Note 5-Convertible Notes | 12 Months Ended |
Dec. 31, 2014 |
Notes | |
Note 5-Convertible Notes | Note 5—CONVERTIBLE NOTES |
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The following table summarizes the changes in the convertible notes during 2013 and 2014: |
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| | Short Term | | | Long Term | | | Total | | | | | | | | | | | | | |
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Balance as of December 31, 2012 | | $ | - | | | $ | - | | | $ | - | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Cash additions | | | 50,000 | | | | - | | | | 50,000 | | | | | | | | | | | | | |
Non-cash additions | | | | | | | - | | | | - | | | | | | | | | | | | | |
Cash payments | | | - | | | | - | | | | - | | | | | | | | | | | | | |
Conversions | | | - | | | | - | | | | - | | | | | | | | | | | | | |
Original issue discount | | | - | | | | - | | | | - | | | | | | | | | | | | | |
Total | | | 50,000 | | | | - | | | | 50,000 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Less: unamortized discount | | | (48,151 | ) | | | - | | | | (48,151 | ) | | | | | | | | | | | | |
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Balance as of December 31, 2013 | | $ | 1,849 | | | $ | - | | | $ | 1,849 | | | | | | | | | | | | | |
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Cash additions | | | 1,444,700 | | | | 852,500 | | | | 2,297,200 | | | | | | | | | | | | | |
Non-cash additions | | | 16,601 | | | | - | | | | 16,601 | | | | | | | | | | | | | |
Cash payments | | | (240,000 | ) | | | - | | | | (240,000 | ) | | | | | | | | | | | | |
Conversions | | | (88,400 | ) | | | (50,000 | ) | | | (138,400 | ) | | | | | | | | | | | | |
Original issue discount | | | 176,661 | | | | 10,000 | | | | 186,661 | | | | | | | | | | | | | |
Total | | | 1,309,562 | | | | 812,500 | | | | 2,122,062 | | | | | | | | | | | | | |
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Less: unamortized discount | | | (413,898 | ) | | | (783,668 | ) | | | (1,197,566 | ) | | | | | | | | | | | | |
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Balance as of December 31, 2014 | | $ | 895,664 | | | $ | 28,832 | | | $ | 924,496 | | | | | | | | | | | | | |
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On December 4, 2013 the Company entered into a $500,000 Promissory Note with JMJ Financial of which $50,000 is original issue discount. (Attached as Exhibit 99.02 to the Company's Form 8-K filed December 17, 2013). Under the terms, the Company will receive one or more installments on a periodic basis and will have 90 days for the date of each installment in which to repay the principal amount of the loan and interest. In the event repayment is not made within the 90 day period, JMJ shall have the right to convert any unpaid sums into common stock of the Company at the rate of the lesser of $.05 per share or 60% of the lowest trade reported in the 25 days prior to conversion. As of December 31, 2013, the Company received $50,000 of the note. During 2013, the Company recorded a discount of $50,000 on the note due to accounting for the conversion option as a derivative liability of which $1,849 was amortized during 2013. |
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In February 2014, the Company entered into a 10% convertible note with Tangiers in the amount of $60,500. Of this amount, $5,500 was an original issue discount on the note. The note is amortized using the straight line method through the maturity date of February 27, 2015. The note is convertible at a variable price of the lower of $0.01 or 50% of the lowest trading price during the 25 day period prior to the date of conversion. The note is convertible 180 days from the date of the note. The note matures on February 27, 2015. In September 2014, the entire balance was converted into 8,066,666 shares of common stock using a conversion price of $0.0075 per share. The note was fully amortized since it was converted in full during the year 2014. |
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In April 2014, the Company entered into a 12% Convertible Note with JSJ Investments, Inc. (“JSJ”) in the amount of $100,000. Prior to October 28, 2014, the Company may redeem the Note for $150,000. Thereafter, JSJ may convert the Note into common stock of the Company at a stated discount of 50% based on the average of the lowest three trades in the previous ten days, or $0.06 per share. The note matures on October 28, 2014. The note was amended on October 21, 2014. The new conversion rate is now either 50% discount to the average of the three lowest trades in the previous ten days immediately prior to the date of conversion or a 50% discount to the average of the three lowest trades in the previous ten trading days immediately prior to October 28, 2014. The new maturity date is April 28, 2015. The amendment included a standstill provision whereby the parties agree to no conversions under the Note until February 1, 2015 and in consideration of the standstill provision the Company agrees to pay JSJ $36,000 by October 28, 2014, of which $1,000 is for legal fees payable to New Venture Attorneys, P.C. The payment of $35,000 to JSJ and payment of $1,000 to New Venture Attorneys, P.C. were both paid on October 27, 2014. |
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In April 2014, the Company entered into an Equity Purchase Agreement and a Securities Purchase Agreement with Premier Venture Partners, LLC (“Premier”) whereby Premier is obligated, providing the Company has met certain conditions including the filing of a Form S-1 Registration Statement for the shares to be acquired, to purchase up to $5,000,000 of the Company’s common stock at the rates set forth at the request of the Company by issuing a Put Notice when funds are needed. The Securities Purchase Agreement is a facility whereby the Company will receive $22,500 pursuant to two Convertible Promissory Notes. |
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In April 2014, the Company entered into a Convertible Promissory note totaling $16,601 with ICPI for expense of rent of office space. ICPI may convert the note into fully paid and non-assessable shares of Series A Preferred Stock. The conversion price is $0.50 per share. |
