Note 7 - Notes Payable | 9 Months Ended |
Sep. 30, 2013 |
Notes | ' |
Note 7 - Notes Payable | ' |
Note 7 – Notes Payable |
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A summary of notes payable as of September 30, 2013 and December 31, 2012 is as follows: |
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| Interest | Maturity | September 30, | December 31, | |
Creditor | Rate | Date | 2013 | 2012 | |
Xing Investment Corp. (1) | 10.00% | 5/12/08 | $171,000 | $171,000 | | |
Salt Lake City Corporation (3) | 3.25% | 8/1/15 | 38,564 | 53,690 | | |
William and Nina Wolfson (4) | 11.00% | 2/27/16 | 33,831 | 42,279 | | |
Cyprus Credit Union (5) | 2.69% | 12/5/14 | 12,663 | 20,410 | | |
Salt Lake City Corporation (6) | 5.00% | 9/1/17 | 40,972 | 47,785 | | |
Express Travel Related Services (7) | 6.00% | 2/19/14 | 9,827 | - | | |
Total | | | 306,857 | 335,164 | | |
Less: Current portion | | | -234,041 | -222,179 | | |
Long-term portion | | | $72,816 | $112,985 | | |
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A summary of convertible notes payable as of September 30, 2013 and December 31, 2012 is as follows: |
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| | Interest | Maturity | September 30, | December 31, | |
Creditor | Rate | Date | 2013 | 2012 | |
Asher Enterprises, Inc. (2)* | 8.00% | 3/16/12 | - | $3,000 | |
Asher Enterprises, Inc. (2)* | 8.00% | 4/25/12 | 5,700 | 25,000 | |
Asher Enterprises, Inc. (2)* | 8.00% | 9/12/12 | 22,500 | 22,500 | |
Asher Enterprises, Inc. (2)* | 8.00% | 11/6/12 | 42,500 | 42,500 | |
Southridge Partners II, LP (8) | 0% | 2/28/13 | 75,000 | 75,000 | |
Eastshore Enterprises, Inc. (9) | 8.00% | 8/17/14 | 35,000 | 35,000 | |
Debt discount - convertible notes, net | | | -15,390 | -38,105 | |
| Total, net | | | 165,310 | 164,895 | |
| Less: Current portion | | | -165,310 | -158,374 | |
| Long-term portion | | | - | $6,521 | |
* | For all Asher notes payable, the interest rate increased from 8% to 22% on May 19, 2013 and then they were paid in full on October 11, 2013 | | | |
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A summary of the related party note payable as of September 30, 2013 and December 31, 2012 is as follows: |
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| Interest | Maturity | September 30, | December 31, | | |
Creditor | Rate | Date | 2013 | 2012 | | |
Richard D. Surber (related party) (10) | 20.00% | 11/6/17 | $25,000 | $25,000 | | |
Nexia Holdings, Inc. (related party (11) | 10.00% | 4/15/15 | 30,210 | - | | |
Total, net | | | 55,210 | 25,000 | | |
Less: Current portion | | | -24,987 | -3,534 | | |
Long-term portion | | | $30,223 | $21,466 | | |
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(1) On May 12, 2006, Green borrowed $171,000 from Xing Investment Corp with a convertible promissory note. The note is interest bearing at 10% per annum with no interest due until the note maturity date of May 12, 2008. Both principal and accrued interest, at the option of the note holder, may be converted into Common stock of Green at $0.01 per share. The note was not liquidated at the maturity date and is currently in default. No payments have been made on the obligation because Green is unable to locate Xing Investment Corp. or its representatives. As of September 30, 2013 and December 31, 2012, accrued interest reported in accounts payable and accrued expenses was $34,200. |
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(2) During the period from April 5, 2011 through February 2, 2012, Green has issued a series of convertible promissory notes with an aggregate face amount of $197,500 to Asher Enterprises, Inc. that mature from January 9, 2012 to November 6, 2012. The transactions have been handled as a private sale exempt from registration under Rule 506 of the Securities Act of 1933. The notes mature in approximately 270 days from issuance and bear interest at a rate of 8% per annum. At the holder’s option, the notes can be converted into Green’s common shares at the conversion rates of 56% to 61% discount to the market price of the lowest six trading prices of Green’s common shares during the ten-day period ending one trading day prior to the date of the conversion. As amended, the interest rate increases to 22% after May 19, 2013 at the option of Asher. As of September 30, 2013, $120,600 of principal, interest, and default amount on the notes had been converted into 6,773,874 shares of common stock. As of September 30, 2013, the notes are considered in default. The notes call for a default amount and Green has recorded a loss contingency. As of September 30, 2013 the loss contingency amounted to $45,000. As of September 30, 2013, the total of principal, interest, and default amount owed to Asher was $135,526. On July 2, 2013, Asher and Green retroactively amended the notes to provide that the 50% default fee may not be converted to equity of Green until May 20, 2013. |
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The exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. As a result, the Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability (see Note 5 - Derivative Liability). |
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(3) On June 18, 2010, Landis Salons, Inc. received a loan in the amount of $100,000 from the Division of Economic Development of Salt Lake City Corporation. The loan includes a 1% origination fee and bears interest at the rate of 3.25% per annum. Principal and interest payments are made monthly over a five year term commencing June 2010. The loan is secured by a $25,000 certificate deposit held in the name of Landis Salons, Inc. and is personally guaranteed by Richard Surber, CEO of Green. The certificate of deposit is considered restricted because it is collateral for the loan. As of September 30, 2013, the note balance is $38,564. Principal payments made on the note during the nine months ended September 30, 2013 amounted to $15,126. |
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(4) On February 27, 2012, Green and Landis Experience Center, LLC issued an 11% note payable in the principal face amount of $50,000 to William and Nina Wolfson in exchange for a cash payment of the same amount. The note has a due date of February 27, 2016. The note provides for monthly payments in the amount of $1,292 of principal and interest. In addition to the Company’s guarantee to the note, Richard Surber has personally guaranteed the note. As of September 30, 2013, the note balance is $33,831. Principal payments made on the note during the nine months ended September 30, 2013 amounted to $8,448. |
