Note 7 Notes Payable | 12 Months Ended |
Dec. 31, 2014 |
Notes | |
Note 7 Notes Payable | NOTE 7 NOTES PAYABLE |
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(a) $115,000 March 31, 2014 LG Capital/Adar Bays Convertible Notes |
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On March 31, 2014, the Company issued two convertible notes in the principal amounts of $57,500 each. The notes mature on March 31, 2015, are 8% per annum convertible notes and each includes a 5% original issue discount such that the total proceeds to the Company from issuance of the two notes is $115,000 and the purchase price for each note is $55,000. At the option of the holder after 180 days, all or any amount of the principal of the note then outstanding may be converted into shares of the Company’s common stock. The conversion price for each share is 70% of the average of the 3 lowest closing bid prices for twenty prior trading days. Interest shall be paid by the Company in common stock. |
The Company recorded a derivative liability of $84,506 from the variable conversion pricing of the convertible note and recorded accretion expense of $84,506 relating to the derivative liability from variable conversion pricing during the year ended December 31, 2014. At December 31, 2014, the derivative liability from variable conversion pricing was revalued and the Company recorded a gain on revaluation of $56,295 during the year ended December 31, 2014, resulting in an ending derivative liability balance of $28,211. |
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During the three months ended December 31, 2014, the debtors elected to convert $65,321 in convertible debt principal and interest into 1,189,299 shares of common stock with an aggregate fair value of $91,960, representing the fair value of the derivative liabilities and the amortized cost of convertible debt settled was included as additional paid-in capital. During the year ended December 31, 2014, the Company recorded a loss of $26,639 on the excess of fair value of stock issued over the converted principal amount. As at December 31, 2014, the stock has not been issued, and the conversion value of $65,321 has been recorded to stock issuance liability. At December 31, 2014, the convertible note principal and interest balances are $54,875. |
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The back-end notes entered into on March 31, 2014, with face values of $57,500 each was funded and the Company received the funds on October 22, 2014 and December 11, 2014. The Company issued two convertible notes in the principal amounts of $57,500 each. The note matures on March 31, 2015, are 8% per annum convertible notes and each includes a 5% original issue discount such that the total proceeds to the Company from issuance of the note is $55,000 and the purchase price for each note is $55,000. The back-end notes were also amended such that the conversion price for each share is 65% of the lowest closing bid price for twenty prior trading days. At the option of the holder after 180 days, all or any amount of the principal of the note then outstanding may be converted into shares of the Company’s common stock. Interest shall be paid by the Company in common stock. At December 31, 2014, the back-end convertible note principal and interest balances are $115,835. |
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The Company recorded a derivative liability of $80,028 from the variable conversion pricing of the convertible note and recorded accretion expense of $14,543 relating to the derivative liability from variable conversion pricing during the year ended December 31, 2014. At December 31, 2014, the derivative liability from variable conversion pricing was revalued and the Company recorded a gain on revaluation of $48,145 during the year ended December 31, 2014, resulting in an ending derivative liability balance of $31,883. |
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Subsequent to December 31, 2014, the debtor elected to convert $15,000 of convertible debt principal into 1,775,148 shares of common stock with an aggregate fair value of $71,006 which is the market trading price at date of conversion. |
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(b) $100,000 May 8, 2014 JSJ Investments Convertible Note |
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On May 8, 2014, the Company issued a 12% convertible note in exchange for cash received of $100,000. The Company must pay 12% interest per annum on the unpaid principal balance, and the principal balance was due on November 8, 2014. Upon maturity date, the note has a cash redemption premium of 130% of the principal amount. The note may be converted to stock at a conversion price equal to 45% discount to the average of the three lowest trades on the previous ten trading days to the date of conversion. |
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The Company recorded a derivative liability of $129,359 from the variable conversion pricing of the convertible note and recorded accretion expense of $129,359 relating to the derivative liability from variable conversion pricing during the year ended December 31, 2014. As the amount of derivative liability was in excess of the principal amount of the note, the Company recorded a charge on the statement of operations of $28,333 for the year ending December 31, 2014. At December 31, 2014, the derivative liability from variable conversion pricing was revalued and the Company recorded a gain on revaluation of $128,978, during the year ended December 31, 2014, resulting in an ending derivative liability balance of $381. |
