SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2014 |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 13: SUBSEQUENT EVENTS |
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On April 2, 2014, the Company Board of Directors elected Stephen M. Hicks to the Board of Directors, to fill a vacancy on the Board, and as President of the Company. Mr. Hicks is the Chief Executive Officer of Southridge LLC (“Southridge.”) Southridge and its affiliates have financed the Company in the past and continue to own debt and equity securities of the Company. New directors, who are not officers, are paid $12,500 per year in cash or stock. |
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On April 2, 2014, the Company Board of Directors elected Mr. Gilbert Steedley to the Board to fill a vacancy on the Board. Mr. Steedley is currently interim Chief Executive Officer and Director of Accelpath, New York, N.Y. Compensation is as indicated above for Mr. Hicks. |
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On April 2, 2014, the Company elected Henry Sargent as Vice President and Secretary of the Company. Mr. Sargent is Chief Operating Officer and General Counsel of Southridge. |
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Issuance of Common Stock |
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From April 1, 2014 until October 28, 2014, the Company converted a total of $189,620 loan principal plus $23,795 accrued interest and fees into 383,758,189 shares of common stock. |
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On August 27, 2013 the Company received proceeds of $10,500 for the exercise of 1,093,750 warrants and as of December 31, 2013 the shares had not been issued and accordingly the Company recorded the liability for the share issuance. On August 19, 2014 the Company issued the warrant holder 9,545,455 shares which represented the fair value of $10,500 of the proceeds received. |
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On July 9, 2013 the Company received proceeds of $27,923 for the exercise of 2,389,817 warrants and as of December 31, 2013 the shares had not been issued and accordingly the Company recorded the liability for the share issuance. On August 19, 2014 the Company issued the warrant holder 27,202,727 shares which represented the fair value of $27,923 of the proceeds received. |
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On July 1, 2014, the Company issued 7,634,921 shares of common stock to a note lender for failing to issue shares timely upon receipt of the conversion notice from the lender. The Company recorded $12,979 of interest expense for such issuance. |
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On September 15, 2014, the Company issued 7,027,778 shares of common stock to a note lender for failing to issue shares timely upon receipt of the conversion notice from the lender. The Company recorded $4,919 of interest expense for such issuance. |
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Issuance of Promissory Notes |
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On April 25, 2014 the Company issued a promissory note for $ 100,000. The note matures on April 30, 2015 with the stated interest rate at 8%. |
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Issuance of Convertible Promissory Notes |
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On April 4, 2014 the Company issued a convertible promissory note for $ 50,000 to a related party. The note matures in one year from the issuance date with the stated interest rate at 0%. The note is convertible into the Company’s common stock at a 40% discount of the lowest closing bid price during the 30 trading days prior to conversion. |
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On April 21, 2014 the Company issued a convertible promissory note to a related party for $2,500. The note matures on April 30, 2015 with the stated interest rate at 0%. The note is convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the 30 trading days prior to conversion. |
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On June 19, 2014 the Company issued a convertible promissory note for $ 100,000. The note matures on December 31, 2014 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a conversion price of $0.0019 per share. In addition, 10,526,316 warrants were issued with an exercise price of $0.00228 per share. The warrants are fully vested and have a life of 5 years from date of issuance. |
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On July 17, 2014 the Company issued a convertible promissory note for $ 23,000. The note matures on June 30, 2015 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a conversion price of $0.001 per share. In addition, 4,600,000 warrants were issued with an exercise price of $0.0012 per share. The warrants are fully vested and have a life of 5 years from date of issuance. |
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On July 17, 2014 the Company issued a convertible promissory note for $ 20,000. The note matures on December 31, 2015 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the 10 trading days prior to conversion. |
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On August 13, 2014 the Company issued a convertible promissory note for $ 85,000. The note matures on June 30, 2015 with the stated interest rate at 8%. The note is convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the 20 trading days prior to conversion. |
