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Debt
9 Months Ended
Sep. 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 $10,400 and $3,500 for nine and three months ended September 30, 2013, respectively and is included in interest expense on the unaudited condensed consolidated statement of operations and in accrued expenses on the unaudited condensed consolidated balance sheet as of September 30, 2013 and December 31, 2012, respectively.

 

As reflected on the balance sheets, the value of the 10% convertible notes at September 30, 2013 and December 31, 2012 amounted to approximately $114,000 and are classified as current.  The Notes are convertible at any time at the option of the holder into Common Stock at the conversion rate of $0.14 per share. 

 

 

BRIDGE NOTES PAYABLE

 

Convertible Bridge Notes Payable:

 

2013

Convertible Bridge Notes Payable:

 

During the nine months ended September 30, 2013, the Company fully converted four short-term convertible bridge notes and partially converted four short-term convertible bridge notes totaling $155,110 into 313,849,209 shares of common stock. During the nine months ended September 30, 2013, the Company issued $310,760 convertible bridge notes payable in which $275,500 was received in cash, $6,300 was additional interest applied to the principal and $28,960 was an assignment of debt from loans 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 $306,145 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 $2,965.

 

In connection with the outstanding convertible notes payable, the Company has recorded amortization expense of $168,122 for the nine months ended September 30, 2013 with $198,508 net discount balance remaining. As of September 30, 2013, the balance of the Company’s convertible debt amounts to $1,312,993.

 

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. The Company repaid $30,000 relating to this loan. The balance of $25,000 was again restructured and assigned to a third party on July 10, 2013. The balance which was classified as a convertible note includes interest of $3,960 for a total of $28,960. 

 

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 portion of a $51,000 short-term convertible bridge note totaling $45,000 into 4,500,000 shares of common stock. 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 noteholders 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.

 

Loans Payable:

 

2013

 

On February 20, 2013, the Company entered in to short term note payable totaling $6,000. This note matured on February 27, 2013 and bears interest at 6% per annum. In addition, the Company converted the $6,000 from February 2013 and the $5,000 loan from October 2012 totaling $11,000 into 9,892,402 shares of common stock.

 

2012

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