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(5) On September 5, 2012, Landis Salons, Inc. received a loan in the amount of $22,959 from Cyprus Credit Union for the refinancing of a Company truck. The loan replaced the loan for the truck to Chase bank (see loan #5 above). The loan has a maturity date of December 5, 2014 and bears interest at the rate of 2.69% per annum. Principal and interest payments of $899 are made monthly over 27 months commencing October 5, 2012. The loan is secured by a lien on the vehicle in addition to the corporate guarantee for the loan. Richard Surber, CEO of the Company has personally guaranteed the loan. As of September 30, 2013, the note balance is $12,663. Principal payments made on the note during the nine months ended September 30, 2013 amounted to $7,747. |
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(6) On August 20, 2012, the Board of Directors of Landis Experience Center, LLC approved that it enter into a loan agreement with Salt Lake City Corporation in the amount of $50,000. Pursuant to the board approval, a note in the amount of $50,000 was issued on August 21, 2012. The note bears interest at 5% per annum and requires 60 monthly installments of $944 commencing October 1, 2012. In addition to corporate guarantees and the personal guarantee by Richard Surber, President, CEO, and Director of LEC, a certificate of deposit is being held as collateral for the loan. As of September 30, 2013, the note balance was $40,972. Principal payments made on the note during the nine months ended September 30, 2013 amounted to $6,813. |
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(7) On February 19, 2013, the Board of Directors of Landis Salons, Inc. approved that it enter into a loan agreement with Express Travel Related Services Company, Inc. in the amount of $36,000. The note is a merchant account financing arrangement wherein Landis repays the loan at the rate of 9% of the American Express credit card sales receipts that are due each month. The loan requires a prepaid interest charge that is 6% ($2,160) of the $36,000 loan amount. These financing costs are being amortized to interest expense during the one year term of the loan. The total amount due at the inception date is $38,160. As of September 30, 2013, the loan balance was $9,827. Payments made during the nine months ended September 30, 2013 amounted to $28,333. |
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(8) On August 15, 2012, Green issued a $75,000 promissory convertible promissory note to Southridge Partners II, LP as a condition of Southridge entering into an Equity Purchase Agreement with the Company (see Note 10). The transaction has been handled as a private sale exempt from registration under Rule 506 of the Securities Act of 1933. The note bears no interest and matures on February 28, 2013 at which time a balloon payment of the entire principal amount is due. The holder of the note is entitled any time after the maturity date to convert the note into common stock of the Company at 70% of the average of the two lowest closing bid prices for the five day prior to the date of the conversion. The Company determined the note contained a beneficial conversion feature and therefore recorded a $32,143 debt discount. As of September 30, 2013, the balance of the note was $75,000 and the balance of the debt discount was $0. No payments have been made on the note as of September 30, 2013 and the note is in default. |
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(9) On August 17, 2012, Green issued a $35,000 convertible promissory note to Eastshore Enterprises, Inc. Green converted $15,000 of accounts payable to Eastshore to the note and also received $20,000 in cash for the loan. The transaction has been handled as a private sale exempt from registration under Rule 506 of the Securities Act of 1933. The note matures on August 17, 2014 and bear interest at a rate of 8% per annum. After one year from issuance, the holder can be convertible into Green’s common shares at the conversion rate of 54% of the market price of the lowest price of Green’s common shares during the ten-day period ending one trading day prior to the date of the conversion. As of September 30, 2013, none of the note had been converted into shares of common stock. As of September 30, 2013, the balance of the note was $35,000 and the balance of the debt discount was $15,390. No payments have been made on the note as of September 30, 2013. |
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The exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. As a result, the Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability (see Note 5 - Derivative Liability). |
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(10) On November 5, 2012, Landis Salons II, Inc. entered into a promissory note with Richard Surber, President, CEO and Director of Green, for the sum of $25,000 for funds loaned. The note bears interest at the rate of 20% per annum, with a term of five years and monthly payments of $662 and a demand feature by which the note can be called upon the demand of Mr. Surber. Landis Salons II as security for the note pledged all of its assets, stock in trade, inventory, furniture, fixtures, supplies, any intangible property and all tangible personal property of Landis Salons II and all and any other assets to which Landis Salons II holds title or claims ownership or that is hereafter acquired by Landis Salons II, subject only to purchase money liens held by sellers or grantors. As of September 30, 2013, the balance of the note was $25,000. For the nine month period ended September 30, 2013, $2,649 was paid toward accrued interest. |
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(11) On April 15, 2013, Green entered into a promissory note with its parent company, Nexia Holdings, Inc., in the amount of $37,400 for cash advanced to Green. Interest on the note is 10% per annum, monthly payments are $1,726 and the note is due 24 months from signing. As of September 30, 2013, the principal balance on the note was $30,210 and principal payments on the note amounted to $7,190. |