DEBT

6 Months Ended

Jun. 30, 2012

Debt

NOTE 3. DEBT

Debt relating to continuing operations:

Debt relating to Iconic Brands, Inc. consisted of the following at June 30, 2012 and December 31, 2011:

		2012			2011
Convertible promissory note, interest at 7%, due September 13, 2014, net of unamortized discount of $36,375 and $44,619, respectively	(A)	$	63,625		$	55,381
Loans payable, interest at 0%, due on demand (see Note 9)	(C)		114,800			112,300
Convertible promissory note, interest at 6%, due June 30, 2010 (see Note 9)	(B)		30,000			30,000
Convertible promissory notes, interest at 12%, due June 30, 2010 (see Note 9)	(B)		70,000			70,000
Convertible promissory note, interest at 8% (default rate of 22%), due February 7, 2011 (in default)	(A)		56,500			56,500
Total			334,925			324,181
Less current portion of debt			(271,300	)		(268,800	)
Long term debt		$	63,625		$	55,381

(A) The $100,000 face value of the 7% convertible note outstanding at June 30, 2012 is convertible into shares of the Company’s common stock at a price of $0.50 per share. The $56,500 face value of the 8% convertible note outstanding at June 30, 2012 is convertible into shares of the Company’s common stock at a variable conversion price equal to 60% of the Market Price, as defined.

(B) These promissory notes were issued to the same entity lender on April 15, 2010. The notes provide that upon an event of default that is not cured within the allotted time, the holder shall have the option to convert the outstanding principal and interest into shares of common stock at a conversion price of $0.00001 per share. The Company has defaulted on all three notes and has failed to cure the defaults within the time allotted specified in the note default provisions.

While the Company has not received any notice or indication from the lender of its intention to convert the $100,000 debt (or a portion thereof), if the lender does elect to convert the $100,000 of debt and related accrued interest at June 30, 2012 at the $0.00001 per share conversion rate it would require the Company to issue 12,255,200,000 common shares to this lender (or over 99% of the 12,309,561,412 shares of Company Common Stock outstanding after this lender’s conversion). However, by virtue of his ownership of the 1 share of Series A Preferred Stock, Mr. DeCicco would retain voting control of the Company.

Also, the notes provided for the grant of a total of 1,200,000 warrants exercisable at an exercise price of $0.20 per share for 3 years. The $51,600 fair value of the warrants (valued using the Black-Scholes option pricing model and the following assumptions: stock price of $0.092 per share, exercise price of $0.20 per share, term of 3 years, risk-free interest rate of 1.62%, and expected volatility of 100%) and the remaining $45,400 intrinsic value of the beneficial conversion feature arising from the default provisions in the three promissory notes due to this lender described in the two preceding paragraphs (the total debt discounts are limited to the amount of proceeds allocated to the convertible instrument) were recorded initially as a debt discount and amortized as interest expense over the term of the notes ended June 30, 2010.

(C) In the six months ended June 30, 2012, the two entity lenders described in Note 9 paid audit and accounting fees totaling $2,500 on behalf of the Company.

At June 30, 2012, the debt relating to Iconic Brands, Inc. is due as follows:

Past due	$	271,300
Year ending June 30, 2013		-
Year ending June 30, 2014		-
Year Ending June 30, 2015		100,000
Total		371,300
Less debt discounts		36,375
Net	$	334,925

Accrued interest payable on debt relating to Iconic Brands, Inc. consisted of:

	June 30, 2012		December 31, 2011
Convertible note, interest at 7%	$	19,560	$	16,070
Convertible note, interest at 6%		3,981		3,083
Convertible notes, interest at 12%		18,571		14,383
Convertible note, interest at 8% (default rate of 22%)		20,185		13,987
Total	$	62,297	$	47,523

Debt relating to discontinued operations:

Debt relating to the Company’s wholly-owned subsidiary Iconic Imports consisted of the following at June 30, 2012 and December 31, 2011:

		2012			2011
Promissory note, interest at 20%, due January 29, 2009 (in default)		$	100,000		$	100,000
Convertible promissory notes, interest at 10%, due
October 25, 2007 to November 27, 2007 (in default)	(A)		75,000			75,000
Promissory notes, interest at 13%, due
May 31, 2010 (in default)	(B)		220,000			220,000
Due Donald Chadwell (5% stockholder at
December 31, 2011), interest at 0%, no repayment terms			763,000			763,000
Due Richard DeCicco (officer, director and 30% stockholder
at December 31, 2011) and affiliates, interest at 0%,			714,338			714,338
no repayment terms
Convertible notes, interest at 7% (default rate of 14%),
due August 27, 2012 to November 27, 2012, net of
unamortized discounts of $3,908 and $10,194, respectively	(A)		146,092			139,806
Total			2,018,430			2,012,144
Less current portion of debt			(395,000	)		(395,000	)
Long term debt		$	1,623,430		$	1,617,144

(A) $225,000 total face value of convertible notes outstanding at June 30, 2012 is convertible into shares of the Company’s common stock at a price of $0.50 per share.

(B) The 13% promissory notes specify that the loan proceeds were for the purpose of purchasing containers of Danny DeVito’s Premium Limoncello and that the holder will be repaid the principal from the receivables of the sales of the Danny DeVito Premium Limoncello product as they are collected by the Company.

At June 30, 2012, the debt relating to Iconic Imports, Inc. is due as follows:

Past due	$	395,000
Year ending June 30, 2013		150,000
No repayment terms (due two significant stockholders)		1,477,338
Total		2,022,338
Less debt discounts		3,908
Net	$	2,019,240

Accrued interest payable on debt relating to Iconic Imports, Inc (included in current liabilities of discontinued operations in the accompanying consolidated balance sheets) consisted of:

	June 30, 2012		December 31, 2011
Convertible note, interest at 7%	$	64,585	$	59,351
Promissory note, interest at 20%		59,998		50,026
Promissory notes, interest at 13%		73,318		59,058
Convertible promissory notes, interest at 10%		43,488		39,748
Total	$	241,389	$	208,183