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Debt
3 Months Ended
Sep. 30, 2012
Debt:  
Debt Disclosure

10% CONVERTIBLE NOTES PAYABLE

 

As of September 30, 2012 and December 31, 2011 the remaining 10% convertible notes outstanding were in default. The default provision requires an additional 2% interest per annum until the loans are repaid or converted. The 2% default penalty totaled approximately $10,000 and $14,000 for the periods ended September 30, 2012 and December 31, 2011, respectively and is included in interest expense on the consolidated statement of operations and in accrued expenses on the consolidated balance sheets as of September 30, 2012 and December 31, 2011, respectively.

  

As reflected on the balance sheets, the value of the 10% convertible notes at September 30, 2012 and December 31, 2011 amounted to approximately $114,000 and are classified as current due to the fact that they are in default for the non-payment by the maturity date.

 

CONVERTIBLE NOTES PAYABLE

 

2012

 

Convertible Bridge Notes Payable:

 

During the nine months ended September 30, 2012, the Company repaid two short-term convertible bridge notes totaling $77,500. In addition, the Company converted a $51,000 short-term convertible bridge note into 5,100,000 shares of common stock. During the nine months ended September 30, 2012, the Company received $222,000 in short term convertible bridge notes payable. The notes bear interest between 8% - 10% interest and are payable upon maturity, 9 months from the date of the loans.

 

Revenue Linked Convertible Notes Payable:

 

During the nine months ended September 30, 2012, the Company entered in to several short term convertible notes totaling $401,000. These notes mature in 9 months, are non-interest bearing and convertible into $0.07 a share after 9 months. In addition, the note holders received 1,000,000 shares for every $10,000 invested for a total of 40,100,000 shares and as a result recorded a debt discount of $424,770 of which $254,360 was amortized.

 

The Company anticipates it will generate revenue relating to third party managed carrier branded corporate websites, as well as through the sales of its products, and through the proposed test and launch of a national direct response marketing and distribution campaign for its products. The noteholders, upon repayment in full, will be entitled to 10%, on a pro-rated basis, of the aforementioned gross revenue, as adjusted, over a 12 month period following the repayment.

  

2011

 

Convertible Bridge Notes Payable:

 

In 2011, bridge noteholders converted approximately $1,156,126 of principal and $80,000 in accrued interest into 12,385,728 shares of the Company’s common stock. During the year ended December 31, 2011 the Company received $476,016 in short term convertible bridge notes payable. The notes bear interest at 10% interest and are payable upon maturity, 90-180 days from the date of the loans. During the year ended December 31, 2011, the Company repaid $30,000 of notes payable.

 

During the year ended December 31, 2011, the Company recorded amortization expense of approximately $627,000 relating to current and prior year debt discount on bridge notes payable.

 

Non-Convertible Bridge Notes Payable:

 

2011

 

In March of 2011, the principal balance of the note of approximately $125,000 and accrued interest of approximately $48,000 was converted into 1,424,028 shares of common stock of the Company.

 

Schedule of Extinguishment of Debt

DUE TO STOCKHOLDERS

 

In March of 2011, the Company settled all outstanding liabilities with Mr. Bozsnyak in exchange for 1,200,000 shares of common stock and recorded a gain on extinguishment of approximately $47,000, which is included in the accompanying consolidated statement of operations for the year ended December 31, 2011.