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Notes Payable
12 Months Ended
Dec. 31, 2011
Debt  
Debt Disclosure [Text Block]

5.  Notes Payable

 

Series 2011-A Convertible Notes

 

During May 2011, the Company issued a Series 2011-A convertible note totaling $100,000 which bears interest at the rate of 15% and is due on November 16, 2012. The note is convertible at the option of the holder into Common Stock at a conversion price of $0.05 per share. Interest is payable on maturity, or earlier upon conversion, acceleration, or redemption.

 

The Series 2011-A convertible note was sold pursuant to a referral agreement that provided for a cash payment equal to 10% of each note and 2,000,000 common stock warrant exercisable for $0.05 per share for a period of five years for each $100,000 increment of Series 2011 convertible notes. A total of $100,000 in convertible notes were placed pursuant to this referral agreement.

 

Series 2011-B Convertible Notes

 

During August and November 2011, the company issued Series 2011-B convertible notes totaling $400,000 which bear interest at the rate of 8% and are due five years from the date of issuance. The notes are convertible at the option of the holder into Common Stock at a conversion price of $0.06 per share. Interest is payable semi-annually in arrears, on January 15 and July 15 of each calendar year, beginning January 15, 2013, or earlier upon conversion, acceleration or redemption.  

 

The Series 2011-B convertible notes were sold pursuant to a referral agreement that provided for a cash payment equal to 10% of each note and warrants to acquire 1,000,000 shares of common stock exercisable at $0.06 per share for a period of five years for each $200,000 increment of Series 2011-B convertible notes. A total of $400,000 in convertible notes were placed pursuant to this referral agreement and, accordingly, the Company paid $40,000 in referral fees and committed to issue warrants to acquire 2,000,000 shares of common stock exercisable at $0.06 per share. With respect to the $200,000 in 2011-B convertible notes placed in August 2011, the Company’s President and Chief Operating and Financial Officer, received $20,000 in referral fees related to his assistance in placing the notes. See Note 9: Related Party Transactions.

 

Series 2010 Convertible Notes

 

The Series 2010 convertible notes bear interest at the rate of 0.08% and are due December 31, 2016. The notes are convertible at the option of each holder into Common Stock at an initial conversion price of $0.182 per share, subject to adjustments in the event of stock splits, dividends or the like, and new share issuance. Pursuant to the terms of the Merger Agreement between Cascade and SMI, on April 1, 2010 Cascade effected a share dividend of 2.64 additional shares of Cascade Common Stock for each one outstanding share of Cascade Common Stock (the “Stock Dividend”). The Stock Dividend increased the shares of common stock issued and outstanding from 52,354,223 to approximately 190,569,371 (after giving effect to share roundups). After completing the Stock Dividend the conversion price on the convertible notes adjusted from approximately $0.182 per share to $0.05 per share.

 

The Series 2010 convertible notes are automatically converted into Common Stock on the first trading day following the date on which all of the following shall have occurred (and, as applicable, be continuing):  

 

(i)

six months shall have elapsed from the initial issuance of the convertible notes (the “Restricted Period”) and

 

(ii)

either:

 

(a)

the closing price of the Common Stock on the principal exchange or inter-dealer quotation system on which it is traded shall be $0.25 (after giving effect to the Stock Dividend) or greater for 22 consecutive trading days (with the earliest such testing period commencing after the end of the Restricted Period) during which period the arithmetic mean of the trading volume of shares of Common Stock shall be at least 100,000 per trading day, or

 

(b)

a transaction shall have been consummated in which not less than $15 million in aggregate amount of Common Stock shall be issued by Cascade for consideration, the fair market value of which is not less than $15 million; provided, in each case that the Common Stock so issued to the Holder may be transferred without limitation as to amount pursuant to Rule 144 or pursuant to an effective resale registration statement under the Securities Act of 1933.



In October, 2010, $100,000 of Series 2010 convertible notes payable elected to convert their notes to common stock and were issued a total of 2,000,000 shares of common stock. In May and July, 2011, an additional $100,000 of Series 2010 convertible notes payable elected to convert their notes to common stock and were issued a total of 2,000,000 shares of common stock.