Convertible Notes Payable | 3 Months Ended |
Oct. 31, 2014 |
Convertible Notes Payable [Abstract] | |
CONVERTIBLE NOTES PAYABLE | NOTE 4 - CONVERTIBLE NOTES PAYABLE |
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Convertible notes payable consists of the following: |
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| | October 31, | | | July 31, | |
Description | | 2014 | | | 2014 | |
On November 15, 2012, the Company entered into a Senior Secured Promissory Note (the “Note”) with an unaffiliated party (the “Third Party”) under which the Company received a one-year loan with a principal balance of $100,000. The loan bears interest at 20% per annum with interest payments due quarterly. In addition, the Company issued 2,500,000 shares of restricted common stock to the lender and Mr. Holley and McBride pledged their 56,250,000 shares of the Company’s common stock as collateral and transferred 1,000,000 shares of free trading shares to the lender. If the Company goes into default of the provisions of the loan, it becomes convertible into the Company’s common stock at a price of $0.001 per share (100 million shares). If an event of default occurs, the lender will have the ability of becoming the controlling shareholder of the Company. The Company recorded deferred financing costs of $560,000 in connection with these transfers. The deferred financing costs are being amortized to interest expense over the term of the loan or twelve months. The company has recognized the remaining amortization on the deferred financing costs in the amount of $148,111 for the year ended July 31, 2014, which is reflected in the statement of operations. On June 20, 2013, the Company and the Third party entered into an Amended and Restated Senior Secured Convertible Promissory Note (the “Amended Note”) which amended certain terms of the Note. Pursuant to the Amended Note, the Company’s repayment of the principal balance of the Amended Note is secured by all the assets of the Company. In addition, the provisions of the Note whereby Mssrs. Holley and McBride pledged 56,250,000 of their shares of common stock of the Company were removed. As of October 31, 2014, the lender has converted total principal and interest of $16,000 to common stock. | | $ | 100,000 | | | $ | 100,000 | |
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On February 27, 2013, the Company entered into a $335,000 convertible loan agreement. The agreement provides for a $35,000 original issue discount. The lender, at its discretion, may provide funds up to $300,000 to the Company. It provided $60,000 at the closing of the agreement on April 30, 2013. All loans under the agreement are payable in full one year after the funds are issued together with a prorated portion of the original issue discount. All amounts outstanding under the agreement become convertible, at the lender’s discretion, into shares of the Company’s common stock starting 180 days from the execution date of the agreement. The conversion rate per share is the lower of (i) $0.044 or (ii) 60% of the lowest trade price during the 25 trading days prior to a conversion notice. The lender has agreed that it will not execute any short trades and, at no time, will hold more than 4.9% of the Company’s outstanding common stock. | | | - | | | | 77,726 | |
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If the Company repays all amounts outstanding under the agreement within 90 days of the execution date, there will be no interest amounts due. If it does not pay all amounts due within 90 days of the execution date, it cannot make any other prepayments of the amounts outstanding without the consent of the lender. In addition, there will be a one-time interest charge of 12% of the amounts outstanding. The Company must also register all shares that are issuable under the agreement in any Registration Statement that it files with the SEC for any purpose. As of October 31, 2014, the lender has converted total principal and interest of $80,454 to common stock. |
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On April 30, 2013, the Company sold an 18% Senior Convertible Debenture in the principal amount of $60,000 (the “Debenture”). The Debenture matures on April 30, 2014 and has an interest rate of 18% per annum payable monthly and on each conversion date. The conversion price of the Debenture is 65% of the average of the lowest three closing bid prices of the Common Stock for the twenty trading days immediately prior to the conversion date. | | | 37,554 | | | | 46,254 | |
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Upon an Event of Default (as defined in the Debenture), the outstanding principal amount of the Debenture plus accrued but unpaid interest, liquidated damages and other amounts owing on the Debenture through the date of the acceleration shall become at the Debenture holder’s election immediately due and payable in cash at the Mandatory Default Amount (as defined in the Debenture). Commencing five days after the occurrence of an Event of Default that results in the eventual acceleration of the Debenture, the interest rate on the Debenture shall accrue at an interest rate equal to the lesser of 22% per annum or the maximum rate permitted under applicable law. |