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In April 2014, the Company entered into a $10,000 Convertible Promissory Note (the “Note”) with Premier Venture Partners, LLC. Under the terms of the Note the Company will receive $10,000 for the preparation and filing of the Form S-1 Registration Statement required for the Equity Purchase Agreement (Attached as Exhibit 99.02 to the Company's Form 8-K filed April 9, 2014). Premier Venture Partners, LLC shall have the right to convert any unpaid sums into common stock of the Company at the rate of the lesser of $.03 per share or 50% of the lowest trade reported in the 10 days prior to date of conversion. A second Convertible Promissory Note, in the amount of $12,500, will be issued after the Form S-1 Registration Statement is filed in order to cover any additional expense of making the Form S-1 Registration Statement effective. All of the $22,500 was paid directly to legal for the expense of preparing and making the S-1 Registrations Statement effective. |
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In May 2014, the Company entered into a 10% Convertible Note with Typenex Co Investment LLC (“Typenex”) in the amount of $139,500, of which $14,500 is the original issue discount. The discount is amortized using the straight line method over the term of the note. Typenex may convert the Note into common stock of the Company at a conversion price of $0.07 per share. The note matures on March 28, 2015. In conjunction with the note, a total of 1,130,470 common stock warrants were issued. The warrants were accounted for as derivative liabilities resulting in a discount to the note of $83,682. In December 2014, $35,174 of the note and accrued interest was converted into 2,714,008 shares of common stock using a conversion price of $0.013 per share. |
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In May 2014, the Company entered into an 8% Convertible Note with LG Capital Funding LLC (“LG”) in the amount of $58,500, of which $10,000 is the original issue discount. The discount is amortized using the straight line method over the term of the note. LG may convert the Note into common stock of the Company at a stated discount of 50% based average of the lowest trading bid price for the 15 prior trading days. The note is convertible 180 days from the date of the note. |
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In July 2014, the Company entered into a $200,000 Convertible Note with WHC Capital LLC, of which there is a $40,000 original issue discount. WHC was also issued 1,250,000 common shares as part of the agreement and those shares were recorded as debt discount of $52,500. WHC may convert the note into common stock of the Company at a 50% discount to the lowest trading price of 25 trading days prior to the conversion date. The note is convertible 180 days from the date of the note. WHC was fully repaid in October of 2014 in the amount of $240,000. |
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In July 2014, Tangiers provided additional funding to the Company in the amount of $50,000 in accordance with the February 2014 agreement. The note had a $5,000 original issue discount and accrues interest at 10%. |
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In August 2014, the Company entered into a 12% $100,000 Convertible Note with JSJ Investments. JSJ may convert the Note into common stock of the Company at a 50% discount to the average 3 lowest trading days of 20 trading days prior to conversion OR 20 trading days prior to the date the note was executed. |
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In August 2014, the Company entered into a $56,250 Convertible Note with Auctus Private Equity Fund LLC, of which $6,250 is original issue discount. Auctus may convert the note into common stock at a 50% discount to the average 2 lowest trading days of 25 trading days prior to the conversion. The note is convertible 180 days from the date of the note. |
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In September 2014, the Company entered into an amendment to the Tangiers convertible note up to the amount of $220,000 from February 2014. Company borrowed a total of $55,000 of which $5,000 is original issue discount. Tangiers may convert the Note into common stock of the Company at the lower of $0.023 or a 50% discount to the trading price of the prior 25 trading days. The note is convertible 180 days from the date of the note. The new term of the note is September 22, 2014. |
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In September 2014, JMJ Investments provided additional funding to the Company in the amount of $50,000 in accordance with the December 2013 agreement of which $5,556 is original issue discount. |
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In September 2014, the Company entered into a $55,250 Convertible Note with Auctus Private Equity Fund LLC, of which $5,250 is original issue discount. Auctus may convert the note into common stock at a 50% discount to the average 2 lowest trading days of 25 trading days prior to the conversion. The note is convertible 180 days from the date of the note. |
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In October 2014, the Company entered into a 8% Convertible Note with Union Capital LLC in the amount of $50,000 of which $2,500 is original issue discount. Union may convert the note into common shares of the Company at a discount of 50% to the lowest trading price of the 20 trading days prior to the conversion date. |
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In October 2014, the Company entered into a $55,000 Convertible Note with Vista Capital Investments LLC, of which $6,111 is original issue discount. Vista may convert the note into common shares of the Company at $0.05 or a 60% discount to the lowest trading price of the 25 days prior to the conversion date. |
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In October 2014, JMJ Investments provided additional funding to the Company in the amount of $40,000 in accordance with the December 2013 agreement of which $4,444 is original issue discount. |
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In October 2014, the Company entered into a 8% Convertible Note with LG Capital Funding LLC in the amount of $47,250, of which $6,750 is original issue discount. LG may convert the note into common shares of the Company at a 50% discount to the lowest trading price of the 15 days prior to the conversion date. |
