Note 4 - Convertible notes payable | 12 Months Ended |
Jul. 31, 2013 |
Debt Disclosure [Abstract] | ' |
Note 4 - Convertible notes payable | ' |
Note 4 – Convertible notes payable |
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Tangiers Investors, LLC (“Tangiers”) |
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On February 23, 2012, the Company entered into an agreement with Tangiers Investors, LP, a Delaware limited partnership, an accredited investor, whereby Tangiers Investors loaned the Company the aggregate principal amount of $102,500, less $2,500 for legal related costs and $10,000 fee to be paid to a third party, together with interest at the rate of eight percent (8%) per annum, until the maturity date of February 22, 2013. On March 7, 2012, the Company entered into another agreement with Tangiers for the same amount and terms with the maturity of March 6, 2013. On August 31, 2012 the Company entered into a third agreement with Tangiers for $20,000 with an interest rate of ten percent (10%) per annum, until the maturity date of February 8, 2013. On May 21, 2013, the Company entered into a Secured Convertible Promissory Note agreement with Tangier’s Capital, a Delaware corporation, an accredited investor, whereby Tangier’s Capital loaned the Company the aggregate principal amount of $62,500, less $35,000, for legal related costs, the six (6) month forbearance on any and all of the Company’s notes held by the Purchaser that are currently in default, and for the settlement of losses resulting from the delay in issuance of shares for the conversion dated March 13, 2013 pertaining to the one hundred and two thousand five hundred dollars ($102,500) convertible note dated March 7, 2012, together with an interest rate of ten percent (10%) and with the maturity of May 21, 2013. |
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If the Note is not paid in full with interest on the maturity date, Tangiers has the right to convert this Note into restricted common shares of the Company. The Company at its option may elect to convert all or part of the principal and any accrued unpaid interest on these notes at any time or times on or before the maturity based on a conversion price. The conversion price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower) shall be equal to 65% multiplied by the average of the two lowest closing prices during the ten (10) trading days prior to conversion notice. |
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Tangiers Note 1 and Note 2 are original issue discount notes valued for $315,385 consisting of principal of $205,000 and a discount of $110,385 which was valued based on the 65% conversion rate. See Note 6 for share conversion. |
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Tangiers Note 3 provides Tangiers the option until the repayment date, to convert the note to shares of the Company’s common stock at a fixed price of $0.02 per share. The Company has determined the value associated with the beneficial conversion feature in connection with the notes to be $20,000. On February 8, 2013, the Note matured and is currently in default. The company has negotiated a 6 month forbearance against default on this note. See subsequent event (Note 12). |
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Tangiers Note 4 is original issue discount note valued for $125,000 consisting of principal of $62,500 and a discount of $62,500 which was valued based on the 50% conversion rate. |
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The Company may prepay all or any portion of the aggregate principal amount and accrued interest within ninety (90) days of the date of issuance in an amount equal to one hundred twenty percent (120%) of face value plus accrued interest; or after ninety-one (91) days after the date of issuance of this Note but not later than one hundred eighty (180) days in an amount equal to one hundred forty percent (140%) of face value plus accrued interest; or if on or after one hundred eighty-one (181) days from the date of issuance, upon the express written consent from Tangiers. The Company has provided Tangiers with 896,593 shares of New America as collateral for the Notes. |
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Asher Enterprises Inc. (“Asher”) |
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On June 27, 2012, the Company entered into an agreement with Asher Enterprises, a Delaware corporation, an accredited investor, whereby Asher Enterprises loaned the Company the aggregate principal amount of $63,000, less $3,000 for legal related costs, together with interest at the rate of eight percent (8%) per annum, until the maturity date of March 27, 2013. On August 2, 2012, the Company entered into another agreement with Asher Enterprises for $27,500, less $2,500 for legal related costs, together with an interest rate of eight percent (8%) and with the maturity of May 6, 2013. On November 1, 2012, the Company entered into another agreement with Asher Enterprises for $42,500, less $2,500, for legal related costs, together with an interest rate of eight percent (8%) and with the maturity of August 5, 2013. On February 7, 2013, the Company entered into another agreement with Asher Enterprises for $27,500, less $2,500, for legal related costs, together with an interest rate of eight percent (8%) and with the maturity of October 29, 2013. The original issue discount note, as described in ASC 480-55, may not be prepaid in whole or in part. |