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In connection with the sale of the Debenture, on April 30, 2013 (the “Initial Exercise Date”) the Company issued the purchaser of the Debenture a warrant to purchase 3,726,708 shares of the Company’s common stock at an exercise price of $.03 per share (subject to adjustment as provided in the debenture). The warrant is exercisable on a cashless basis (as provided in the warrant) and as a result there is no assurance that any part of the warrant will be exercised for cash. The warrant terminates three years from the Initial Exercise Date and on such date the warrant shall be automatically exercised via cashless exercise. The fair market value of the warrant was $37,267 on the date of issuance. As of October 31, 2014 the warrant has been fully exercised for a total amount of $3,727 in common stock, the lender also converted total principal and interest of $8,700 into common stock. |
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On October 10, 2013, Dethrone Royalty Holdings, Inc. (the “Company”), entered into a securities purchase agreement (the “SPA”) with an investor (“Investor”), pursuant to which the Investor purchased a master promissory note (the “Master Note”) with a principal balance of $48,000 for a purchase price of $40,000 at an original issuance discount of $4,000. The Company also agreed to pay $4,000 worth of legal, accounting and due diligence costs to the Investor. | | | 112,261 | | | | 128,461 | |
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Pursuant to the Master Note, the Investor has the right, solely in the Investor’s discretion, to subsequently purchase up to eight (8) additional promissory notes (each, an “Additional Note”, the Master Note and each Additional Note collectively, the “Notes”), at any time from the date of issuance of the Master Note until October 10, 2014. Each Additional Note shall have a principal balance of $22,000 and shall have a purchase price of $20,000, at an original issue discount of $2,000. |
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Pursuant to the Master Note, if the Company repays the entire balance of each Note prior to the Prepayment Opportunity Date (as defined in the Master Note), the Company shall pay an interest rate equal to 0% per annum. If the Company does not repay the entire balance of each Note prior to the Prepayment Opportunity Date (as defined in the Master Note) each Note shall have a one-time interest charge equal to 12%, applied to the outstanding balance of each note. |
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Each Note is convertible, at any time after the date six months from the Purchase Price Date (as defined in the Master Note), into shares of the Company’s common stock at an exercise price equal to (i) the outstanding balance divided by (ii) 60% of the lowest intra-day trade price in the twenty-five (25) trading days immediately preceding the conversion, subject to certain adjustment as further described in the Master Note (the “Conversion Price”). |
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In connection with the SPA and the issuance of the Master Note, the Company issued to the Investor warrants to purchase shares of the Company’s common stock at an exercise price equal to the Conversion Price. The warrant has a term of five years. The warrant provides for both cash and cashless exercise. The fair value of the warrant on the date of issuance was $295,273. As of October 31, 2014, the Company has incurred conversion penalties of $155,567, the lender has converted total principal and interest of $19,759 into common stock. |
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On January 8, 2014, the Company sold an Original Issue Discount Convertible Promissory Note in the principal amount of $75,000, dated January 8, 2014 (the “Note”) for cash consideration of $50,000. The Note matures on July 8, 2014 (“Maturity Date”) and all overdue principal will entail a late fee at the rate of 22% per annum. The Company may prepay the Note for $100,000 at any time prior to the Maturity Date. | | | 48,806 | | | | 72,196 | |
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The Note may be converted into common stock of the Company at any time after the Maturity Date at a fixed price of $0.0001 per share. However, if the stock price of the Company loses the bid at any time before the Maturity Date, the conversion price shall be $0.00001 per share. The Note shall not be converted to the extent that such conversion would result in beneficial ownership by the holder and its affiliates to own more than 4.99% of the issued and outstanding shares of the Company’s common stock. Such limitations on conversion may be waived by the Note holder upon with not less than 61 days’ prior notice to the Company. As of October 31, 2014 the investor has converted total principal and interest into $23,390 into common stock. |