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During the three months ended December 31, 2014, the debtor elected to convert $50,000 in convertible debt principal into 568,064 shares of common stock with an aggregate fair value of $96,571, representing the fair value of the derivative liabilities and the amortized cost of convertible debt settled was included as additional paid-in capital. During the year ended December 31, 2014, the Company recorded a loss of $46,571 on the excess of fair value of stock issued over the converted principal amount. As at December 31, 2014, the stock has not been issued, and the conversion value of $50,000 has been recorded to stock issuance liability. At December 31, 2014, the convertible note principal and interest balance is $57,118. |
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(c) $1,105,000 June 4, 2014 Typenex Convertible Note |
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On June 4, 2014, the Company issued a 10% secured convertible promissory note in the principal amount of $1,105,000. The Company must pay 10% interest per annum on the unpaid principal balance which is due November 4, 2015. The purchase price for the note is $1,000,000, computed as $1,105,000 original principal balance, less the original issue discount (“OID”) of $100,000, less the transaction cost of $5,000. On the closing date, the investor shall pay the purchase price to the Company by delivering the following at closing: |
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a) The initial cash purchase price of $170,000 and $15,000 of the OID (received) |
b) Secured investor note #1 in the principal amount of $85,000 and $8,500 of the OID |
c) Secured investor note #2 in the principal amount of $85,000 and $8,500 of the OID) |
d) Secured investor note #3 in the principal amount of $85,000 and $8,500 of the OID |
e) Secured investor note #4 in the principal amount of $85,000 and $8,500 of the OID |
f) Investor note #5 in the principal amount of $85,000 and $8,500 of the OID |
g) Investor note #6 in the principal amount of $85,000 and $8,500 of the OID |
h) Investor note #7 in the principal amount of $85,000 and $8,500 of the OID |
i) Investor note #8 in the principal amount of $85,000 and $8,500 of the OID |
j) Investor note #9 in the principal amount of $85,000 and $8,500 of the OID) Investor note #10 in the principal amount of $85,000 and $8,500 of the OID |
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The conversion price for each lender conversion shall be $1.65. Lender has the right at any time after the purchase price date to convert all or any part of the outstanding balance into shares of common stock. During the year ended December 31, 2014, the Company received the first tranche of $170,000 less transaction cost. |
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As the conversion price at the date of issuance of the note was less than the Company’s market trading price of $2.04 on June 4, 2014, the Company recorded a beneficial conversion feature of $41,212 against additional paid-in capital and recorded accretion expense of $16,453 for the year ended December 31, 2014. |
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During the three months ended December 31, 2014, the debtor elected to convert $30,000 in convertible debt principal into 807,168 shares of common stock with an aggregate fair value of $64,573, representing the fair value of the derivative liabilities and the amortized cost of convertible debt settled was included as additional paid-in capital. During the year ended December 31, 2014, the Company recorded a loss of $34,573 on the excess of fair value of stock issued over the converted principal amount. As at December 31, 2014, the stock has not been issued, and the conversion value of $30,000 has been recorded to stock issuance liability. At December 31, 2014, the convertible note principal and interest balance is $159,675. |
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(d) $1,500,000 June 25, 2014 Himmil Convertible Note |
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On June 25, 2014, the Company entered into a Securities Purchase Agreement (the “Agreement”) with a single accredited investor (the “Investor”) in a private placement pursuant to which the Investor purchased a 5% Convertible Note with a face amount of $1,500,000 for a purchase price of $1,000,000 (the “Note”). The Note bears interest at a rate of 5% per annum and is payable one year after the date of the issuance. The Company may pay interest due either in cash or, at its option, through freely tradable stock. The Note will be convertible at the option of the Investor at any time into shares of the Company’s common stock at a conversion price equal to the less of (i) $1.90 and (ii) 70% (60% in the event of default) of the average of the two lowest volume-weighted-average-price of the Common Stock during the 12 consecutive trading days immediately preceding the applicable conversion date. All or part of the then remaining principal amount of the Note may be prepaid at any time at a price equal to 125% of the sum of the remaining principal amount of the Note to be prepaid plus all accrued and unpaid interest thereon. The principal amount of the Note will be reduced by $500,000 if the shares of Common Stock underlying the Note are registered for public resale pursuant to an effective registration statement by August 24, 2014. As at December 31, 2014, the carrying amount of this Convertible Note is $808,043, net of a $500,000 original issuer discount. |