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If the Note is not paid in full with interest on the maturity date, Asher has the right to convert this Note into restricted common shares of the Company. The Company at its option may elect to convert all or part of the principal and any accrued unpaid interest on these notes at any time or times on or before the maturity based on a conversion price. The conversion price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower) shall equal to 58% multiplied by the average of the three lowest closing prices during the ten (10) trading days prior to conversion notice. |
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The Four (4) original issue discount notes were valued for $276,725, consisting of principal of $160,500 and a discount of $116,225 which was valued based on the 58% conversion rate for all three notes. See Note 6 for share conversion. |
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The Company may prepay all or any portion of the aggregate principal amount and accrued interest within thirty (30) days of the date of execution of this Note, this Note may be prepaid in an amount equal to one hundred thirty percent (130%) of face value plus accrued interest; or after thirty-one (31) days after the execution of this Note but not later than sixty (60) days from the date of execution of this Note, this Note may be prepaid in an amount equal to one hundred thirty five percent (135%) of face value plus accrued interest; or after sixty-one (61) days after the execution of this Note but not later than ninety (90) days from the date of execution of this Note, this Note may be prepaid in an amount equal to one hundred forty percent (140%) of face value plus accrued interest; or after ninety-one (91) days after the execution of this Note but not later than one hundred fifty (150) days from the date of execution of this Note, this Note may be prepaid in an amount equal to one hundred forty five percent (145%) of face value plus accrued interest; or after fifty-one (151) days after the execution of this Note but not later than one hundred eighty (180) days from the date of execution of this Note, this Note may be prepaid in an amount equal to one hundred fifty percent (150%) of face value plus accrued interest. After the expiration of one hundred eightieth (180) days following the date of the Note, the Company shall have no right of prepayment. |
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Denali Equity Croup LLC. (“Denali”) |
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On June 28, 2012, the Company entered into a Consulting Service Agreement with Denali Equity Group, LLC, a Nevada limited liability company, that in consideration of the service, the Company shall issue a convertible note of $135,000 to Denali. The Consulting Service Agreement has a term of two (2) years. During the quarter ended October 31, 2012, the Company recorded $67,500 in consulting expense, leaving a prepaid expense balance of $45,000. The Convertible Note Agreement with Denali is for the principal amount of $135,000 with interest at the rate of eight percent (8%) per annum, until the maturity date of June 30, 2014. On March 03, 2013, the Company entered another agreement with Harbor Gates, LLC, a Denali affiliated company for $25,000 together with an interest rate of eight percent (8%) and with the maturity of December 31, 2013. |
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The original issue discount note, as described in ASC 480-55, may not be prepaid in whole or in part. If the Note is not paid in full with interest on the maturity date, Denali has the right to convert this Note into restricted common shares of the Company. The Company at its option may elect to convert all or part of the principal and any accrued unpaid interest on these notes at any time or times on or before the maturity based on a conversion price. The conversion price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower) shall equal to 90% multiplied by the average of the two lowest closing prices during the ten (10) trading days prior to conversion notice. |
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The Company may prepay all or any portion of the aggregate principal amount and accrued interest within ninety (90) days of the date of execution of this Note, this Note may be prepaid in an amount equal to one hundred ten percent (110%) of face value plus accrued interest; or after ninety-one (91) days after the execution of this Note but not later than one hundred eighty (180) days from the date of execution of this Note, this Note may be prepaid in an amount equal to one hundred twenty percent (120%) of face value plus accrued interest; or on or after one hundred eighty-one (181) days from the date of execution of this Note, this Note may be prepaid in an amount equal to one hundred twenty five percent (125%) of face value plus accrued interest. |
