NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2014 |
Debt Disclosure [Abstract] | ' |
NOTES PAYABLE | ' |
On June 29, 2012, the Company issued a $488,489 Convertible Promissory Note and Security Interest in favor of a trade creditor representing the past due invoices of the creditor for professional fees. During the year ended December 31, 2013, the creditor advanced a total of $8,006 for payment of the Company’s operating expenses whereby increasing the principal balance of the note to $491,465. On November 5, 2013, the Company executed the Second Amendment to the Convertible Promissory Note. In this amendment the creditor has agreed to waive the default in the payment of monthly installments and to waive all accrued default interest. The Note is now due in full on or before May 31, 2014. The conversion price of the Note has been amended to $0.075 per share. Additionally, certain accounts payable and accrued expenses of $278,962 due to the creditor for services provided subsequent to the issuance of the original obligation were added to the Note, making the current balance of the Note $812,249. As a result of retiring the old debt and including it in the new note the expensing of the remaining debt discount of $270,502 was accelerated which resulted in a loss on extinguishment of debt of $183,877. Interest relating to the amortization of the debt discount for the year ended December 31, 2013 amounted to $69,772 and $0 remained of the debt discount at December 31, 2013. As of September 30, 2014 this note is past due and there is principal and interest due of $812,249 and $88,124 on the new note, respectively. |
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On June 12, 2013, the Company executed a promissory note for $10,000. The loan has no stated interest rate and was due August 12, 2013. The note does not bear interest but did include a loan fee of $5,000. During the nine months ended September 30, 2014, $3,000 was repaid on the loan and the loan was extended with no specific terms of repayment. |
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On August 12, 2013, in connection with the merger, the Company issued $51,440 of new notes. The notes are secured, bear interest at 8% and mature in five years. As of September 30, 2014 there is $4,667 of accrued interest on these notes. |
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On September 23, 2013, we entered into a $400,000 Promissory Note (the “Note”) with JMJ Financial (“JMJ”). The face amount of the Note includes an original issue discount of $40,000. The initial advance to be made under the Note by JMJ is $50,000. JMJ may, after making this initial advance, lend us additional sums under the terms of the Note in such amounts and at such dates as it chooses. Individual loans mature one year from the effective date of each payment. If repaid within ninety (90) days from the date of issue, the loan will not bear interest. Upon ninety (90) days after the date of issue, a one-time interest charge of twelve percent (12%) of the principal amount will be applied. JMJ may convert all or part of the Note, at its discretion, into shares of our common stock. The conversion price is sixty percent (60%) of the lowest trading price for our common stock in the twenty-five trading days immediately preceding the conversion date. For the initial advance the Company recorded a debt discount in the amount of $55,000 (payment plus 10% original discount) in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $129,184 based on the Black Scholes Merton pricing model. As of September 30, 2014, this note was fully converted into common stock. As a result of the conversion the remaining debt discount was expensed and the Company recognized a gain on derivative of $3,636. |
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On November 1, 2013, the Company executed a convertible promissory note for $30,000. The note bears interest at 9% and matures in two years. The loan is convertible at any time into shares of common stock at $0.075 per share beginning one year from the date of the note. In addition, the note required the issuance of warrants to purchase 400,000 warrants. The aggregate fair value of these warrants totaled $14,034 based on the Black Scholes Merton pricing model. As of September 30, 2014, there is $2,463 of accrued interest. |
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On November 1, 2013, the Company executed a convertible promissory note for $16,000. The note is convertible at $0.075 after one year, bears interest at 9% and matures in two years. During the nine months ended September 30, 2014, the Company repaid $3,000 before it borrowed another $5,000 on the loan. As of September 30, 2014, there is $1,279 of accrued interest. |
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On November 4, 2013, we obtained short term financing from a Lender under a 9% Convertible Note in the amount of $70,000 (the “Short-Term Note”). The Short-Term Note features an original issue discount of $6,700. The $63,300 in funding received from the Lender was used to pay off and retire the Convertible Promissory Note issued to Asher Enterprises, Inc., dated April 9, 2013. The Short-Term Note accrues interest at a rate of nine percent (9%) per year, with all principal and interest due in full within thirty days from the date of issue. The note was reviewed for a beneficial conversion feature and it was determined that none existed as the fair market price of the stock was in excess of the conversion price on the date of the note. At any time, the Short-Term Note may be converted, in whole or in part at the option of the holder, at a price of $0.075 per share. The Short-Term Note is currently in default. As of September 30, 2014 there is $5,696 of accrued interest. |
