Debt | 3 Months Ended |
Nov. 30, 2013 |
Debt [Abstract] | ' |
Debt | ' |
Note 5 – Debt |
|
Debt consist of the following at November 30, 2013 and August 31, 2013: |
|
Description | | November 30, 2013 | | | August 31, 2013 | |
A. Unsecured convertible debt – Derivative Liabilities | | $ | 1,732,250 | | | $ | 1,732,250 | |
Less : debt discount | | | (164,638 | ) | | | (297,153 | ) |
Convertible debt - net | | | 1,567,612 | | | | 1,435,097 | |
| | | | | | | | |
B. Convertible debt – Unsecured | | | 479,097 | | | | 479,097 | |
Less : debt discount | | | (205,601 | ) | | | (287,615 | ) |
Convertible debt - net | | | 273,496 | | | | 191,482 | |
| | | | | | | | |
C. Notes - Secured | | | 3,196,902 | | | | 3,246,902 | |
| | | | | | | | |
D. Notes – Unsecured | | | 1,075,000 | | | | 1,127,183 | |
| | | | | | | | |
Total debt | | $ | 6,113,010 | | | $ | 6,000,664 | |
|
Debt in default consists of secured and unsecured notes totaling $801,597 and $558,183 at November 30, 2013 and August 31, 2013, respectively. |
|
The corresponding debts above are more fully discussed below: |
|
(A) Unsecured Convertible Debt – Derivative Liabilities |
|
During the three months ended November 30, 2013 the Company did not issue any unsecured convertible debt or warrants that had an embedded conversion feature. The Company’s unsecured convertible derivative debt (recorded as a derivative liability) consists of the following terms and balances at November 30, 2013: |
|
Description | | Information | | | | | |
Interest Rate | | | | | 12-Aug | % | | |
Maturity Date(s) | | | | Apr. 1, 2013 – Aug. 28, 2013 | | | |
| | | | | | | | |
Series 2 | | Fixed conversion price of $1.00 | | | 997,250 | | | |
($1.00 warrants) | | |
Series 3 | | Fixed conversion price of $0.40 | | | 735,000 | | | |
($0.75 warrants) | | |
|
Below is a summary of the Company’s unsecured convertible debt (recorded as a derivative liability) at November 30, 2013 and August 31, 2013: |
|
Description | | November 30, 2013 | | | August 31, 2013 | |
Carry forward balance | | $ | 1,732,250 | | | $ | 832,750 | |
Borrowings | | | - | | | | 1,000,000 | |
Repayment of convertible debt | | | - | | | | (100,500 | ) |
Ending balance | | $ | 1,732,250 | | | $ | 1,732,250 | |
|
(B) Convertible Debt – Unsecured |
|
During the three months ended November 30, 2013 the Company did not issue any unsecured non-derivative convertible debt or warrants. The Company’s unsecured convertible debt (not recorded as a derivative liability) consists of the following terms and balances at November 30, 2013: |
|
Description | | Information | | | | | |
Interest Rate | | | | | 16 | % | | |
Default interest rate | | | | | N/A | | | |
Term | | | | 1 year | | | |
Maturity | | | | Aug. 3, 2013 - Aug. 20, 2013 | | | |
Series 4 debt | | Fixed conversion price of $0.75 | | $ | 374,097 | | | |
Series 5 debt | | Zero percent (0%) interest if repaid within 3 months; Convertible at the lesser of $0.47 or 65% of the lowest trade price in the then prior 25 days, but only after 180 days from the loan date | | $ | 105,000 | | | |
|
The Company amortized $6,130 of its debt issue costs relating to its Series 4 debt during the three months ended November 30, 2013. The remaining unamortized amount of $2,945 will be fully amortized in the fourth quarter of fiscal year 2014. |
|
Below is a summary of the Company’s unsecured convertible debt (not recorded as a derivative liability) at November 30, 2013 and August 31, 2013: |
|
| | November 30, 2013 | | | August 31, 2013 | |
