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Debt
6 Months Ended
Jun. 30, 2013
Notes  
Debt

10% CONVERTIBLE NOTES PAYABLE

 

During the fiscal year ended 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 $7,000 for six months ended June 30, 2013 and 2012, respectively and is included in interest expense on the consolidated statement of operations and in accrued expenses on the consolidated balance sheet as of June 30, 2013 and December 31, 2012, respectively.

 

As reflected on the balance sheets, the value of the 10% convertible notes at June 30, 2013 and December 31, 2012 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.  The Notes are convertible at any time at the option of the holder into Common Stock at the conversion rate of $0.40 per share. 

 

 

BRIDGE NOTES PAYABLE

 

Convertible Bridge Notes Payable:

 

2013

Convertible Bridge Notes Payable:

 

During the six months ended June 30, 2013, the Company fully converted four short-term convertible bridge notes and partially converted three short-term convertible bridge notes totaling $142,000 into 268,849,209 shares of common stock. During the six months ended June 30, 2013, the Company received $180,500 in short term convertible bridge notes payable. The notes bear interest between 8% - 15% interest, are payable upon maturity, and are convertible between date of issuance – 180 days. As a result, the Company recorded $74,349 debt discount related to beneficial conversion feature. Several noteholders received a total of 14,575,000 shares upon issuance of the notes and as a result recorded a debt discount of $12,535 of which $3,026 was amortized.

 

In connection with the outstanding convertible notes payable, the Company has recorded amortization expense of $96,027 for the six months ended June 30, 2013 with $140,344 net discount balance remaining. As of June 30, 2013, the balance of the Company’s convertible debt amounts to $1,253,799.

 

In addition, the Company and an issuer of three convertible debentures totaling $42,290 and accrued interest of $3,571 restructured the convertible notes to a non-convertible loan totaling $55,000. The Company recorded the additional $9,139 as interest expense. During the quarter, the Company repaid $25,000 relating to this loan. The balance as of June 30, 2013 is $30,000.

 

2012

Convertible Bridge Notes Payable:

 

During the six months ended June 30, 2012, the Company repaid two short-term convertible bridge notes totaling $77,500. In addition, the Company converted a portion of a $51,000 short-term convertible bridge note totaling $45,000 into 4,500,000 shares of common stock. The Company received $118,500 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 six months ended June, 2012, the Company entered in to several short term convertible notes totaling $381,000. These notes mature in 9 months, are non-interest bearing and convertible into $0.07 a share after 9 months. In addition, the noteholders received 1,000,000 shares for every $10,000 invested for a total of 38,100,000 shares and as a result recorded a debt discount of $262,257 of which $153,603 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.

 

Loans Payable:

2013

 

On February 20, 2013, the Company entered in to short term note payable totaling $6,000. This note matures on February 27, 2013 and bears interest at 6% per annum. In addition, the Company converted two loans totaling $11,000 into 9,892,402 shares of common stock.

 

On May 24, 2013, the Company and an issuer of three convertible debentures totaling $42,290 and accrued interest of $3,571 restructured the convertible notes to a non-convertible loan totaling $55,000. The Company recorded the additional $9,139 as interest expense. During the quarter, the Company repaid $25,000 relating to this loan. The balance as of June 30, 2013 is $30,000.

 

2012

In October of 2012, the Company entered in to short term note payable totaling $5,000. This note matures on April 17, 2013 and bears interest at 8% per annum.