XML 56 R23.htm IDEA: XBRL DOCUMENT

18. Subsequent Events

3 Months Ended

Mar. 31, 2014

Zinergy (DBA) formerly Cynergy Software, Asset Purchase

On April 4, 2014, we closed on a March 13, 2014 Asset Purchase Agreement with Cynergy Corporation, an Oklahoma corporation (“Cynergy”). Pursuant to the Purchase Agreement, we purchased substantially all of the intangible assets and certain tangible assets used in connection with Cynergy’s help desk software business, including all of its intellectual property, its business trademarks and copyrights, equipment, computers, software, machinery and accounts receivable in consideration for an aggregate of $75,000, of which $25,000 was paid at the closing, $25,000 was paid within fifteen (15) days after the closing and the remaining $25,000 was paid within forty (40) days after the closing. We did not purchase and Cynergy agreed to retain and be responsible for any and all liabilities of Cynergy Corporation. The acquisition was financed in part with a software financing agreement. The financing agreement has a lien against the software assets of Zinergy.

Zinergy Service Desk Software is very customizable for business processes. Zinergy integrates with just about every other business tool available. Help Desk Support Software, Help Desk Ticketing Software, Customer Support Software, HRIS Ticketing Solution and much more.

Jadian Enterprises, Inc., Asset Purchase Agreement

On May 9, 2014, the Company, through a newly-formed wholly-owned Illinois subsidiary, Jadian Enterprises, Inc. (“Jadian Enterprises”), closed on an Asset Purchase Agreement (“APA”) with Jadian, Inc., a Michigan corporation (“Jadian”). Pursuant to the APA, we purchased substantially all of the intangible assets and certain tangible assets used in connection with Jadian’s software business, including all of its intellectual property, its business trademarks and copyrights, equipment, computers, software, machinery and accounts receivable in consideration for an aggregate of $425,000, of which $207,945 was paid at the closing, $7,055 was settled as a result of certain offsets, including an offset for $40,760 for prepaid maintenance contracts received by the seller prior to Closing, as diminished by a credit for Accounts Receivable of $33,705, and $210,000 was financed by way of a Promissory Note (the “Jadian Note”). The terms of the Jadian Note include interest at 6% per annum, a ten (10) year amortization, full right of offset, no payments of either principal or interest for thirty (30) days after Closing and equal payments of principal and interest commencing thereafter, no prepayment penalty, and a balloon payment consisting of full payment of all amounts due after three (3) years. The Jadian Note is secured by a lien on the assets of Jadian. We did not purchase and Jadian agreed to retain and be responsible for any and all liabilities of Jadian. We did not purchase and Jadian agreed to retain and be responsible for any and all liabilities of Jadian.

The Company also agreed to provide the seller with additional earn-out rights in connection with the purchase, which provide that the seller will receive up to a maximum of $100,000 per year for the three twelve month periods following the Closing (any delinquent earn-out payment shall bear interest at the rate of 10% per annum until the delinquent amount is paid), based on the gross revenues generated by Jadian during such applicable year based on the following schedule (the “Earn-Out”):

Revenue for the Relevant Year	Earn-Out
$-0- to $500,000	$	-
$500,000 to $600,000	$	25,000
$600,000 to $700,000	$	50,000
$700,000 to $800,000	$	75,000
$800,000 or more	$	100,000

Provided that in no event shall the total amount payable to Jadian Enterprises in connection with the Earn-Out exceed $100,000 per year, or $300,000 in aggregate. Management has determined the probability of having to pay out any of these Earn-Out provisions as Medium and accordingly, has not recorded a contingent liability.

Strand, Inc., Asset Purchase Agreement

On July 31, 2014, one of the Company’s subsidiaries, Telecorp Products, Inc., through a newly-formed wholly-owned Illinois subsidiary, Stratin, Inc. (“Stratin”), closed on an Asset Purchase Agreement (“APA”) with Strand, Inc., an Illinois corporation (“Strand”). Pursuant to the APA, we purchased substantially all of the seller’s assets, including intangible assets and certain tangible assets used in connection with Strand’s software business, including all of its intellectual property, its business trademarks and copyrights, equipment, computers, software, machinery and accounts receivable in consideration for an aggregate of $185,000, of which $100,000 was paid at the closing, and $85,000 was financed by way of a Convertible Promissory Note (the “Strand Note”). The terms of the Strand Note include interest at 6% per annum, no payments of either principal or interest for thirty (30) days after Closing and monthly principal and interest payments of $2,586 commencing thereafter, no prepayment penalty, and a balloon payment consisting of full payment of all amounts due after one (1) year. In the event we default on the July 31, 2015 balloon payment, the seller, may at his option, convert the then outstanding principal and interest into the Class A Common stock of the parent company of Telecorp Products, Inc. (Epazz, Inc.) based on a twenty-five percent (25%) discount to the average closing bid price of Epazz’ common stock over the five (5) trading days prior to the date of default, or $0.00075 per share, whichever is greater. The Strand Note is secured by a lien on the assets of Strand. We did not purchase and Strand agreed to retain and be responsible for any and all liabilities of Strand. We did not purchase and Strand agreed to retain and be responsible for any and all liabilities of Strand.