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On November 25, 2013, the Company issued a Convertible Promissory Note to Asher Enterprises, Inc. in the amount of $42,500. The note bears interest at a rate of 8% per annum, is unsecured and matures on August 27, 2014. The Note is convertible into common stock in whole or in part 180 days after funding at a variable conversion price equal to a 42% discount to the average of the lowest three trading prices in the 10-day trading price prior to the conversion date. During the nine months ended September 30, 2014, the note and $1,700 of accrued interest was converted into shares of common stock. As a result of the conversion the Company recognized a loss on conversion of $25,321. |
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The Company received its second payment from JMJ towards the loan, of $22,000 on December 9, 2013. The Company recorded a debt discount in the amount of $22,000 (payment plus 10% original discount) in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $37,173 based on the Black Scholes Merton pricing model. As of September 30, 2014, principal of $3,525 and $2,889 of accrued interest were converted to common stock and $16,164 of the debt discount has been amortized to interest expense. In addition, the Company fair valued the derivative at $13,685 resulting in a gain on the change in fair value of the derivative. The note balance of $18,475 is shown net of a debt discount of $3,836 at September 30, 2014 and has accrued interest of $0. Subsequent to September 30th the Company received a conversion notice that they were unable to fulfill due to not having enough available authorized shares to cover the conversion. This resulted in default on the Note. The Company is in the process of increasing its authorized common stock and will honor the conversion notices as soon as it is able. |
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As of December 31, 2013 the Company owed Chiles Valley, LLC, $20,000. This loan was repaid in full during the quarter ended March 31, 2014. |
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On January 8, 2014, the Company issued a Convertible Promissory Note to Asher Enterprises, Inc. in the amount of $32,500. The note bears interest at a rate of 8% per annum, is unsecured and matures on October 10, 2014. The Note is convertible into common stock in whole or in part 180 days after funding at a variable conversion price equal to a 42% discount to the average of the lowest three trading prices in the 10-day trading price prior to the conversion date. During the nine months ended September 30, 2014, the note and $1,300 of accrued interest was converted into shares of common stock. As a result of the conversion the Company recognized a loss on conversion of $42,514. |
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On February 13, 2014, we entered into a $250,000 Convertible Promissory Note (the “Note”) with Black Mountain Equities, Inc. (“BME”). The face amount of the Note includes an original issue discount of $25,000. The initial advance to be made under the Note by BME is $25,000. BME may, after making this initial advance, lend us additional sums under the terms of the Note in such amounts and at such dates as it chooses. There is a one-time interest charge of ten percent (10%) and individual loans mature one year from the effective date of each payment. BME may convert all or part of the Note, at its discretion, into shares of our common stock. The conversion is equal to the lesser of a 40% discount to the lowest trading prices in the twenty-five (25) day trading price prior to the conversion date or at a fixed price if $0.025. For the initial advance the Company recorded a debt discount in the amount of $30,000 (payment plus 10% original discount and one time interest charge) in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $82,251 based on the Black Scholes Merton pricing model. As of September 30, 2014, principal of $3,650 and $2,750 of accrued interest were converted to common stock $18,904 of the debt discount has been amortized to interest expense. In addition, the Company fair valued the derivative at $21,111 resulting in a gain on the change in fair value of the derivative. The note balance of $23,600 is shown net of a debt discount of $11,096 at September 30, 2014 and has accrued interest of $0. Subsequent to September 30th the Company received a conversion notice that they were unable to fulfill due to not having enough available authorized shares to cover the conversion. This resulted in default on the Note. The Company is in the process of increasing its authorized common stock and will honor the conversion notices as soon as it is able. |