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At September 1, 2014, due to the issuance of a separate convertible note which violates the Agreement, the interest rate on the Convertible Note increased from 5% to 18%. |
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In connection with the Agreement, the Investor received a warrant to purchase 297,832 shares of common stock, exercisable for a period of 5 years from the date of issuance at exercise price of $2.15, subject to adjustment. If a registration statement is not effective for the resale by the Holder of all of the Warrant Shares, the Investor may exercise the warrant on a “cashless” basis. The conversion price of the Note and the exercise price of the Warrant are subject to “full ratchet” anti-dilution adjustment for subsequent lower price issuances by the Company, as well as customary adjustments provisions for stock splits, stock dividends, recapitalizations and the like. During the year ended December 31, 2014, the Company recorded $195,927 as a derivative liability on the issuance of these warrants. At December 31, 2014, the derivative liability from the issuance of warrants was revalued, resulting in a gain on revaluation of derivative liability of $195,927. During the year ended December 31, 2014, the Company recorded accretion expense of $101,453 on the derivative liability of these warrants. At December 31, 2014, the convertible note principal and interest balance is $1,603,476. |
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The Company recorded a derivative liability of $1,164,745 from the variable conversion pricing of the convertible note and recorded accretion expense of $603,114 relating to the derivative liability from variable conversion pricing during the year ended December 31, 2014. As the amount of derivative liability was in excess of the principal amount of the note, the Company recorded a charge on the profit and loss of $360,672 for the year ending December 31, 2014. At December 31, 2014, the derivative liability from variable conversion pricing was revalued and the Company recorded a gain on revaluation of $1,099,709, resulting in an ending derivative liability balance at December 31, 2014 of $261,209. |
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Subsequent to December 31, 2014, the debtor elected to convert $221,122 in convertible debt principal into 27,822,391 shares of common stock with an aggregate fair value of $503,352 which is the market trading price at respective dates of conversion. |
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(e) $83,500 September 1, 2014 KBM Worldwide Convertible Note |
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On September 1, 2014, the Company issued a convertible note in the principal amount of $83,500. The note matures on June 1, 2015 and bears 8% interest per annum. At the option of the holder after 180 days, all or any amount of the principal of the note then outstanding may be converted into shares of the Company’s common stock. The conversion price for each share is 58% of the average of the 3 lowest closing bid prices for ten prior trading days. |
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The Company recorded a derivative liability of $85,871 from the variable conversion pricing of the convertible note and recorded accretion expense of $39,211 relating to the derivative liability from variable conversion pricing during the year ended December 31, 2014. As the amount of derivative liability was in excess of the principal amount of the note, the Company recorded a charge on the profit and loss of $4,967 for the year ended December 31, 2014. At December 31, 2014, the derivative liability from variable conversion pricing was revalued and the Company recorded a gain on revaluation of $76,440 during the year ended December 31, 2014, resulting in an ending derivative liability balance of $9,431. At December 31, 2014, the convertible note principal and interest balance is $87,362. |
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(f) $82,688 September 12, 2014 LG Capital Convertible Note |
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On September 12, 2014, the Company issued a convertible note in the principal amount of $82,688. The note matures on September 12, 2015 and bears 8% interest per annum. The note contains a 5% original issue discount such that the purchase price is $78,750. At the option of the holder after 180 days, all or any amount of the principal of the note then outstanding may be converted into shares of the Company’s common stock. The conversion price for each share is 70% of the average of the 3 lowest closing bid prices for twenty prior trading days. Interest shall be payable in common stock. |
The Company recorded a derivative liability of $68,933 from the variable conversion pricing of the convertible note and recorded accretion expense of $21,175 relating to the derivative liability from variable conversion pricing during the year ended December 31, 2014. At December 31, 2014, the derivative liability from variable conversion pricing was revalued and the Company recorded a gain on revaluation of $59,964 during the year ended December 31, 2014, resulting in an ending derivative liability balance of $8,969. At December 31, 2014, the convertible note principal and interest balance is $86,185. |
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(g) $4,450,000 October 1, 2014 Green Grow LLC Convertible Note |