The unaudited supplemental pro forma results of operations of the combined entities had the dates of the acquisitions been January 1, 2014 or January 1, 2013 are as follows:

	Combined Pro Forma:
	For the three months ended
	March 31,
	2014			2013
Revenue:	$	487,615		$	580,083

Expenses:
Operating expenses		2,915,778			818,306

Net operating loss		(2,428,163	)		(238,223	)

Other income (expense)		(1,313,019	)		(206,558	)

Net loss	$	(3,741,182	)	$	(444,781	)

Weighted average number of common shares Outstanding – basic and fully diluted		3,615,727,230			1,283,603,738

Net loss per share – basic and fully diluted	$	(0.00	)	$	(0.00	)

Debt Financing, Related Parties, GG Mars Capital, Inc.

Originated April 24, 2014, a $150,000 unsecured promissory note payable, including a $30,000 loan origination fee, owed to GG Mars Capital, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matured on June 26, 2014. In addition, a loan origination fee consisting of 10,000,000 shares of Class A Common Stock was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carried a liquidated damages fee of $10,000 upon default, which was amended and removed on September 19, 2014.

Originated May 7, 2014, a $150,000 unsecured promissory note payable, including a $25,000 loan origination fee, owed to GG Mars Capital, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matured on August 7, 2014. In addition, a loan origination fee consisting of 10,000,000 shares of Class A Common Stock was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carried a liquidated damages fee of $12,500 upon default, which was amended and removed on September 19, 2014.

Originated June 3, 2014, a $25,000 unsecured promissory note payable, including a $4,000 loan origination fee, owed to GG Mars Capital, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carried a 15% interest rate, matures on December 3, 2014. The note also carries a liquidated damages fee of $1,000 upon default, which was amended and removed on September 19, 2014.

Debt Financing, Related Parties, Star Financial Corporation

Originated April 23, 2014, an unsecured $35,000 promissory note payable, including a $7,000 loan origination fee, owed to Star Financial, a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matured on August 23, 2014. In addition, a loan origination fee consisting of 3,500,000 shares of Class A Common Stock was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carried a liquidated damages fee of $2,500 upon default, which was amended and removed on September 19, 2014.

Originated May 28, 2014, an unsecured $32,500 promissory note payable, including a $7,500 loan origination fee, owed to Star Financial, a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matures on September 28, 2014. In addition, a loan origination fee consisting of 3,250,000 shares of Class A Common Stock was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carried a liquidated damages fee of $2,500 upon default, which was amended and removed on September 19, 2014.

Originated June 3, 2014, an unsecured $5,000 promissory note payable, including a $1,000 loan origination fee, owed to Star Financial, a corporation owned by an immediate family member of the Company’s CEO. The note carried a 15% interest rate, matures on December 3, 2014. The note also carried a liquidated damages fee of $500 upon default, which was amended and removed on September 19, 2014.

Originated June 12, 2014, an unsecured $21,250 promissory note payable, including a $4,250 loan origination fee, owed to Star Financial, a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matures on October 12, 2014. In addition, a loan origination fee consisting of 2,125,000 shares of Class A Common Stock was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carried a liquidated damages fee of $2,500 upon default, which was amended and removed on September 19, 2014.

Originated June 30, 2014, an unsecured $20,000 promissory note payable, including a $3,500 loan origination fee, owed to Star Financial, a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matures on December 30, 2014. The note also carried a liquidated damages fee of $500 upon default, which was amended and removed on September 19, 2014.

Equity Based Debt Settlement Financing, Conversions into Class A Common Stock – IBC Funds, LLC

On April 2, 2014, the Company issued 151,900,000 shares of Class A Common Stock pursuant to the conversion of $15,190 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On April 7, 2014, the Company issued 200,000,000 shares of Class A Common Stock pursuant to the conversion of $30,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On April 10, 2014, the Company issued 200,000,000 shares of Class A Common Stock pursuant to the conversion of $20,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On April 16, 2014, the Company issued 200,000,000 shares of Class A Common Stock pursuant to the conversion of $20,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On April 22, 2014, the Company issued 200,000,000 shares of Class A Common Stock pursuant to the conversion of $20,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On April 28, 2014, the Company issued 200,000,000 shares of Class A Common Stock pursuant to the conversion of $20,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On May 1, 2014, the Company issued 200,000,000 shares of Class A Common Stock pursuant to the conversion of $20,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On May 6, 2014, the Company issued 200,000,000 shares of Class A Common Stock pursuant to the conversion of $10,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On May 6, 2014, the Company issued 169,123,600 shares of Class A Common Stock pursuant to the conversion of $8,456 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