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On February 26, 2014, the Company issued a Convertible Promissory Note to GCEF Opportunity Fund, LLC in the amount of $72,500, includes an original issue discount of $7,500. The note bears a onetime 12% interest charge, is unsecured and matures in one year. The Note is convertible into common stock in whole or in part at any time with a conversion price equal to a 50% discount to the average bid price in the ten day trading price prior to the conversion date. The Company recorded a debt discount in the amount of $81,200 in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $179,454 based on the Black Scholes Merton pricing model. As of September 30, 2014; $48,275 of the debt discount has been amortized to interest expense. In addition, the Company fair valued the derivative at $49,626 resulting in a gain on the change in fair value of the derivative. As of September 30, 2014 the note balance is $81,200 with a remaining debt discount of $32,925. In addition to the terms outlined above the Company issued to GCEF 5,000,000 shares of common stock. The stock was valued at $0.052, the closing price on the date of the note for non-cash expense of $260,000 which was recorded as a loss on the issuance of debt. Subsequent to September 30th the Company received a conversion notice that they were unable to fulfill due to not having enough available authorized shares to cover the conversion. This resulted in default on the Note. The Company is in the process of increasing its authorized common stock and will honor the conversion notices as soon as it is able. |
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On March 3, 2014, the Company issued a Convertible Promissory Note to Asher Enterprises, Inc. in the amount of $37,500. The note bears interest at a rate of 8% per annum, is unsecured and matures on December 5, 2014. The Note is convertible into common stock in whole or in part 180 days after funding at a variable conversion price equal to a 42% discount to the average of the lowest three trading prices in the 10-day trading price prior to the conversion date. During the nine months ended September 30, 2014, the note and $1,500 of accrued interest was converted into shares of common stock. As a result of the conversion the Company recognized a loss on conversion of $34,447. |
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On March 14, 2014, the Company issued a Convertible Promissory Note to Magna Equities II, LLC (formerly Hanover Holdings I, LLC) in the amount of $38,000. The note bears interest at a rate of 12% per annum, is unsecured and matures in eight months. The Note is convertible into common stock in whole or in part at any time with a conversion price equal to the lesser of a 45% discount to the lowest trading prices in the five day trading price prior to the conversion date or at a fixed price if $0.04. The Company recorded a debt discount in the amount of $38,000 in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $41,636 based on the Black Scholes Merton pricing model. On September 16, 2014 $6,600 of principal was converted to common stock. As of September 30, 2014; $31,276 of the debt discount has been amortized to interest expense. In addition, the Company fair valued the derivative at $18,181 resulting in a gain on the change in fair value of the derivative. The note balance is $31,400 with a remaining debt discount of $6,724 at September 30, 2014 and has accrued interest of $2,468. Subsequent to September 30th the Company received a conversion notice that they were unable to fulfill due to not having enough available authorized shares to cover the conversion. This resulted in default on the Note. The Company is in the process of increasing its authorized common stock and will honor the conversion notices as soon as it is able. |
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On March 20, 2014, the Company issued a Convertible Promissory Note to KBM Worldwide, Inc. in the amount of $42,500. The funds were not received on the note until April. The note bears interest at a rate of 8% per annum, is unsecured and matures on December 31, 2014. The Note is convertible into common stock in whole or in part 180 days after funding at a variable conversion price equal to a 42% discount to the average of the lowest three trading prices in the 10-day trading price prior to the conversion date. The Company recorded a debt discount in the amount of $32,624 in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $32,624 based on the Black Scholes Merton pricing model. The note is shown net of a debt discount of $32,624 at September 30, 2014 and has accrued interest of $1,565. Subsequent to September 30th the Company received a conversion notice that they were unable to fulfill due to not having enough available authorized shares to cover the conversion. This resulted in default on the Note. The Company is in the process of increasing its authorized common stock and will honor the conversion notices as soon as it is able. |
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On April 17, 2014, the Company received another payment on the original JMJ Financial convertible promissory note dated September 23, 2013 of $44,000 including a $4,000 original issue discount. The Company recorded a debt discount in the amount of $44,000 (payment plus 10% original discount) in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $61,319 based on the Black Scholes Merton pricing model. As of September 30, 2014; $20,131 of the debt discount has been amortized to interest expense. In addition, the Company fair valued the derivative at $43,200 resulting in a gain on the change in fair value of the derivative. The note is shown net of a debt discount of $23,869 at September 30, 2014 and has accrued interest and fees of $9,777. |
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On June 5, 2014, the Company issued a Convertible Promissory Note to KBM Worldwide, Inc. in the amount of $32,500. The note bears interest at a rate of 8% per annum, is unsecured and matures on December 31, 2014. The Note is convertible into common stock in whole or in part 180 days after funding at a variable conversion price equal to a 42% discount to the average of the lowest three trading prices in the 10-day trading price prior to the conversion date. As of September 30, 2014 there is $805 of accrued interest on this note. |
