Note 4 - Convertible notes payable | 3 Months Ended |
Oct. 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 (Tangier’s Note 4), 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. On October 21, 2013, the Company entered into a Secured Convertible Promissory Note agreement with Tangiers Investors, LP, a Delaware corporation, an accredited investor, (Tangier’s Note 5) whereby Tangiers agreed to enter into a debt purchase agreement to acquire unpaid debt obligation of the Company from Filer Support Services, Inc. in the amount of $21,619. As a result of the debt purchase the Company entered into a Secured Convertible Promissory Note in the amount of $21,619 together with interest at the rate of ten percent (10%) per annum, until the maturity date of October 21, 2014. On October 9, 2013, the Company entered into a Secured Convertible Promissory Note agreement with Tangiers Investors, LP, a Delaware corporation, an accredited investor, (Tangier’s Note 6) whereby Tangiers agreed to acquire the April 19, 2013 Secured Convertible Promissory Note in the amount of $35,000 from Harbor Gates LLC. As a result of the exchange agreement the Company entered into a new note of $36,400 consisting of $35,000 in principle and $1,400 in interest from the original note together with interest at the rate of five percent (10%) per annum, until the maturity date of October 09, 2014. |
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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. As of October 31, 2013, this note was fully converted and has a balance of $0. |
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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. As of October 31, 2013, this note was fully converted and has a balance of $0. |
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Tangiers Note 4 is consisting of principal of $62,500. Note was issued as a result of a debt purchase agreement of $50,000 and $12,500 of processing fees. |
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Tangiers Note 5 is consisting of principle of $21,619. Issues as part of a debt purchase agreement to acquire unpaid debt obligation of the Company from Filer Support Services, Inc |
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Tangiers Note 6 is consisting of principal of $36,400. As a result of the exchange agreement the Company entered into a new note of $36,400 consisting of $35,000 in principle and $1,400 in interest from the original note. As of October 31, 2013, this note was fully converted and has a balance of $0. |
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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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The Company determined that Tangiers convertible note’s 4, 5 and 6 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. See Note 7. |
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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. On August 13, 2013, the Company entered into a Secured Convertible Promissory Note agreement (Asher Note 5) with Asher Enterprises, Inc, a Delaware corporation, an accredited investor, whereby Asher loaned the Company the aggregate principal amount of $53,000, less $3,000, for legal related costs, and $5,300 to a third party together with interest at the rate of eight percent (8%) per annum, until the maturity date of May 9, 2014. On September 10, 2013, the Company entered into another Secured Convertible Promissory Note agreement (Asher Note 6) with Asher Enterprises, Inc., a Delaware corporation, an accredited investor, whereby Asher loaned the Company the aggregate principal amount of $53,000, less $3,000, for legal related costs and $5,300 to a third party, together with interest at the rate of eight percent (8%) per annum, until the maturity date of June 12, 2014. |
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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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The Company determined that the convertible notes, Asher Note 5 and Note 6, 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. See Note 7. |
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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. 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. 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 65% conversion rate. As of October 31, 2013 this note has been fully converted and is now $0. |
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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 is 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 of funds not yet funded to the Company. |
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· | $100,000, 3 months after closing |
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· | $100,000, 6 months after closing |
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· | $100,000, 9 months after closing |
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· | $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 half of Drawdown 2 of $50,000 less third party fees of $4,519. On July 2, 2013, the Company received the second half of Drawdown 2 of $50,000 less third party fees of $4,815. On September 18, 2013, the Company received Drawdown 3 of $102,000 less third party fees of 8,200 and interest expense of $2,000. |
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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. See note 7. |
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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 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 As of October 31, 2013, this note was fully converted and has a balance of $0. |
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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 $25,000, 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 $50,000 and a discount of $70,000 which was valued based on the 50% conversion rate. See Note 6 for share conversion As of October 31, 2013, this note was fully converted and has a balance of $0. |
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JMJ Financial |
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On September 04, 2013, the Company entered into another Secured Convertible Promissory Note agreement with JMJ Financial, an accredited investor, whereby JMJ Financial loaned the Company the aggregate principal amount of $25,000, together with interest at the rate of twelve percent (12%) per annum, until the maturity date of September 4, 2014. The issued discount Notes were valued for $46,296, consisting of principal of $25,000, and a discount of $18,519 which was valued based on the 60% conversion rate. |
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LG Capital Funding, LLC |
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On September 12, 2013, the Company entered into an assignment agreement with LG Capital Funding, LLC (LG Capital), a New York corporation, and 136054 AB Limited (AB), whereby LG Capital agreed to purchase the entire $50,000 promissory note originally issued by the company to AB on October 31, 2012. As a result of the assignment agreement the Company entered into a convertible promissory note with LG Capital in the aggregate principal amount of $50,000 (LG Capital Note 1), together with interest at the rate of five percent (5%) per annum, until the maturity date of June 12, 2014. In addition, the Company entered into a Secured Convertible Promissory Note agreement with LG Capital (LG Capital Note 2, whereby LG Capital loaned the Company the aggregate principal amount of $77,000, less $2,000, for legal related costs, and $7,700 to a third party, together with interest at the rate of eight percent (8%) per annum, until the maturity date of June 12, 2014. |
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LG Capital Note 1 is original issue discount note valued for $100,000 consisting of principal of $50,000 and a discount of $100,000 which was valued based on the 50% conversion rate. As of October 31, 2013 this note was fully converted and now has a balance of $0. LG Capital Note 2 is consisting of principal of $77,000 legal cost of $9,700. |
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The Company determined that the convertible notes, LG Capital Note 1 and Note 2, 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. See Note 7. |
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Auctus Private Equity Fund |
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On October 4, 2013, the Company entered into a new convertible note with Auctus Private Equity Fund (Auctus), a Nevada corporation, whereby Auctus loaned the Company the aggregate principal amount of $50,000, less $8,620, for legal related costs, and third party fees, together with interest at the rate of eight percent (8%) per annum, until the maturity date of July 4, 2014. |
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The Auctus Note is consisting of principal of $50,000 with legal cost of $8,620. |
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The Company determined that the convertible note, Auctus 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. See Note 7 |
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As of October 31, 2013, the Company had a balance of convertible notes payable of $252,233 net of unamortized discount of $589,306 and a balance of unamortized financing fee of $87,562. As of October 31, 2013, the Company had accrued and expensed $34,988 in interest. |
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GEL Properties |
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On October 21, 2013, the Company entered into a Secured Convertible Promissory Note agreement with GEL Properties, a Delaware corporation, an accredited investor, whereby GEL Properties loaned the Company the aggregate principal amount of $75,000, together with interest at the rate of six percent (6%) per annum, until the maturity date of October 21, 2014. The issued discount Notes were valued for $115,385, consisting of principal of $75,000, and a original issue discount of $40,385 which was valued based on the 65% conversion rate. |
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The Holder of this Note is entitled, at its option, at any time after the requisite rule 144 holding period, and after full cash payment for the shares convertible hereunder, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") without restrictive legend of any nature, at a conversion price ("Conversion Price") for each share of Common Stock equal to 65% of the lowest closing bid price of the Common Stock as reported on the National Quotations Bureau OTCQB exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for any of the five trading days including the day upon which a Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to included the same day closing price). |