Debt Conversions into Class A Common Stock – Related Parties

On April 2, 2014, the Company issued 250,000,000 shares of Class A Common Stock pursuant to the conversion of $25,000 of convertible debt held by Vivienne Passley, a related party, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On April 7, 2014, the Company issued 125,000,000 shares of Class A Common Stock pursuant to the conversion of $18,750 of convertible debt held by Star Financial Corporation, a related party, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On May 3, 2014, the Company issued 200,000,000 shares of Class A Common Stock pursuant to the conversion of $20,000 of convertible debt held by Star Financial Corporation, a related party, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On May 22, 2014, the Company issued 150,000,000 shares of Class A Common Stock pursuant to the conversion of $15,000 of convertible debt held by Star Financial Corporation, a related party, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On June 17, 2014, the Company issued 334,333,745 shares of Class A Common Stock pursuant to the conversion of $33,433 of convertible debt held by Vivienne Passley, a related party, which consisted of $26,000 of principal, $4,933 of interest and $2,500 of liquidated damages. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

Issuances of Series C Preferred Stock Granted for Services to Related Parties on Subscriptions Payable

On July 7, 2014 the Company issued 5,000,000 shares of Convertible Series C Preferred Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost that was previously granted on January 15, 2014 in consideration for a $43,000 short term promissory note. The total fair value of the common stock was $6,465 based on an independent valuation on the date of grant.

On July 7, 2014 the Company issued 1,000,000 shares of Convertible Series C Preferred Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost that was previously granted on February 8, 2014 in consideration for a $13,000 short term promissory note. The total fair value of the common stock was $1,193 based on an independent valuation on the date of grant.

On July 7, 2014 the Company issued 2,000,000 shares of Convertible Series C Preferred Stock to GG Mars Capital, a related party entity owned by Vivienne Passley, as a loan origination cost that was previously granted on March 7, 2014 in consideration for a $22,000 short term promissory note. The total fair value of the common stock was $1,942 based on an independent valuation on the date of grant.

On July 7, 2014 the Company issued 3,000,000 shares of Convertible Series C Preferred Stock to GG Mars Capital, a related party entity owned by Vivienne Passley, as a loan origination cost that was previously granted on March 26, 2014 in consideration for a $37,500 short term promissory note. The total fair value of the common stock was $2,928 based on an independent valuation on the date of grant.

On July 7, 2014 the Company issued 3,000,000 shares of Convertible Series C Preferred Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost that was previously granted on March 26, 2014 in consideration for a $25,000 short term promissory note. The total fair value of the common stock was $2,928 based on an independent valuation on the date of grant.

On July 7, 2014 the Company issued 2,000,000 shares of Convertible Series C Preferred Stock to GG Mars Capital, a related party entity owned by Vivienne Passley, as a loan origination cost that was previously granted on March 28, 2014 in consideration for a $18,750 short term promissory note. The total fair value of the common stock was $1,594 based on an independent valuation on the date of grant.

On July 7, 2014 the Company issued 3,000,000 shares of Convertible Series C Preferred Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost that was previously granted on March 28, 2014 in consideration for a $25,000 short term promissory note. The total fair value of the common stock was $2,928 based on an independent valuation on the date of grant.

Issuances of Class A Common Stock Granted for Services

On July 30, 2014 the Company issued 277,777,778 shares of Class A Common Stock to Wellington Shields Holdings, LLC, as a fee for closing on an acquisition. The total fair value of the common stock was $55,556 based on the closing price of the Company’s common stock on the date of grant.

Issuances of Class A Common Stock Granted for Services to Related Parties on Subscriptions Payable

On August 29, 2014 the Company issued 3,500,000 shares of Class A Common Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost that was previously granted on April 23, 2014 in consideration for a $35,000 short term promissory note. The total fair value of the common stock was $1,050 based on the closing price of the Company’s common stock on the date of grant.

On August 29, 2014 the Company issued 10,000,000 shares of Class A Common Stock to GG Mars Capital, a related party entity owned by Vivienne Passley, as a loan origination cost that was previously granted on April 24, 2014 in consideration for a $150,000 short term promissory note. The total fair value of the common stock was $3,000 based on the closing price of the Company’s common stock on the date of grant.

On August 29, 2014 the Company issued 10,000,000 shares of Class A Common Stock to GG Mars Capital, a related party entity owned by Vivienne Passley, as a loan origination cost that was previously granted on May 7, 2014 in consideration for a $125,000 short term promissory note. The total fair value of the common stock was $2,000 based on the closing price of the Company’s common stock on the date of grant.

On August 29, 2014 the Company issued 3,250,000 shares of Class A Common Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost that was previously granted on May 28, 2014 in consideration for a $32,500 short term promissory note. The total fair value of the common stock was $650 based on the closing price of the Company’s common stock on the date of grant.

On August 29, 2014 the Company issued 2,125,000 shares of Class A Common Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost that was previously granted on June 12, 2014 in consideration for a $5,000 short term promissory note. The total fair value of the common stock was $213 based on the closing price of the Company’s common stock on the date of grant.

Issuance of Dividends Paid via Class A Common Stock in Lieu of Cash

On September 11, 2014 the Company issued a total of 110,000,000 shares of Class A Common Stock amongst three related party Convertible Series B Preferred Stockholders pursuant to a dividend payable of $11,000 that was earned at a rate of 1.5% of the Company’s revenues for the 2013 calendar year. The total fair value of the common stock was $55,556 based on the closing price of the Company’s common stock on the date of grant.