Short-Term Convertible Debt and Derivative Liability | 12 Months Ended |
Dec. 31, 2014 |
Short-Term Convertible Debt and Derivative Liability [Abstract] | |
SHORT-TERM CONVERTIBLE DEBT AND DERIVATIVE LIABILITY | NOTE 10 – SHORT-TERM CONVERTIBLE DEBT AND DERIVATIVE LIABILITY |
|
|
|
From time-to-time, the Company enters into convertible note agreements whereby the conversion feature is required to be bifurcated out as a derivative liability. Upon conversion of all or a portion of the convertible note, the derivative liability associated with the principal and interest converted is valued immediately before conversion using the Black-Scholes model. The change in fair value of the derivative liability associated with the principal and interest converted was recorded as a gain/loss on fair value of derivative liability in the accompanying statement of operations, with the remaining value of that portion of the derivative liability written off with a corresponding credit to additional paid-in capital. |
|
|
|
Redwood Fund II |
|
|
|
On June 18, 2014, the Company and Redwood Fund II (“Redwood”) entered into a settlement agreement concerning the complete settlement and disposition of all claims by Redwood which include a convertible note issued by the Company to Redwood on April 29, 2013 and due on January 29, 2014. In the year ended December 31, 2014, the Company executed the settlement agreement by issuing Redwood 474,444,444 share of common stock as full consideration for payment of said convertible note. |
|
|
|
WHC Capital, LLC (“WHC”) |
|
|
|
On May 12, 2014, the Company and WHC Capital, LLC (“WHC”) entered into a settlement agreement concerning the complete settlement and disposition of all claims by WHC which include convertible notes issued by the Company to WHC on (i) June 27, 2013 for $100,000, (ii) June 27, 2013 for $50,000, (iii) August 8, 2013 for $100,000, (iv) September 8, 2013 for $100,000, (v) October 22, 2013 for $50,000, (vi) November 30, 2013 for $50,000, and (vii) December 27, 2013 for $50,000. Pursuant to the settlement agreement, the Company will pay WHC $150,000 cash as well as issue a total of 280,000,000 shares of common stock to settle the seven (7) convertible notes in full. As of December 31, 2014, WHC has been paid $150,000 cash and been issued 280,000,000 shares of common stock in full consideration of all outstanding convertible notes payable, leaving a balance owed to WHC of $0. |
|
|
|
LG Capital Funding, LLC |
|
|
|
On February 20, 2014, the Company issued a convertible note of $50,000 to LG Capital Funding, LLC. Under the terms of the note, the Company is to repay any principal balance and interest, at 8% per annum at the maturity date of February 20, 2015. The Company may prepay the convertible promissory note prior to maturity at varying prepayment penalty rates specified under the agreement. The convertible promissory note is convertible into shares of the Company’s common stock any time after the issuance of the convertible note. The conversion price is calculated by multiplying 50% (50% discount) by the lowest trading prices anytime during the five (5) trading days prior to the conversion date. The conversion feature is considered a derivative liability as the conversion feature is variable with no floor as to the number of common shares which could be converted. As of December 31, 2014, LG Capital Funding, LLC has converted $50,000 of principal and $471 of accrued interest into 609,725,000 shares of common stock, leaving a $0 principal balance on this note. |
|
|
|
On April 1, 2014, the Company issued a convertible note of $100,000 to LG Capital Funding, LLC. Under the terms of the note, the Company is to repay any principal balance and interest, at 8% per annum at the maturity date of April 1, 2015. The Company may prepay the convertible promissory note prior to maturity at varying prepayment penalty rates specified under the agreement. The convertible promissory note is convertible into shares of the Company’s common stock any time after the issuance of the convertible note. The conversion price is calculated by multiplying 50% (50% discount) by the lowest trading prices anytime during the five (5) trading days prior to the conversion date. The conversion feature is considered a derivative liability as the conversion feature is variable with no floor as to the number of common shares which could be converted. As of December 31, 2014, LG Capital Funding, LLC has converted $6,625 of principal into 139,963,600 shares of common stock, leaving a balance $93,375 on this note. |