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In October 2014, the Company entered into a 10% Convertible Note with Sarna Family Limited Partnership in the amount of $200,000. Sarna may convert the note into common shares of the Company at $0.01. In November 2014, $25,000 of the note was converted into 2,500,000 shares of common stock using a conversion price of $0.01 per share. |
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In October 2014, the Company entered into a 10% Convertible Note with private investor Mark Sarna in the amount of $200,000. Mr. Sarna may convert the note into common shares of the Company at $0.01. In November 2014, $25,000 of the note was converted into 2,500,000 shares of common stock using a conversion price of $0.01 per share. |
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In October 2014, the Company paid off the WHC Capital LLC Convertible Note in the amount of $240,000. |
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In October 2014, the Company entered into a 10% Convertible Note with Macallan Partners in the amount of $110,000, of which $10,000 is original issue discount. Macallan may convert the note into common shares of the Company at the lesser of a 50% discount to the lowest price in the previous 20 days prior to conversion or at a 50% discount to the bid price on the day of conversion. |
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In November 2014, the Company entered into a 12% Convertible Note with Eastmore Capital in the amount of $55,000, of which $4,000 is original issue discount. Eastmore may convert the note into common shares of the Company at the lesser of the lowest trading price of the day preceding the conversion or at a 50% discount to the lowest price in the previous 15 trading days before the conversion. |
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In November 2014, the Company entered into a 12% Convertible Note with Carebourn Capital in the amount of $128,000, of which $15,800 is original issue discount. Carebourn may convert the note into common shares of the Company at a discount of 50% of the average 3 lowest trading days within the previous 10 trading days prior to conversion. |
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In December 2014, the Company entered into a 10% Convertible Note with SBI Investments in the amount of $240,000, of which $40,000 is original issue discount. SBI may convert the note into common shares of the Company at a 50% discount to the lowest trading price in the previous 25 trading days prior to the conversion. |
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In December 2014, the Company entered into a 10% Convertible Note with investor Joshua Parkiel in the amount of $12,500. Mr. Parkiel may convert the note into common shares of the Company at $0.01. |
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In December 2014, the Company entered into a 10% Convertible Note with private investor David Sarna in the amount of $12,500. Mr. Sarna may convert the note into common shares of the Company at $0.01. |
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In December 2014, the Company entered into a 10% Convertible Note with investor Howard Schwartz in the amount of $25,000. Mr Schwartz may convert the note into common shares of the Company at $0.01. |
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In December 2014, the Company entered into a 10% Convertible Note with private investor Larry Pantirer in the amount of $25,000. Mr. Pantirer may convert the note into common shares of the Company at $0.01. |
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In December 2014, the Company entered into a 10% Convertible Note with investor Seymour Pinewski in the amount of $50,000. Mr Pinewski may convert the note into common shares of the Company at $0.01. |
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In December 2014, the Company entered into a 10% Convertible Note with private investor Stuart Troyetsky in the amount of $50,000. Mr. Troyetsky may convert the note into common shares of the Company at $0.01. |
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In December 2014, the Company entered into a 10% Convertible Note with investor Alan Pines in the amount of $75,000. Mr Pines may convert the note into common shares of the Company at $0.01. |
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In December 2014, the Company entered into a 10% Convertible Note with private investor Martin Statfield in the amount of $50,000. Mr. Statfield may convert the note into common shares of the Company at $0.01. |
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In December 2014, the Company entered into a 10% Convertible Note with investor Morris Sarna in the amount of $50,000. Mr. Sarna may convert the note into common shares of the Company at $0.01. |
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In December 2014, the Company entered into a 10% Convertible Note with private investor Steve Montag in the amount of $12,500. Mr. Montag may convert the note into common shares of the Company at $0.01. |
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In 2014, JMJ Investments converted an aggregate of $62,169 of notes and accrued interest into 5,330,247 shares of common stock using conversion prices ranging from $0.0075 to $0.204 per share. |
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Aggregate amortization of debt discounts totaled $635,273. As of December 31, 2014, the unamortized debt discounts totaled $1,197,566. |
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The Company evaluated all convertible notes describe above under ASC 815 and determined that they qualify as derivative liabilities (see Note 6). |
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Future minimum payments owed on the outstanding debt, including accrued interest, of the Company as of December 31, 2014 are as follows: |
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| | Year Ended December 31, | |
| | 2015 | | | 2016 | | | 2017 | | | 2018 | | | 2019 | | | Total | |
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Convertible Notes | | | 1,346,746 | | | | 103,210 | | | | - | | | | - | | | | 717,411 | | | | 2,167,367 | |
Short-term Non-Convertible Note | | | 4,557 | | | | - | | | | - | | | | - | | | | - | | | | 4,557 | |
Total | | | 1,351,303 | | | | 103,210 | | | | - | | | | - | | | | 717,411 | | | | 2,171,924 | |
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