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On February 11, 2014, the Company sold an Original Issue Discount Convertible Promissory Note in the principal amount of $75,000, dated February 11, 2014 (the “Note”) for cash consideration of $50,000. The Note matures on August 11, 2014 (“Maturity Date”) and all overdue principal will entail a late fee at the rate of 22% per annum. The Company may prepay the Note for $75,000 at any time prior to May 11, 2014. | | | | | | | | |
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The Note may be converted into common stock of the Company at any time after the Maturity Date at a fixed price of $0.0001 per share. However, if the stock price of the Company loses the bid, loses DTC eligibility, or gets “chilled for deposit” at any time before the Maturity Date, the conversion price shall be $0.00001 per share. The Note shall not be converted to the extent that such conversion would result in beneficial ownership by the holder and its affiliates to own more than 4.99% of the issued and outstanding shares of the Company’s common stock. Such limitations on conversion may be waived by the Note holder upon with not less than 61 days’ prior notice to the Company. | | | 75,000 | | | | 75,000 | |
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On February 25, 2014, the Company sold a 10% Convertible Redeemable Note in the principal amount of $22,000 (the “Note”) pursuant to a Securities Purchase Agreement. The Note matures on February 28, 2015 and has an interest rate of 10% per annum. | | | | | | | | |
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The Note may be converted into common stock of the Company at any time beginning on the 180th day of the date of the Note at a price equal to 50% of the lowest closing bid price of the common stock as reported on OTCQB, for the fifteen prior trading days. In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 40% instead of 50% while that “Chill” is in effect. As of October 31, 2014 the investor has converted $22,000 in principal into common stock. | | | - | | | | 22,000 | |
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On March 25, 2014, the Company sold a note with a principal balance of $75,000 for a purchase price of $50,000 at an original issuance discount of $25,000 (the “March 2014 Note”). The March 2014 Note matures on September 25, 2014. | | | 75,000 | | | | 75,000 | |
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On March 31, 2014, the Company sold a note with a principal balance of $42,000 (the “Note”) for a purchase price of $30,000. The Note is due on September 30, 2014. Interest accrues at the rate of 15% per annum, compounding daily. At any time from the date hereof until no payment and/or repayment of funds due to the holder of the March 2014 Note, all principal, accrued but unpaid interest and all other payments due under the March 2014 Note shall be convertible into shares of common stock of the Company, at a conversion price of $.0001 at the option of the Holder, in whole at any time and from time to time. As of October 31, 2014, the Company is in default on the note and incurred total penalties of $42,000; the lender has converted $14,100 into common stock. | | | 53,046 | | | | 67,146 | |
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On April 1, 2014, the Company sold a note (the “Note”) with a principal balance of $21,000 for a purchase price of $15,000. The Note is due on October 1, 2014. Interest accrues at the rate of 15% per annum, compounding daily. At any time from the date hereof until no payment and/or repayment of funds due to the holder of the April 2014 Note, all principal, accrued but unpaid interest and all other payments due under the April 2014 Note shall be convertible into shares of common stock of the Company, at a conversion price of $.0001 at the option of the Holder, in whole at any time and from time to time. As of October 31, 2014 the note holder has converted total principal and interest into $4,150 into common stock. | | | 16,850 | | | | 21,000 | |
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On June 3, 2014, the Company sold a note with a principal purchase price of $10,000 (the “Note”). The Note is due on June 2, 2015. Interest accrues at the rate of 8% per annum, compounding daily. At any time from the date hereof until no payment and/or repayment of funds due to the holder of the June 2015 Note, all principal, accrued but unpaid interest and all other payments due under the June 2015 Note shall be convertible into shares of common stock of the Company, at a conversion price of $.0001 at the option of the Holder, in whole at any time and from time to time. | | | 10,000 | | | | 10,000 | |
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On June 4, 2014, the Company sold a note with a principal purchase price of $60,000 (the “Note”). The Note is due on June 2, 2015. Interest accrues at the rate of 8% per annum, compounding daily. At any time from the date hereof until no payment and/or repayment of funds due to the holder of the June 2015 Note, all principal, accrued but unpaid interest and all other payments due under the June 2015 Note shall be convertible into shares of common stock of the Company, at a conversion price of $.0001 at the option of the Holder, in whole at any time and from time to time. | | | 60,000 | | | | 60,000 | |