|
|
|
On October 14, 2014, the Company received $95,000 pursuant to a back end convertible note of $100,000 dated April 1, 2014 with LG Capital Funding, LLC. Under the terms of the note, the Company is to repay any principal balance and interest, at 8% per annum at the maturity date of April 1, 2015. The Company may prepay the convertible promissory note prior to maturity at varying prepayment penalty rates specified under the agreement. The convertible promissory note is convertible into shares of the Company’s common stock any time after the issuance of the convertible note. The conversion price is calculated by multiplying 50% (50% discount) by the lowest trading prices anytime during the five (5) trading days prior to the conversion date. The conversion feature is considered a derivative liability as the conversion feature is variable with no floor as to the number of common shares which could be converted. |
|
|
|
Inter-Mountain Capital Corp. |
|
|
|
On April 21, 2014, the Company entered into a collateralized secured convertible promissory note with Inter-Mountain Capital Corp ("Inter-Mountain"), a Delaware corporation, for an 9% convertible promissory note with an aggregate principal amount of $2,207,500, of which the company is to assume $200,000 in original interest discount ("OID") and legal fees and other expenses of Inter-Mountain totaling $10,000, which together with any unpaid accrued interest is due on March 21, 2016. The note is to be issued in tranches with an initial tranche of $557,500, of which $500,000 was received on April 22, 2014, assuming $57,500 in OID. The Company received a second tranche of $110,000, of which the Company received $100,000 on August 8, 2014, assuming $10,000 of OID. The Company received a third tranche of $27,500, of which the Company received $25,000 on November 13, 2014, assuming $2,500 of OID. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at a fixed conversion price of $0.0075. The remaining tranches of $275,000 of funding to the Company under the note will consist of $250,000 in principal and the $25,000 in OID, which have not yet been funded. As of December 31, 2014, Inter-Mountain Capital Corp has converted $59,400 of principal debt into 495,000,000 shares of common stock in the Company. |
|
|
|
Adar Bays, LLC |
|
|
|
On May 27, 2014, the Company issued a convertible note of $75,000 to Adar Bays, LLC. Under the terms of the note, the Company is to repay any principal balance and interest, at 8% per annum at the maturity date of May 27, 2015. The Company may prepay the convertible promissory note prior to maturity at varying prepayment penalty rates specified under the agreement. The convertible promissory note is convertible into shares of the Company’s common stock any time after the issuance of the convertible note. The conversion price is calculated by multiplying 50% (50% discount) by the lowest trading prices anytime during the five (5) trading days prior to the conversion date. The conversion feature is considered a derivative liability as the conversion feature is variable with no floor as to the number of common shares which could be converted. As of December 31, 2014, Adar Bays, LLC has not converted any debt. |
|
|
|
SFH Capital, LLC |
|
|
|
On January 13, 2014, SFH Capital, LLC entered into a debt purchase agreement with Pegasus Capital, Inc. for a $5,000 portion of the promissory note originally in the amount of $242,000 dated February 1, 2009. On the same date, the Company then entered into convertible debenture for that $5,000 portion of debt assigned to SFH Capital, LLC. As of December 31, 2014, SFH Capital, LLC converted the entire $5,000 of principal into 100,000,000 unrestricted common shares of the Company. |
|
|
|
On February 13, 2014, SFH Capital, LLC entered into a debt purchase agreement with Pegasus Capital, Inc. for a $22,500 portion of the promissory note originally in the amount of $242,000 dated February 1, 2009. On the same date, the Company then entered into a convertible debenture for that $22,500 portion of debt assigned to SFH Capital, LLC. As of December 31, 2014, SFH Capital, LLC converted the entire $22,500 of principal into 225,154,110 unrestricted common shares of the Company. |