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On September 16, 2014 the Company issued a convertible promissory note for $ 23,000. The note matures on June 30, 2015 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a conversion price of $0.0005 per share. In addition, 9,200,000 warrants were issued with an exercise price of $0.0006 per share. The warrants are fully vested and have a life of 5 years from date of issuance. |
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On October 21, 2014 the Company issued a convertible promissory note for $ 50,000. The note matures on May 01, 2015 with the stated interest rate at 0% and a premium to be paid on redemption of $20,000. Upon maturity, at the election of the holder, the note is convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the 10 trading days prior to conversion. |
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On October 22, 2014 the Company issued a convertible promissory note for $ 14,000. The note matures on September 30, 2015 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a conversion price of $0.0004 per share. In addition, 7,000,000 warrants were issued with an exercise price of $0.00048 per share. The warrants are fully vested and have a life of 5 years from date of issuance. |
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On November 10, 2014 the Company issued a convertible promissory note for $ 20,000. The note matures on October 31, 2015 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the 30 trading days prior to conversion. |
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On November 17, 2014 the Company issued a convertible promissory note for $ 4,156. The note matures on October 31, 2015 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the 30 trading days prior to conversion. |
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Entry Into A Material Definitive Agreement |
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On June 13, 2014, the Company entered into a consulting agreement (the “Consulting Agreement”) with Tarpon Bay Partners, LLC, a Florida limited liability company (“Tarpon”), for the period from the date of the agreement through March 31, 2015. The agreement requires Tarpon to provide general management and consulting services and advisory services to the Company, including assistance in connection with the restructuring of its outstanding debt and equity securities. The manager of Tarpon is Stephen Hicks, the President of the Company. |
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Pursuant to the terms of the Consulting Agreement, Tarpon will be compensated by the issuance to it by the Company of shares of Series H Convertible Preferred Stock. Pursuant to the terms of the Consulting Agreement, Tarpon will receive Series H Preferred Stock with a stated value of $425,000 upon the execution of the Agreement, and additional Series H Preferred Stock with a stated value of $75,000 monthly, commencing July 1, 2014 and continuing through the balance of the term. Tarpon has waived the monthly issuances of Series H Preferred Stock for the months of November and December, 2014. The execution and delivery of the Consulting Agreement was approved by the directors of the Company. Mr. Hicks did not participate in the vote on this matter. |
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On June 13, 2014, the Company entered into an Equity Purchase Agreement with an accredited investor. The terms of the Equity Purchase Agreement provide that the Investor agrees, subject to put notices from the Company, to purchase up to $5,000,000 in Common Stock during the 24 months following the execution of the Agreement, subject to certain conditions and limitations. For each closing, the purchase price of the Common Stock will be 90% of the average of the three lowest Closing Bid Prices during the 10 trading days following the relevant Clearing Date (as defined in the Equity Purchase Agreement). In connection therewith, the Company also entered into a Registration Rights Agreement with the investor, pursuant to which the Company is required to file a Registration Statement with the Securities and Exchange Commission for the expected number of shares to be issued under the Equity Purchase Agreement within 120 days of the date of the Registration Rights Agreement. The Investor also provided the Company with a one year loan of $100,000; the obligation to repay this loan is represented by a Promissory Note issued by the Company to the Investor. |
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Series A and Series F Preferred Stock |
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On June 3, 2014, the Company filed with the Secretary of State of the State of Delaware Certificates of Correction to its existing Certificates of Designations for its Series A and Series F Preferred Stock, respectively. These filings reduced the number of authorized shares of the Company’s Series A Preferred Stock from the previously reported 400,000 shares to 52,500 shares and the number of authorized shares of the Series F Preferred Stock from the previously reported 1,000,000 shares to 38,644 shares. In each case, the current number of outstanding shares (as of the date of filing of each Certificate of Correction, 2014) of the relevant Series is not more than the number of authorized shares specified in the corresponding Certificate of Correction. |