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On October 1, 2014, the Company issued convertible notes to various debtors in the principal amount of $4,450,000 in received consideration of consulting expenses from the debtors. The note matures on April 1, 2015 and bears 10% interest per annum. At the option of the holder after 180 days, all or any amount of the principal of the note then outstanding may be converted into shares of the Company’s common stock. The conversion price for each share is 50% of the average of the lowest closing bid price for twenty prior trading days. Interest shall be payable in common stock. At December 31, 2014, the convertible note principal and interest balance is $4,560,945. |
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(h) $75,000 November 25, 2014 Tangiers Convertible Note |
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On November 25, 2014, the Company issued a convertible note in the principal amount of $220,000. The initial amount received by the Company was $75,000, with an additional $7,500 of the financing retained by the debtor through an original issuer discount. The debtor has the option to finance additional amounts up to the balance of $220,000 until May 25, 2015. The note matures on November 25, 2015 and bears 10% interest per annum. The note contains a 5% original issue discount such that the purchase price is $78,750. At the option of the holder, all or any amount of the principal of the note then outstanding may be converted into shares of the Company’s common stock. The conversion price for each share is 58% of the lowest closing bid prices for ten prior trading days. |
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The Company recorded a derivative liability of $78,148 from the variable conversion pricing of the convertible note and recorded accretion expense of $4,926 relating to the derivative liability from variable conversion pricing during the year ended December 31, 2014. As the amount of derivative liability was in excess of the principal amount of the note, the Company recorded a charge on the statement of operations of $14,596 for the year ending December 31, 2014. At December 31, 2014, the derivative liability from variable conversion pricing was revalued and the Company recorded a gain on revaluation of $52,651 during the year ended December 31, 2014, resulting in an ending derivative liability balance of $25,497. At December 31, 2014, the convertible note principal and interest balance is $84,966. |
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(i) $43,000 November 26, 2014 KBM Worldwide Convertible Note |
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On November 26, 2014, the Company issued a convertible note in the principal amount of $43,000 . The note matures on August 28, 2015 and bears 8% interest per annum. At the option of the holder, beginning May 13, 2015, all or any amount of the principal of the note then outstanding may be converted into shares of the Company’s common stock. The conversion price for each share is 42% of the lowest three closing bid prices for ten prior trading days. |
The Company recorded a derivative liability of $61,303 from the variable conversion pricing of the convertible note and recorded accretion expense of $2,173 relating to the derivative liability from variable conversion pricing during the year ended December 31, 2014. As the amount of derivative liability was in excess of the principal amount of the note, the Company recorded a charge on the statement of operations of $26,621 for the year ending December 31, 2014. At December 31, 2014, the derivative liability from variable conversion pricing was revalued and the Company recorded a gain on revaluation of $37,487 during the year ended December 31, 2014, resulting in an ending derivative liability balance of $23,816. At December 31, 2014, the convertible note principal and interest balance is $44,178. |
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The carrying value of convertible debentures are as follows: |
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| 2014 | 2013 |
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Balance of convertible debentures, beginning of year | $- | $- |
Proceeds from new convertible debt tranches | 1,727,000 | - |
Convertible debt issued on consulting fees | 4,450,000 | |
Derivative liability of variable conversion price | -1,794,105 | - |
Derivative liability of warrants | -195,927 | - |
Excess of derivative liability of conversion price on principal amount | 436,215 | - |
Interest accrued on principal | 239,434 | - |
Accretion of derivative liability of conversion price | 1,032,636 | - |
Conversion Of Convertible Debt | (145,315) | - |
Balance of convertible debentures, end of year | $5,749,937 | $- |
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The fair value of derivative liabilities are as follows: |
| 2014 | 2013 |
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Fair value of derivative liabilities, beginning of year | $- | $- |
Fair value of derivative liability at inception of new tranches | 1,752,893 | - |
Fair value of derivative liability of warrants | 195,928 | - |
Gain of revaluation of derivative liability | (1,559,423) | - |
Fair value of derivative liabilities, end of year | $389,397 | $- |
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(j) $200,000 CDN October 1, 2014 Demand Promissory Note |
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On October 1, 2014, the Company received CDN $200,000 (US $171,323) pursuant to a demand promissory note agreement. The note bears interest at 12% per annum, calculated yearly and is due and payable in full on demand. Interest is due and payable annually on the first day of January of each year and must be paid no later than September 30, 2015. |