|
|
|
On February 28, 2014, SFH Capital, LLC entered into a debt purchase agreement with Pegasus Capital, Inc. for a $90,000 portion of the promissory note originally in the amount of $242,000 dated February 1, 2009. On the same date, the Company then entered into convertible debenture for that $90,000 portion of debt assigned to SFH Capital, LLC. As of December 31, 2014, SFH Capital, LLC has converted $5,000 of principal debt into 100,000,000 shares of common stock in the Company. |
|
|
|
On June 27, 2014, the Company executed a convertible promissory note with SFH Capital, LLC in the amount of $50,000 bearing interest of 10% per annum and maturing on June 27, 2015. The $50,000 was wired directly to WHC Capital, LLC whom is another note holder of the Company. The convertible promissory note is convertible into shares of the Company’s common stock any time after the issuance of the convertible note. The conversion price is calculated by multiplying 50% (50% discount) by the lowest trading prices anytime during the ten (10) trading days prior to the conversion date. The conversion feature is considered a derivative liability as the conversion feature is variable with no floor as to the number of common shares which could be converted. As of December 31, 2014, SFH Capital, LLC has not converted any of this debt. |
|
|
|
On August 5, 2014, the Company executed a convertible promissory note with SFH Capital, LLC in the amount of $50,000 bearing interest of 10% per annum and maturing on August 5, 2015. The $50,000 was wired directly to WHC Capital, LLC whom is another note holder of the Company. The convertible promissory note is convertible into shares of the Company’s common stock any time after the issuance of the convertible note. The conversion price is calculated by multiplying 50% (50% discount) by the lowest trading prices anytime during the ten (10) trading days prior to the conversion date. The conversion feature is considered a derivative liability as the conversion feature is variable with no floor as to the number of common shares which could be converted. As of December 31, 2014, SFH Capital, LLC has not converted any of this debt. |
|
|
|
Beaufort Capital Partners, LLC |
|
|
|
On June 30, 2014, the Company executed a convertible note agreement with Beaufort Capital Partners, LLC in the amount of $100,000, interest of 12% per annum, payable by December 30, 2014 and convertible into common shares of the Company at a 38% discount to market based on the (3) three lowest closing prices within (10) ten trading days prior to conversion. As of December 31, 2014, Beaufort Capital Partners, LLC has not converted any of this debt. |
|
|
|
Eastmore Capital, LLC |
|
|
|
On August 13, 2014, the Company executed a convertible note agreement with Eastmore Capital, LLC in the amount of $110,000, interest of 12% per annum, payable by August 12, 2015 and convertible into common shares of the Company at a 40% discount to market based on the lowest closing prices within (10) ten consecutive trading days prior to conversion. As of December 31, 2014, Eastmore Capital, LLC has not converted any of this debt. |
|
|
|
Left Coast Pictures, Inc. |
|
|
|
On July 7, 2014, the Company executed a convertible note agreement with Left Coast Pictures, Inc. in the amount of $25,000, interest of 5% per annum, payable by January 7, 2015 and convertible into common shares of the Company at a 50% discount to market based on the lowest closing prices within (10) ten trading days prior to conversion. As of December 31, 2014, Left Coast Pictures, Inc. has not converted any of this debt. |
|
|
|
Firehole River Capital, LLC |
|
|
|
On October 2, 2014, the Company issued a convertible note and securities purchase agreement to Firehole River Capital, LLC in the amount of $82,500 of which $75,000 was received net of legal fees. The convertible note bears interest of 12%, matures on June 2, 2015, and is convertible into shares of the Company’s stock at a conversion rate of 50% of the lowest trading price during the 10 days prior to conversion. As of December 31, 2014, Firehole River Capital, LLC has not converted any of this debt. |
|
|
|
