CONVERTIBLE DEBENTURES | 12 Months Ended |
Dec. 31, 2013 |
Debt Disclosure [Abstract] | ' |
CONVERTIBLE DEBENTURES | ' |
12. CONVERTIBLE DEBENTURES |
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| | Issuance | | Principal | | | Discount | | | Carrying Value | | | Interest Rate | | Maturity Date |
| a | ) | 15-Aug-13 | | | 15,500 | | | | 1,928 | | | | 13,572 | | | | 8 | % | 19-May-14 |
| a | ) | 23-Aug-13 | | | 27,500 | | | | 18,845 | | | | 8,655 | | | | 8 | % | 27-May-14 |
| a | ) | 1-Jul-13 | | | 42,500 | | | | 13,929 | | | | 28,571 | | | | 8 | % | 28-Mar-14 |
| a | ) | 17-Oct-13 | | | 27,500 | | | | 11,741 | | | | 15,759 | | | | 8 | % | 16-Jul-14 |
| b | ) | 4-Nov-13 | | | 15,000 | | | | 9,542 | | | | 5,458 | | | | 6 | % | 4-Nov-15 |
| b | ) | 9-Dec-13 | | | 20,000 | | | | 13,054 | | | | 6,946 | | | | 6 | % | 5-Dec-15 |
| c | ) | 9-Dec-13 | | | 33,159 | | | | 21,644 | | | | 11,515 | | | | 8 | % | 5-Dec-15 |
| d | ) | 2-Apr-13 | | | 208,250 | | | | 11,814 | | | | 196,436 | | | | 0 | % | 2-Jan-13 |
| e | ) | 2-Oct-13 | | | 76,500 | | | | 28,501 | | | | 47,999 | | | | 12 | % | 18-Sep-14 |
| f | ) | 26-Jun-13 | | | 83,333 | | | | 55,037 | | | | 28,296 | | | | 12 | % | 26-Jun-14 |
| f | ) | 26-Sep-13 | | | 27,778 | | | | 25,682 | | | | 2,096 | | | | 12 | % | 26-Sep-14 |
| f | ) | 9-Dec-13 | | | 27,778 | | | | 23,506 | | | | 4,272 | | | | 12 | % | 9-Dec-14 |
| g | ) | 4-Nov-13 | | | 15,000 | | | | 7,077 | | | | 7,923 | | | | 8 | % | 4-Nov-15 |
| h | ) | 18-Sep-13 | | | 30,000 | | | | 10,210 | | | | 19,790 | | | | 12 | % | 18-Sep-14 |
| | | | | | 649,798 | | | | 252,510 | | | | 397,288 | | | | | | |
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a) | The Company entered into several convertible promissory notes (“Asher Notes”) with Asher Enterprises Inc. (“Asher”). Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time after 6 months from the issuance date at a conversion price per share equal to 60% of the average price of the lowest 5 day trading days during the 10 trading days preceding the conversion. The Asher Notes cannot be converted, to the extent that Asher Enterprises Inc. and its affiliates would beneficially own in excess of 4.99% of the Company’s outstanding common stock. | | | | | | | | | | | | | | | | | | | |
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The convertible debenture may be repaid by the Company as follows: |
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| • | Outstanding principal multiplied by 135% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 61 days following the issuance date and ending on the date that is 90 days following the issuance date; | | | | | | | | | | | | | | | | | | |
| • | Outstanding principal multiplied by 140% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 91 days following the issuance date and ending on the date that is 120 days following the issuance date; | | | | | | | | | | | | | | | | | | |
| • | Outstanding principal multiplied by 150% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 121 days following the issuance date and ending on the date that is 180 days following the issuance date; | | | | | | | | | | | | | | | | | | |
| • | Outstanding principal multiplied by 175% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 181 days following the issuance date through the maturity date. | | | | | | | | | | | | | | | | | | |
| • | In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 22% per annum and the Asher Notes becomes immediately due and payable. Should that occur the Company is liable to pay the holder 150% of the then outstanding principal and interest. | | | | | | | | | | | | | | | | | | |
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b) | The Company entered into two convertible promissory notes (“GEL Notes”) with GEL Properties, LLC (“GEL”). Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time after 6 months from the issuance date at a conversion price per share equal to 60% of the lowest closing bid price during the 5 trading days preceding the conversion. The GEL Notes cannot be converted, to the extent that GEL would beneficially own in excess of 4.99% of the Company’s outstanding common stock. | | | | | | | | | | | | | | | | | | | |
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The convertible debenture may be repaid by the Company as follows: |
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| • | Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period of 90 days beginning on the issuance date; | | | | | | | | | | | | | | | | | | |
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| • | Outstanding principal multiplied by 140% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 91 days following the issuance date and ending on the date that is 180 days following the issuance date; | | | | | | | | | | | | | | | | | | |
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| • | Outstanding principal multiplied by 150% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 181 days following the issuance date through the maturity date. | | | | | | | | | | | | | | | | | | |
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| • | In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the GEL Notes becomes immediately due and payable. | | | | | | | | | | | | | | | | | | |
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c) | On October 18, 2012, The Company entered into a convertible bridge note (the “Baier Note”) with The Marie Baier Foundation (“The Foundation”) for $147,062. On December 9, 2013, the Company assigned $34,159 of principal and interest of the Baier Note to GEL Properties, LLC (“GEL”) and entered into a $34,159 convertible promissory note (the “GEL Note”) with GEL. Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time after 6 months from the issuance date at a conversion price per share equal to 60% of the lowest closing bid price during the 5 trading days preceding the conversion. The GEL Notes cannot be converted, to the extent that GEL would beneficially own in excess of 4.99% of the Company’s outstanding common stock. | | | | | | | | | | | | | | | | | | | |
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The convertible note cannot be prepaid. |
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d) | On April 2, 2013, the Company entered into a convertible bridge note with GCA Strategic Investment Fund Limited. On December 31, 2013 the Company entered in a letter agreement with GCA Strategic Investment Fund Limited, in which the original maturity date of September 20, 2013 was extended to January 2, 2014. | | | | | | | | | | | | | | | | | | | |
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The unpaid principal portion and accrued interest on the convertible bridge note is convertible in whole or in part as follows: |
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| • | Conversion price per share equal to the lower of : | | | | | | | | | | | | | | | | | | |
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| (i) | 100% of the average price of the Company’s common stock for the 5 trading days preceding the conversion days | | | | | | | | | | | | | | | | | | |
| (ii) | 70% of the daily average price of the Company’s common stock for the 10 trading days preceding the conversion date. | | | | | | | | | | | | | | | | | | |