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On February 12, 2013, the Company entered into an assignment agreement with Magna and Denali Equity Group (Denali), whereby Magna agreed to purchase the entire $135,000 convertible promissory note issued by the company to Denali over the next 60 days. In consideration for the $135,000 Denali note, Magna agreed to pay Denali $45,000 on February 12, 2013. The remaining payments are as follows: $45,000 on or before March 27, 2013, and another $45,000 on or before May 8, 2013, subject to certain purchase provisions. As a result of the assignment agreement the Company entered into a convertible promissory note with Magna in the aggregate principal amount of $45,000 less legal related costs, together with interest at the rate of twelve percent (12%) per annum, until the maturity date of February 12, 2014. On March 18, 2013, the Company entered into a second convertible promissory note assignment agreement with Magna and Denali Equity Group (Denali) for the second payment of $45,000. On April 30, 2013, the Company entered into a third convertible promissory note assignment agreement with Magna and Denali Equity Group (Denali) for the third payment of $45,000, referenced in the February 12, 2013 assignment agreement. Denali did not receive the funds until May 14, 2013. Magna is entitled to convert, at any time after the issuance of this note, all or any lesser portion of the outstanding principal and accrued but unpaid interest into common stock at a conversion price for each share of common stock equal to a price which is a 50% discount from the lowest trading price in the five days prior to the day that the holder requests conversion. |
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The three issued discount Note 1, Note 2 and Note 3 were valued for $150,000, consisting of principal of $135,000 and a discount of $15,000 which was valued based on the 90% conversion rate. During this same period the Company converted $135,000 principal amount of the Denali Notes to shares of common stock, which reduced $150,000 from the value of the notes, thereby reducing the balance to $0. |
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Tonaquint Inc. (“Tonaquint”) |
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On July 19, 2012, the Company entered into an agreement with Tonaquint Inc., a Utah corporation, an accredited investor, whereby Tonaquint Inc. loaned the Company the aggregate principal amount of $85,000, less $2,500 for legal related costs and $7,500 fee to be paid to a third party, together with interest at the rate of eight percent (8%) per annum, until the maturity date of April 19, 2013. The original issue discount note, as described in ASC 480-55, may not be prepaid in whole or in part. If the Note is not paid in full with interest on the maturity date, Tonaquint has the right to convert this Note into restricted common shares of the Company. The Company at its option may elect to convert all or part of the principal and any accrued unpaid interest on these notes at any time or times on or before the maturity based on a conversion price. The conversion price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower) shall be equal to 65% multiplied by the average of the two lowest closing prices during the ten (10) trading days prior to conversion notice. |
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The Company may prepay prior to the maturity date by paying an amount equal to the outstanding principal of the Note multiplied by one hundred fifty (150%) percent together with accrued and unpaid interest thereon, upon the express written consent from Tonaquint. |
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The issued discount Note 1 was valued for $130,769, consisting of principal of $85,000 and a discount of $45,769 which was valued based on the 60% conversion rate. See Note 6 for share conversion. |
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On April 18, 2013, the Company entered into a Secured Convertible Promissory Note dated April 26, 2013 with Tonaquint Inc., a Utah corporation, an accredited investor, whereby Tonaquint Inc. agreed to loan the Company the aggregate principal amount of $560,000, less $10,000 for legal related costs and an original issue discount of $50,000, together with interest at the rate of eight percent (8%) per annum, until the maturity date of 20 months from after issuance or December 18, 2014. The said Note is secured by real estate property located in Cook County, Illinois and is referenced in a Mortgage Agreement dated April 18, 2013 for a total value of $400,000. |
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The note provides Tonaquint the option until the repayment date, to convert the note to shares of the Company’s common stock at $0.015 per share, subject to adjustment during certain events, such as, but limited to, issuance of options, change in option price or rate of conversion, deemed warrant issuance. As a result of the adjustment on share price, this note has been accounted as derivative liability. (See Note 7 for derivative) |