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Series G Preferred Stock |
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On June 13, 2014, the number, designation, rights, preferences and privileges of the Series G Preferred Stock were established by the Board. The designation, rights, preferences and privileges that the Board established for the Series G Preferred Stock are set forth in a Certificate of Designations that was filed with the Secretary of State of the State of Delaware on June 17, 2014. Among other things, the Certificate of Designation provides that each one share of Series G Preferred has voting rights equal to (x) (i) 0.019607 multiplied by the total issued and outstanding Common Stock eligible to vote at the time of the respective vote (the number determined by this clause (i), the “Numerator”), divided by (ii) 0.49, minus (y) the Numerator. These voting rights apply only to matters of Company capitalization (i.e. increase in authorized common stock, stock splits, etc.), and similar matters upon which stockholders are entitled to vote or to which stockholders are entitled to give consent.The Series G has a par value of $0.001 per share, no rights to dividends but provides for liquidation rights which entitle the holder to a pro-rata share of net assets. Each Series G share is convertible, at the option of the holder, into one share of Common Stock. The Company issued 51 shares of the Series G to the President. |
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Material Modification to Rights of Security Holders |
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By unanimous written consent of the Board (Mr. Hicks not participating), the Board authorized the filing of a Certificate of Designation for its Series G Convertible Preferred Stock (“Series G Preferred Stock”) and the issuance of all of the fifty-one (51) authorized shares of such Series G Preferred Stock to Stephen Hicks (the “Series G Stockholder”) for a purchase price of $1 per share. As a result of the voting rights granted to the Series G Preferred Stock in the Certificate of Designations, the Series G Stockholder holds in the aggregate approximately 51% of the total voting power of all issued and outstanding voting capital of the Company. Pursuant to the terms of the Board resolution authorizing the issuance of the Series G Preferred Stock, and authorizing the issuance of the shares to Mr. Hicks, the Company has the right to redeem said Preferred Stock of the Company upon his resignation or the termination of his services as President of the Company. The Company believes that the issuance of the Series G Preferred Stock to Mr. Hicks will facilitate the Company’s ability to manage its affairs. |
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Series H Preferred Stock |
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On June 13, 2014, the number, designation, rights, preferences and privileges of the Series H Preferred Stock were established by the Board. The designation, rights, preferences and privileges that the Board established for the Series H Preferred Stock are set forth in a Certificate of Designations that was filed with the Secretary of State of the State of Delaware on June 17, 2014. |
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The Certificate of Designations for the Series H Preferred Stock provides for the issuance of up to 1,000 shares of Series H stock with a stated value of $25,000 per share. As long as any shares of Series H Preferred Stock remain outstanding, the Company cannot, without the consent of the holders of at least 90% of the Series H Preferred Stock, redeem, repurchase or otherwise acquire any junior securities, or pay or make any distribution upon any junior securities as defined therein. |
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The Series H Preferred Stock is convertible at the option of the holder into such number of shares upon the conversion ratio equal to the aggregate stated value of the Series H Preferred Stock converted divided by the average closing bid price for the calendar month preceding the original issuance date of the shares being converted, as reported by the reporting service. The Company is required to reserve a sufficient number of shares of common stock as may be required to be issued thereunder. The conversion ratio is subject to adjustment, from time to time, for various reasons including a sale or merger by the Company. |
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With respect to all matters upon which stockholders are entitled to vote or to which stockholders are entitled to give consent, the holders of the outstanding shares of Series H Preferred Stock shall vote together with the holders of Common Stock without regard to class, except as to those matters on which separate class voting is required by applicable law or the Articles of Incorporation or bylaws. |