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| • | The holders must not convert more than 33 1/3% of the initial principal sum into shares of the Company’s common stock at a price below $0.08 per share during any calendar month. | | | | | | | | | | | | | | | | | | |
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Global does not have the right to convert the convertible bridge note, to the extent that Global and its affiliates would beneficially own in excess of 9.99% of the Company’s outstanding common stock. |
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In the event the Company elects to prepay the convertible bridge note in full or in part, the Company is required to pay principal, interest and any other amounts owing multiplied by 130%. The convertible bridge note also contains a mandatory partial prepayment requirement should the Company obtain certain future net financings in excess of $300,000, and under other conditions. |
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e) | The Company entered into a convertible promissory note (“Hanover Note”) with Hanover Holdings I, LLC (“Hanover”). Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time after 6 months from the issuance date at a conversion price per share equal to 60% of the lowest VWAP (“Variable Weighted Average Price”) price during the 5 trading days preceding the conversion. The Hanover Note cannot be converted, to the extent that Hanover would beneficially own in excess of 4.99% of the Company’s outstanding common stock. | | | | | | | | | | | | | | | | | | | |
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The convertible debenture may be repaid by the Company as follows: |
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| • | Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period of 180 days beginning on the issuance date; | | | | | | | | | | | | | | | | | | |
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| • | In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 22% per annum and the GEL Notes becomes immediately due and payable. | | | | | | | | | | | | | | | | | | |
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f) | During the period ended December 31, 2013 the Company entered into a one year promissory note with JMJ Financial. The total amount that may be borrowed is $275,000, which includes an upfront fee of 10%. No interest will be applied to the principal balance for the first 90 days after cash advance. After the first 90 days, an interest charge of 12% will be immediately applied to the principal and the 10% upfront fee. | | | | | | | | | | | | | | | | | | | |
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On delivery of consideration, the lender may convert all or part of the unpaid principal and upfront fee into common stock at its sole discretion. All balances outstanding have a variable conversion price equal to the lesser of $0.07 or 60% of the market price. The market price is defined as the lowest trade price in the 25 days prior to the conversion date. The lender is limited to holding no more than 4.99% of the issued and outstanding common stock at the time of conversion. |
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After the expiration of 90 days following the delivery date of any consideration, the Company will have no right of prepayment. |
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g) | The Company entered into a convertible promissory note (“LG Note”) with LG Properties, LLC (“LG”). Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time after 6 months from the issuance date at a conversion price per share equal to 50% of the average of the two lowest closing bid prices during the 5 trading days preceding the conversion. The LG Note cannot be converted, to the extent that LG would beneficially own in excess of 4.99% of the Company’s outstanding common stock. | | | | | | | | | | | | | | | | | | | |
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The convertible debenture may be repaid by the Company as follows: |
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| • | Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period of 90 days beginning on the issuance date; | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| • | Outstanding principal multiplied by 140% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 91 days following the issuance date and ending on the date that is 180 days following the issuance date; | | | | | | | | | | | | | | | | | | |
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| • | Outstanding principal multiplied by 150% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 181 days following the issuance date through the maturity date. | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| • | In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the LG Notes becomes immediately due and payable. | | | | | | | | | | | | | | | | | | |
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h) | During the period ended December 31, 2013 the Company entered into a convertible debenture agreement with Magna LLC. | | | | | | | | | | | | | | | | | | | |
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The unpaid principal portion on the convertible debenture is convertible in whole or in part as follows at a conversion price equal to 80% of the average price of the Company’s common stock for the 5 trading days preceding the conversion day. The holders must not convert more than 300% of the average daily dollar volume in the 10 day trading period ending on the day that the holder elects conversion. |
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The Company has evaluated whether separate financial instruments with the same terms as the conversion features above would meet the characteristics of a derivative instrument as described in paragraphs ASC 815-15-25. The terms of the contracts do not permit net settlement, as the shares delivered upon conversion are not readily convertible to cash. The Company’s trading history indicated that the shares are thinly traded and the market would not absorb the sale of the shares issued upon conversion without significantly affecting the price. As the conversion features would not meet the characteristics of a derivative instrument as described in paragraphs ASC 815-15-25, the conversion features are not required to be separated from the host instrument and accounted for separately. As a result, at December 31, 2013 the conversion features would not meet derivative classification. |
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At December 31, 2013, the convertible debentures are unsecured. During the period ended December 31, 2013, $357,176 (2012 - $nil) of convertible debentures were settled by issuing 158,956,298 (2012 - nil) shares of common stock of the Company. |
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During the period ended December 31, 2013, $194,159 (2012 - $nil) of convertible debentures were settled through payment of cash. |
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During the period ended December 31, 2013, the Company incurred $nil (2012 - $31,126) in transaction costs in connection with the issuance of the convertible debentures, which has been recorded as a reduction to the carrying values of convertible debentures. |