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On June 6, 2014, the Company sold a note with a principal purchase price of $60,000 (the “Note”). The Note is due on June 5, 2015. Interest accrues at the rate of 8% per annum, compounding daily. The Note is convertible into shares of the Company’s common stock at an exercise price equal to (i) the outstanding balance divided by (ii) 60% of the lowest intra-day trade price in the five (5) trading days immediately preceding the conversion, subject to certain adjustment as further described in the original Note (the “Conversion Price”). | | | 60,000 | | | | 60,000 | |
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On June 4, 2014, a new lender assumed a $60,000 portion of existing debt. Pursuant to the original note agreement, if the Company does not repay the entire balance of the maturity date, June 15, 2014, the Note shall accrue interest at 22% per annum. The Note is convertible into shares of the Company’s common stock at an exercise price equal to (i) the outstanding balance divided by (ii) 60% of the lowest intra-day trade price in the twenty-five (25) trading days immediately preceding the conversion, subject to certain adjustment as further described in the original Note (the “Conversion Price”). As of October 31, 2014, the Company is in default on the Note and incurred penalties of $74,000, and the lender converted total principal and interest of $21,661 into common stock. | | | 229,057 | | | | 176,718 | |
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On July 2, 2014, a new lender assumed a $70,000 portion of existing debt. Pursuant to the original note agreement, if the Company does not repay the entire balance of the maturity date, July 2, 2015, the Note shall accrue interest at 22% per annum. | | | | | | | | |
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The Note is convertible into shares of the Company’s common stock at an exercise price equal to (i) the outstanding balance divided by (ii) 60% of the lowest intra-day trade price in the twenty-five (25) trading days immediately preceding the conversion, subject to certain adjustment as further described in the original Note (the “Conversion Price”). As of October 31, 2014, the lender converted total principal and interest of $52,573 into common stock. | | | 12,000 | | | | 57,000 | |
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On August 27, 2014, the Company sold a 12% Convertible Redeemable Note in the principal amount of $160,000 (the “Note”) pursuant to a Securities Purchase Agreement. The Note matures on March 27, 2015. | | | | | | | | |
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The Note may be converted into common stock of the Company at any time beginning on the 1st day of the date of the Note at a price equal to the lesser of (i) $0.01 or (ii) 60% of the lowest intraday bid price of the common stock as reported on OTCQB, for the five prior trading days. As of October 31, 2014 the investor has converted $6,000 of principal and interest into common stock. | | | 154,000 | | | | - | |
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On October 2, 2014, the Company sold a 12% Convertible Redeemable Note in the principal amount of $58,000 (the “Note”) pursuant to a Securities Purchase Agreement. The Note matures on May 2, 2015. | | | | | | | | |
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The Note may be converted into common stock of the Company at any time beginning on the 1st day of the date of the Note at a price equal to 40% of the lowest intraday bid price of the common stock as reported on OTCQB, for the prior thirty trading days. As of October 31, 2014 the investor has converted $31,378 of principal and interest into common stock. | | | 26,622 | | | | - | |
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On October 17, 2014, the Company sold a 1% Convertible Redeemable Note in the principal amount of $500,000 (the “Note”) pursuant to a Securities Purchase Agreement. The Note matures on April 17, 2015. | | | | | | |
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The Note may be converted into common stock of the Company at any time beginning on the 1st day of the date of the Note at a price equal to 56% of VWAP as reported on OTCQB, for the five prior trading days. As of October 31, 2014 the investor has converted no principal or interest into common stock. | | | 500,000 | | | | - | |
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| | | 1,570,196 | | | | 1,048,501 | |
Original issue discount | | | 96,500 | | | | 96,500 | |
Beneficial conversion feature | | | 305,639 | | | | 305,639 | |
Less: Amortization of discounts | | | (412,641 | ) | | | (347,023 | ) |
Total convertible notes payable | | $ | 1,559,694 | | | $ | 993,385 | |
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