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On September 30, 2014 the Company entered into an agreement in-order to satisfy an outstanding liability of the Company to our former Vice President of International Markets, Shaul Kochan, dating back to 2009. Per the terms of the agreement the Company shall issue 110 shares of preferred stock with a stated value equal to $110,000. The Company has agreed to redeem the preferred stock in 14 separate tranches at the beginning of each calendar month beginning October 1, 2014, pursuant to the following schedule: $5,000 in stated value worth of shares each month for the first 4 months; $7,500 in stated value worth of shares each month for the subsequent 6 tranches; $10,000 in stated value worth of shares each month for the subsequent 3 tranches; and $15,000 in stated value worth of shares in the final month. |
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If the Company misses payment of any tranche it will have 30 calendar days in which to cure such payment, after which time the Company agrees to issue additional shares of preferred stock representing 1% of the aggregate stated value of the then outstanding preferred stock held by Mr. Kochan, redeemable under similar terms. |
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In addition, the Company agrees to extend the maturity date of the outstanding warrant held by Mr. Kochan from its current expiration date of March 7, 2015 to March 7, 2017. The Company further agrees to issue an additional warrant to Mr. Kochan for right to exercise and purchase 2,000,000 shares of the Company’s common stock at an exercise price of $0.052 and maturity date of March 7, 2017. |
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Entry Into A Material Definitive Agreement |
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On October 24, 2014, the Company entered into an agreement in-order to satisfy outstanding liabilities of the Company due to our former Chief Financial Officer (“CFO”) and Former Director, Terry R. Lazar (“Lazar”), dating back to 2009. Mr. Lazar acted as CFO for the Company until February 15, 2014, and the Company has accrued approximately $485,000 in deferred compensation on behalf of Lazar, including accrued warrants for his services on the Company’s Board (“Deferred Comp”). In addition, Lazar has loaned approximately $225,000 to the Company in the form of loans(s) (“Loan”). Mr. Lazar and the Company have agreed to satisfy and terminate all Deferred Comp and Loan obligations of the Company due to Lazar by having the Company issue to Lazar a new series of preferred stock. |
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Per the terms of the agreement the Company shall issue 200 shares of preferred stock with a stated value equal to $200,000. The preferred stock shall carry an annual dividend yield of 5%, and shall be convertible into 100,000,000 shares of common stock at the option of Lazar. The Company has the option to redeem the preferred stock at any time for an amount equal to its stated value plus any accrued dividend by paying cash to Lazar subject to a conversion notice tendered by the holder within five days from receipt of a redemption notice. |
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Definitive Information Statement filed with SEC for Capital Increase and Reverse Stock Split |
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A Preliminary Information Statement was filed with the SEC on October 24, 2014, and the Definitive Information Statement on December 11, 2014, to notify the Company’s stockholders that on October 24, 2014, our stockholders approved the following amendments (the “Amendments”) to our Certificate of Incorporation: (1) a Reverse Stock Split of the Company’s common stock at a ratio of not less than one-for-one hundred and not more than one-for-five hundred as determined by our Board of Directors (the “Reverse Stock Split”), subject to the Board’s discretion to determine, without any further action by stockholders, not to proceed with a reverse stock split if it determines that a reverse stock split is no longer in the best interest of the Company and its stockholders, and (2) the authorization of an increase in the number of authorized shares of common stock from two billion (2,000,000,000) shares of common stock, par value $.001 per share, to ten billion (10,000,000,000) shares of common stock, par value $.00001 per share (the “Authorized Share Increase”). The Company currently has no commitments for the issuance of any shares of common stock or preferred stock, other than as provided for in existing agreements and instruments to which it is a party. The Company received stockholder approval for the Amendments pursuant to a written consent from the holder of all of the outstanding shares of the Company’s Series G Preferred Stock, a super voting preferred stock. The majority holder approved the Amendments by written consent in lieu of a meeting on October 24, 2014. The Amendments (which includes the Authorized Share Increase and Reverse Stock Split) will become effective when we file the Certificate of Amendment with the Secretary of State of the State of Delaware, subject to, following Board determination of the Reverse Stock Split ratio, our filing for approval of and an effective date for the Reverse Stock Split with the Financial Industry Regulatory Authority (FINRA). The Amendments will not be filed, and will not become effective, until the date that is at least 20 days after December 15, 2014, the date on which the Definitive Information Statement was first mailed or otherwise delivered to our stockholders. |