Carry forward balance | | $ | 479,097 | | | $ | 650,000 | |
Borrowings | | | - | | | | 409,000 | |
Repayment of convertible debt | | | - | | | | (59,220 | ) |
Reclassification of convertible debt to demand | | | - | | | | (520,683 | ) |
Ending balance | | $ | 479,097 | | | $ | 479,097 | |
|
(C) Notes - Secured |
|
The Company’s secured debt consist of the following terms and balances at November 30, 2013: |
|
Interest Rate | | | | | 7% - 12.75 | % | | |
Maturity | | | | Sep. 1, 2013 - Aug. 28, 2014 | | | |
SKI debts | | Secured by all the assets of OSM | | $ | 2,990,902 | | | |
Series 6 debt | | Secured by the tetra pack inventory, tetra pack receivables and a second position on all other assets of OSM. | | $ | 206,000 | | | |
|
Below is a summary of the Company’s secured debt at November 30, 2013 and August 31, 2013: |
|
| | November 30, 2013 | | | August 31, 2012 | |
Carry forward balance | | $ | 3,246,902 | | | $ | 3,242,613 | |
Borrowings (Series 6) | | | - | | | | 256,000 | |
Repayment of debt | | | (50,000 | ) | | | - | |
Accrued interest | | | - | | | | - | |
Reclassification of accrued interest on debt from debt to accrued interest | | | - | | | | (251,711 | ) |
Ending balance | | $ | 3,196,902 | | | $ | 3,246,902 | |
|
The Company issued 275,000 shares of its common stock in connection with extending a forbearance agreement (as further described in the Company’s Annual Report filed on Form 10-K for the year ended August 31, 2013); these share have a fair value of $165,000 which was charged to other expense and was based on the quoted closing trading price of the Company’s stock on September 16, 2013 ($0.60/share). |
|
(D) Notes – Unsecured Demand Notes |
|
The Company’s unsecured demand debt consists of the following maturities and balances at November 30, 2013 and August 31, 2013: |
|
Amount | | | Information | | Maturity | | | |
$ 1,027,500 | | | Represents current convertible demand debt | | In Default – August 25, 2014 | | | |
$ 10,000 | | | Represents an advance from a third party | | Due on demand | | | |
$ 37,500 | | | The Company is in litigation regarding this debt; see note 8. | | In litigation | | | |
|
Below is a summary of the Company’s unsecured demand debt at November 30, 2013 and August 31, 2013: |
|
Description | | November 30, 2013 | | | August 31, 2012 | |
Carry forward balance | | $ | 1,127,183 | | | $ | 287,500 | |
Borrowings | | | 280,500 | | | | 422,500 | |
Repayments | | | (332,683 | ) | | | (204,000 | ) |
Reclassification from derivative to demand debt | | | - | | | | 100,500 | |
Reclassification from convertible to demand debt | | | - | | | | 520,683 | |
| | $ | 1,075,000 | | | | 1,127,183 | |
|
In connection with its demand debt, and for the three months ended November 30, 2013, the Company incurred an original issue discount of $10,500 (which was recorded as debt discount) and recorded $3,000 as debt issue costs. |
|
(E) Debt discount |
|
Below is a summary of the Company’s debt discount at November 30, 2013 and August 31, 2013: |
|
| | November 30, 2013 | | | August 31, 2013 |
Total outstanding debt | | $ | 6,483,249 | | | $ | 6,585,432 | |
Carry forward debt discount – net | | | (584,768 | ) | | | (404,088 | ) |
Debt discount | | | (10,500 | ) | | | (994,214 | ) |
Amortization of debt discount | | | 225,029 | | | | 813,534 | |
Debt – net | | $ | 6,113,010 | | | $ | 6,000,664 | |
|
The Company’s remaining debt discount of $370,240 will be fully amortized during fiscal year 2014. |