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On June 19, 2014, we borrowed the sum of $15,000 from Steven J. Smith under the terms of a Promissory Note. Pursuant to these terms the loan was non-interest bearing but did include a fee of 1,000,000 shares of common stock. The note was due and payable within seven (7) days of funding with no stated interest. The shares were valued at the closing price on the date of the loan of $0.0051 for a total non-cash expense of $5,100. The repayment terms of this note are currently be renegotiated. |
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On June 23, 2014, the Company received another payment on the original JMJ Financial convertible promissory note dated September 23, 2013 of $27,500 including a $2,500 original issue discount. The Company recorded a debt discount in the amount of $27,500 (payment plus 10% original discount) in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $34,654 based on the Black Scholes Merton pricing model. As of September 30, 2014; $7,535 of the debt discount has been amortized to interest expense. In addition, the Company fair valued the derivative at $26,796 resulting in a gain on the change in fair value of the derivative. The note is shown net of a debt discount of $19,965 at September 30, 2014 and has accrued interest of $3,611. |
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On June 25, 2014, the Company issued a Convertible Promissory Note to KBM Worldwide, Inc. in the amount of $32,500. The note bears interest at a rate of 8% per annum, is unsecured and matures on December 31, 2014. The Note is convertible into common stock in whole or in part 180 days after funding at a variable conversion price equal to a 42% discount to the average of the lowest three trading prices in the 10-day trading price prior to the conversion date. As of September 30, 2014 there is $698 of accrued interest on this note. |
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The maturities of these notes and the related party notes below, net of discounts for the next five years are: |
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Twelve months ended September 30, | | | | | | | | | | | | |
| 2015 | | | $ | 1,230,911 | | | | | | | | | | | |
| 2016 | | | | 30,000 | | | | | | | | | | | |
| 2017 | | | | — | | | | | | | | | | | |
| 2018 | | | | 51,440 | | | | | | | | | | | |
| 2019 | | | | — | | | | | | | | | | | |
| Total Future Maturities | | | $ | 1,312,351 | | | | | | | | | | | |
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A summary of the status of the Company’s debt discounts including original issue discounts, and derivative liabilities, and changes during the periods is presented below: |
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Debt Discount | | 31-Dec-13 | | Additions | | Amortization | | 30-Sep-14 |
Finiks Capital – February 1, 2013 | | $ | 37,682 | | | $ | — | | | $ | (37,682 | ) | | $ | — | |
Neal – June 3, 2013 | | | 3,975 | | | | — | | | | (3,975 | ) | | | — | |
JMJ – October 2, 2013 | | | 41,439 | | | | — | | | | (41,439 | ) | | | — | |
JMJ – December 9, 2013 | | | 18,795 | | | | — | | | | (14,959 | ) | | | 3,836 | |
Black Mountain Equities, Inc. – February 13, 2014 | | | — | | | | 30,000 | | | | (18,904 | ) | | | 11,096 | |
GCEF Opportunity Fund, LLC – February 26, 2014 | | | — | | | | 81,200 | | | | (48,275 | ) | | | 32,925 | |
Hanover Holdings, LLC – March 14, 2014 | | | — | | | | 38,000 | | | | (31,276 | ) | | | 6,724 | |
KBM – March 20, 2014 | | | — | | | | 32,624 | | | | — | | | | 32,624 | |
JMJ – April 17, 2014 | | | — | | | | 44,000 | | | | (20,131 | ) | | | 23,869 | |
JMJ – June 23, 2014 | | | — | | | | 27,500 | | | | (7,535 | ) | | | 19,965 | |
| | $ | 101,891 | | | $ | 253,324 | | | $ | (224,176 | ) | | $ | 131,039 | |
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Derivative Liabilities | | 31-Dec-13 | | Initial valuation | | Revaluation on 9/30/14 | | (Gain) loss of fair value of derivative |
JMJ – October 2, 2013 | | $ | 88,314 | | | $ | — | | | $ | — | | | $ | (88,314 | ) |
JMJ – December 9, 2013 | | | 33,274 | | | | — | | | | 13,685 | | | | (19,589 | ) |
Black Mountain Equities, Inc. – February 13, 2014 | | | — | | | | 82,251 | | | | 21,111 | | | | (61,140 | ) |
GCEF Opportunity Fund, LLC – February 26, 2014 | | | — | | | | 179,454 | | | | 49,626 | | | | (129,828 | ) |
Hanover Holdings, LLC – March 14, 2014 | | | — | | | | 41,636 | | | | 18,181 | | | | (23,455 | ) |
KBM – March 20, 2014 | | | — | | | | 32,624 | | | | 32,624 | | | | — | |
JMJ – April 17, 2014 | | | — | | | | 61,319 | | | | 43,200 | | | | (18,119 | ) |
JMJ – June 23, 2014 | | | — | | | | 34,654 | | | | 26,796 | | | | (7,858 | ) |
| | $ | 121,588 | | | $ | 431,938 | | | $ | 205,223 | | | $ | (348,303 | ) |
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Original Issue Discount | | 31-Dec-13 | | Additions | | Amortization | | 30-Sep-14 |
JMJ – October 2, 2013 | | $ | 3,767 | | | $ | — | | | $ | (3,767 | ) | | $ | — | |
JMJ – December 9, 2013 | | | 1,879 | | | | — | | | | (1,496 | ) | | | 383 | |
Black Mountain Equities, Inc. – February 13, 2014 | | | — | | | | 5,000 | | | | (2,644 | ) | | | 2,356 | |
GCEF Opportunity Fund, LLC – February 26, 2014 | | | — | | | | 16,200 | | | | (9,586 | ) | | | 6,614 | |
Darren Magot – January 27, 2014 | | | — | | | | 2,500 | | | | (2,500 | ) | | | — | |
JMJ – April 17, 2014 | | | — | | | | 4,000 | | | | (1,830 | ) | | | 2,170 | |
JMJ – June 23, 2014 | | | — | | | | 2,500 | | | | (685 | ) | | | 1,815 | |
| | $ | 5,646 | | | $ | 30,200 | | | $ | (22,508 | ) | | $ | 13,338 | |