the office of Lender, unless another place of payment shall be specified in writing by Lender. |
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C-9 - Raff Family Trust: |
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1. On October 2, 2013, the Company issued convertible notes for a total of $10,800. The notes bear interest at 20% per annum and are due December 31, 2013. Lender may opt to convert the principal and interest due at maturity into shares of the Borrower’s common stock December 31, 2013, “and the Company agrees and acknowledges that such debt obligations but may, at the discretion of current successor Lender, be converted into Common shares of the Company at any time prior to the modified Maturity Date at an exercise price of $.0008/share”. |
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In addition, “The Company agrees to secure the remaining balance of common shares held in Treasury by placing a ‘reserve’ on the balance of Treasury shares, in favor of the required terms of this Agreement, effective the date of the original Agreement until such time as the notes are converted or the obligation is paid in full;” |
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2. 4.1 2nd Amendment. On January 2, 2014, pursuant to the Amendment, the Maturity Date was deemed to be April 3, 2014, “and the Company agrees and acknowledges that such debt obligations but may, at the discretion of the current successor Lender, be converted into Common shares of the Company at any time prior to the modified Maturity Date at an exercise price of $.0008/share”. Place of Payment. All amounts payable hereunder shall be payable at the office of Lender, unless another place of payment shall be specified in writing by Lender. |
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C-10 - Nina Treiman: |
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1. On October 2, 2013, the Company issued convertible notes for a total of $10,800. The notes bear interest at 20% per annum and are due December 31, 2013. Lender may opt to convert the principal and interest due at maturity into shares of the Borrower’s common stock December 31, 2013, “and the Company agrees and acknowledges that such debt obligations but may, at the discretion of current successor Lender, be converted into Common shares of the Company at any time prior to the modified Maturity Date at an exercise price of $.0008/share”. |
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In addition, “The Company agrees to secure the remaining balance of common shares held in Treasury by placing a ‘reserve’ on the balance of Treasury shares, in favor of the required terms of this Agreement, effective the date of the original Agreement until such time as the notes are converted or the obligation is paid in full;” |
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2. 4.1 2nd Amendment. On January 2, 2014, pursuant to the Amendment, the Maturity Date was deemed to be April 3, 2014, “and the Company agrees and acknowledges that such debt obligations but may, at the discretion of the current successor Lender, be converted into Common shares of the Company at any time prior to the modified Maturity Date at an exercise price of $.0008/share”. Place of Payment. All amounts payable hereunder shall be payable at the office of Lender, unless another place of payment shall be specified in writing by Lender. |
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C-11 - WWFD, LLC: |
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1. On October 2, 2013, the Company issued convertible notes for a total of $10,800. The notes bear interest at 20% per annum and are due December 31, 2013. Lender may opt to convert the principal and interest due at maturity into shares of the Borrower’s common stock December 31, 2013, “and the Company agrees and acknowledges that such debt obligations but may, at the discretion of current successor Lender, be converted into Common shares of the Company at any time prior to the modified Maturity Date at an exercise price of $.0008/share”. |
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In addition, “The Company agrees to secure the remaining balance of common shares held in Treasury by placing a ‘reserve’ on the balance of Treasury shares, in favor of the required terms of this Agreement, effective the date of the original Agreement until such time as the notes are converted or the obligation is paid in full;” |
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2. 4.1 2nd Amendment. On January 2, 2014, pursuant to the Amendment, the Maturity Date was deemed to be April 3, 2014, “and the Company agrees and acknowledges that such debt obligations but may, at the discretion of the current successor Lender, be converted into Common shares of the Company at any time prior to the modified Maturity Date at an exercise price of $.0008/share”. Place of Payment. All amounts payable hereunder shall be payable at the office of Lender, unless another place of payment shall be specified in writing by Lender. |
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Fair Value Measurements |
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Assets and liabilities recorded at fair value in the consolidated balance sheet are categorized based upon the level of judgment associated with the inputs used to measure the fair value. Level inputs, as defined by ASC 820-10, are as follows: |
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Level 1 - quoted in active markets for identical assets or liabilities. |
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Level 2 - other significant observable inputs for the assets or liabilities through corroberation with market data at the measurement date. |
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Level 3 - significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date. |
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For certain of the Company’s financial instruments, including cash, prepaid expenses, accounts payable and accrued expenses the carrying amounts approximate fair value due to their short maturities. The carrying amounts of the Company’s notes payable approximates fair value based on the prevailing interest rates. |
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The following table summarizes fair value measurements by level at December 31, 2013 and December 31, 2012 for assets and liabilities measured at fair value on a recurring basis. These warrants and convertible notes are considered derivatives because the conversion prices are variable and the Company does not have enough authorized common stock to satisfy the convertible notes and warrants: |
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at December 31, 2013 | | | | | |
| Level 1 | Level 2 | Level 3 | Total | |
Derivative liability | | | | | |
Conversion features | | | ($315,573) | ($315,573) | |
Warrants liability | | | -371 | -371 | |
Total Derivative liability | | | -315,944 | -315,944 | |
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at December 31, 2012 | | | | | |
| Level 1 | Level 2 | Level 3 | Total | |
Derivative liability | | | | | |
Conversion features | | | ($92,000) | ($92,000) | |
Warrants liability | | | -1,235 | -1,235 | |
Total Derivative liability | | | -93,235 | -93,235 | |
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Derivative liability for conversion features for the year ended June 30, 2013 were valued using the Black-Scholes Option pricing model with the following assumptions: expected life of 0.5 to 1 year, risk free interest rate of 1%, dividend yield of 0, and expected volatility of 0.1%. |
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The following is a reconciliation of the derivatives liability |
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Value at May 27, 2010 (Inception) | | $ | 0 | | |
Issuance of instruments | | | 52,250 | | |
Relief from liability | | | 0 | | |
Value at December 31, 2010 | | $ | 52,250 | | |
Issuance of instruments | | | 360,916 | | |
Relief from liability | | | 285,163 | | |
Value at December 31, 2011 | | $ | 128,000 | | |
Issuance of instruments | | | 187,000 | | |
Relief from liability | | | -24,000 | | |
Change of value | | | -197,765 | | |
Value at December 31, 2012 | | $ | 93,235 | | |
Change of value | | | 253,660 | | |
Relief from Liability | | | -30,951 | | |
Value at December 31, 2013 | | | 315,944 | | |
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In accordance with ASC 815-10-35 the Company recognized loss of $253,660 in the change in derivative value for the year ended December 31, 2013 and a gain of $197,765 for December 31, 2012. |