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On initial funding, Tonaquint will deliver to the Company cash in the amount of $100,000 (the “Initial Prepayment”) and $400,000 in a subsequent 5% secured notes issued by Toniquant. The notes issued by Toniquant will be due 12 months from the Initial Funding Date based on the following fund disbursal schedule, together with interest at the rate of five percent (5%) per annum starting April 26, 2013 until the funding receive by the Company. As a result of the two notes above, the Company has an effective interest rate of three percent (3%) for the portion that yet funded to the Company. |
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· | $100,000, 3 months after closing | | | |
· | $100,000, 6 months after closing | | | |
· | $100,000, 9 months after closing | | | |
· | $100,000 12 months after closing | | | |
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On May 1, 2013 the Company received the initial drawdown of $100,000 less $10,000 in legal fees for a total of $90,000. The issued discount Drawdown 1 of Note 2 was valued for $150,000, consisting of principal of $100,000 and a discount of $50,000. On June 3, 2013, the Company received Drawdown 2 of $50,000 less third party fees of $4,519. On July 2, 2013, the Company received Drawdown 3 of $50,000 less third party fees of $4,815. |
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The Company determined that this convertible note contained features that were embedded in a freestanding host contract. As a result we analyzed this instrument, in accordance with ASC 815-15-25-1 and determined that the embedded feature should be accounted for separately as a derivative instrument with changes in fair value recognized in income each period. |
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Tonaquint Note 4 Face Value | | $ | 260,739 | |
Debt Discount | | | | |
Convertible Note Warrant Derivative | | | 121,460 | |
Conversion Feature Derivative | | | 89,279 | |
Original Issue Discount | | | 50,000 | |
Total Debt Discount | | $ | 260,739 | |
Amortization of Debt Discount, as of July 31, 2013 | | | (41,603 | ) |
Debt Discount, Net | | $ | 219,136 | |
Tonaquint Note 4 Carrying Value as of July 31, 2013 | | $ | 41,603 | |
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Hanover Holdings, LLC. (“Magna Group”) |
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On February 5, 2013, the Company entered into an agreement with Hanover Holdings I, LLC (Magna Group), a New York corporation, an accredited investor, whereby Magna loaned the Company the aggregate principal amount of $16,500, less $2,500 for legal related costs, together with interest at the rate of twelve percent (12%) per annum, until the maturity date of March 27, 2013. In addition, Magna has agreed to fund $33,000 over the next sixty days to be paid as follows: $16,500 on or before March 20, 2013 and an additional $16,500 on or before May 1, 2013. On March 12, 2013, the Company entered into a Secured Convertible Promissory Note agreement with Magna Group, whereby Magna Group loaned the Company the aggregate principal amount of $16,500, less $2,500, for legal related costs, together with an interest rate of twelve percent (12%) and with the maturity of October 5, 2013. |
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The original issued discount Notes were valued for $56,896, consisting of principal of $33,000 and a discount of $23,896 which was valued based on the 58% conversion rate. See Note 6 for share conversion. |
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Harbor Gates LLC. (“Harbor”) |
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On March 4, 2013, the Company entered into a Convertible Promissory Note agreement with Harbor Gates, LLC (Harbor Gates), a Delaware limited liability corporation, an accredited investor, whereby Harbor Gates loaned the Company the aggregate principal amount of $25,000, together with interest at the rate of eight percent (8%) per annum, until the maturity date of December 31, 2013. On April 12, 2013, the Company entered into another Secured Convertible Promissory Note agreement with Harbor Gates, whereby Harbor Gates loaned the Company the aggregate principal amount of $35,000, together with an interest rate of eight percent (8%) and with the maturity of December 31, 2013. |
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The issued discount Notes were valued for $120,000, consisting of principal of $60,000 and a discount of $60,000 which was valued based on the 50% conversion rate. See Note 6 for share conversion. |
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As of July 31, 2013, the Company had a balance of convertible notes payable of $329,520 net of unamortized discount of $326,382 and a balance of unamortized financing fee of $57,257. As of July 31, 2013, the Company had accrued and expensed $721,297 interest that related to convertible notes. |