Convertible Note Payable

6 Months Ended

Jun. 29, 2014

Debt Disclosure [Abstract]

Convertible Note Payable

NOTE 10 – CONVERTIBLE NOTE PAYABLE

A summary of convertible debentures payable as of June 29, 2014 and December 29, 2013 is as follows:

	June 29, 2014		December 29, 2013
Convertible note, accrue interest at 8% per annum and mature on November 23, 2013	$	-	$	50,000
Debt discount - beneficial conversion feature		-		-
Convertible note, net unamortized discount	$	-	$	50,000

On November 23, 2012, the Company entered into an unsecured Note Payable Agreement with Gary Schahet (the “Lender”) pursuant to which the Company issued $50,000 of an unsecured convertible note (the “Note Payable”).

The Note Payable accrues interest at a rate of 8% per annum and matured on November 23, 2013. The Lender may also convert all or a portion of the Note Payable at any time at a price equal to the lesser of (i) $0.25, or (ii) ninety percent (90%) of a Subsequent Financing Price (price per share paid by investors in a subsequent financing), or (iii) ninety percent (90%) of a Change of Control price (per share consideration paid in a change of control transaction).

The Company has determined the value associated with the beneficial conversion feature in connection with the Note Payable to be $50,000. The aggregate beneficial conversion feature has been accreted and charged to financing expense in the amount of $0.00 and $50,000 as of June 29, 2014 and December 29, 2013, respectively. During the twenty-six weeks ended June 29, 2014 and six months ended June 30, 2013, the Company recorded interest expense of $1,150 and $1,000, respectively. On June 11, 2014, pursuant to the terms of the Note Payable, a total of 224,600 shares of common stock were issued to the Lender at $0.25 per share in exchange for the cancellation of the outstanding principal and interest accrued thereon.

On September 9, 2013, the Company entered into a private placement (the “2013 Offering”) to raise capital by issuing units, each consisting of convertible debentures with four-year maturity (the “Debentures”) with sixty percent (60%) warrant coverage (the “Warrants”).

The Debentures accrue interest at a rate of 7% per annum and mature four years from the respective dates of issuance, which are listed on the chart below. The Debentures have a conversion price of $0.37 per unit and the Warrants have an exercise price at a thirty percent (30%) discount from the market price on the date of exercise, subject to a $0.25 per share floor, or $0.37 per warrant share on date of maturity.

The Debentures contain a mandatory conversion feature whereby the Company may require conversion of the Debentures if the Company’s Common Stock is trading at an average volume of at least 50,000 shares per day for thirty consecutive trading days, provided the average trading price of such stock is $0.75 or greater during such time. The Debentures shall automatically convert at maturity.

	June 29, 2014			December 29, 2013
Debentures, accrue interest at 7% per annum and mature on October 8, 2017	$	-		$	100,000
Debentures, accrue interest at 7% per annum and mature on November 17, 2017		100,000			100,000
Debentures, accrue interest at 7% per annum and mature on November 25, 2017		75,000			75,000
Debentures, accrue interest at 7% per annum and mature on November 26, 2017		40,000			40,000
Debentures, accrue interest at 7% per annum and mature on November 25, 2017		40,000			40,000
Debentures, accrue interest at 7% per annum and mature on February 2, 2018		50,000			-
Debt discount - beneficial conversion feature		(61,820	)		(36,269	)
Accrued interest		12,349			3,180
Convertible note, net unamortized discount	$	255,529		$	321,911

During the fiscal year ended December 29, 2013, the Company issued a total of $355,000 Debentures and had determined the value associated with the beneficial conversion feature in connection with the Debentures to be $318,731, net with the Unamortized Discount in the amount of $36,269. During the twenty-six weeks ended June 29, 2014, the Company issued an additional $50,000 Debentures and issued a total of 283,243 shares of common stock at $0.37 per share to convert $100,000 principal amount of the Debenture and related accrued interest.

As of June 29, 2014, the Company has Debenture balance totaling to $305,000 and had determined the value associated with the beneficial conversion feature in connection with the Debentures to be $243,180, net with the Unamortized Discount in the amount of $61,820 including $100,000 converted on June 5, 2014.

As of December 29, 2013, the Debenture balance with the beneficial conversion feature of $318,731 net with the Unamortized Discount balance of $36,269, and accrued interest balance of $3,180. During the twenty-six weeks ended June 29, 2014, in combination with the Debentures issued during the fiscal year ended December 29, 2013 and during the twenty-six weeks ended June 29, 2014, the Company recorded interest expense of $18,931, with accrued interest balance of $12,349, Debenture balance with the beneficial conversion feature of $255,529 net with the Unamortized Discount balance of $61,820.