On October 6, 2014, Firehole River Capital, LLC (the “Assignee”) entered into a purchase and assignment agreement with Gorilla Pictures (the “Assignor”) relating to the purchase of a portion of the Company’s note issued to the Assignor, and the Company issued Assignee a convertible note for the portion of the debt purchased by Assignee in the amount of $75,000. As of December 31, 2014, Firehole River Capital, LLC has converted $42,500 of principal leaving a balance of $32,500 on the note. |
|
|
|
Short-term convertible debt at December 31, 2014 and December 31, 2013, represents the following: |
|
|
|
Convertible Debt Due: | | Original Principal | | | Reduction through conversion to stock as of | | | Reduction through cash payment as of December 31, 2014 | | | Balance at | | | Balance at December 31, 2013 | |
31-Dec-14 | 31-Dec-14 |
Asher Enterprises, Inc. | | $ | 220,500 | | | $ | (120,500 | ) | | | (100,000 | ) | | $ | - | | | $ | 125,000 | |
Magna Group, Inc/Hanover Holdings | | | 272,500 | | | | (272,500 | ) | | | - | | | | - | | | | 45,000 | |
Redwood Management, LLC | | | 200,000 | | | | (200,000 | ) | | | - | | | | - | | | | - | |
Redwood Fund II, LLC | | | 150,000 | | | | (150,000 | ) | | | - | | | | - | | | | 119,664 | |
WHC Capital, LLC | | | 800,000 | | | | (650,000 | ) | | | (150,000 | ) | | | - | | | | 500,000 | |
LG Capital | | | 250,000 | | | | (56,625 | ) | | | - | | | | 193,375 | | | | - | |
Elegant Funding | | | 20,000 | | | | (20,000 | ) | | | - | | | | - | | | | - | |
Fourth Street Fund LP | | | 50,000 | | | | (10,000 | ) | | | - | | | | 40,000 | | | | 50,000 | |
SFH Capital, LLC | | | 217,500 | | | | (32,500 | ) | | | - | | | | 185,000 | | | | - | |
Inter-Mountain Corp | | | 687,500 | | | | (59,400 | ) | | | - | | | | 628,100 | | | | - | |
Firehole River Capital, LLC | | | 157,500 | | | | (42,500 | ) | | | - | | | | 115,000 | | | | - | |
Adar Bay, LLC | | | 75,000 | | | | - | | | | - | | | | 75,000 | | | | - | |
Beaufort Capital Partners, LLC | | | 100,000 | | | | - | | | | - | | | | 100,000 | | | | - | |
Left Coast Pictures, Inc. | | | 25,000 | | | | - | | | | - | | | | 25,000 | | | | - | |
Eastmore Capital, LLC | | | 110,000 | | | | - | | | | - | | | | 110,000 | | | | - | |
Less: Discounts | | | - | | | | - | | | | - | | | | - | | | | (128,463 | ) |
Total | | $ | 3,335,500 | | | $ | (1,614,025 | ) | | $ | (250,000 | ) | | $ | 1,471,475 | | | $ | 711,201 | |
|
|
|
Nature of Derivative Liability |
|
|
|
From time-to-time, the Company enters into convertible note agreements whereby the conversion feature is required to be bifurcated out as a derivative liability. |
|
|
|
The derivative liability at December 31, 2014 and December 31, 2013 related to the following convertible notes, |
|
|
|
| | December 31, | | | December 31, | | | | | | | | | | | | | |
2014 | 2013 | | | | | | | | | | | | |
Magna Group, Inc. | | $ | - | | | $ | 45,166 | | | | | | | | | | | | | |
Redwood Fund II, LLC | | | - | | | | 145,773 | | | | | | | | | | | | | |
Southridge Partners II, LLC | | | - | | | | 25,998 | | | | | | | | | | | | | |
WHC Capital, LLC | | | - | | | | 70,134 | | | | | | | | | | | | | |
LG Capital | | | 1,083,881 | | | | - | | | | | | | | | | | | | |
Elegant Funding | | | - | | | | - | | | | | | | | | | | | | |
Fourth Street Funding | | | 200,043 | | | | - | | | | | | | | | | | | | |
Inter-Mountain Capital Corp. | | | 3,766,833 | | | | - | | | | | | | | | | | | | |
Adar Bays, LLC | | | 439,651 | | | | - | | | | | | | | | | | | | |
Beaufort Capital Partners, LLC | | | 586,201 | | | | - | | | | | | | | | | | | | |
Eastmore Capital LLC | | | 646,374 | | | | - | | | | | | | | | | | | | |
Firehole River Capital, LLC | | | 728,817 | | | | | | | | | | | | | | | | | |
Left Coast Pictures, Inc. | | | 148,378 | | | | | | | | | | | | | | | | | |
SFH Capital, LLC | | | 210,830 | | | | - | | | | | | | | | | | | | |
| | $ | 7,811,368 | | | $ | 287,071 | | | | | | | | | | | | | |
|
|
|
The following is the range of variables used in revaluing the derivative liabilities at December 31, 2014 and December 31, 2013: |
|
|
|
| | December 31, | | December 31, | | | | | | | | | | | | | | | | |
2014 | 2013 | | | | | | | | | | | | | | | | |
Annual dividend yield | | 0 | | 0 | | | | | | | | | | | | | | | | |
Expected life (years) of | | 0.01 – 1.5 | | 0.01 – .90 | | | | | | | | | | | | | | | | |
Risk-free interest rate | | 10% | | 10% | | | | | | | | | | | | | | | | |
Expected volatility | | 525.70% | | 372.20% | | | | | | | | | | | | | | | | |
|
|
|