NOTES PAYABLE

3 Months Ended

Sep. 30, 2013

Notes to Financial Statements

NOTES PAYABLE

NOTE 4 – NOTES PAYABLE

Notes payable consist of the following:

	September 30, 2013
Note payable to an individual, a shareholder of the Company – related party, interest at 10.0% per annum, no monthly payments, matures on April 1, 2014, convertible into common stock of the Company at a price of $0.50 per share	$         60,000
Notes payable to five (5) individuals and two corporate entities, original issue discount of 50%, interest accrued as of September 30, 2013 was $110,075, no monthly payments, matures on December 31, 2013, convertible into common stock of the Company at a price of $0.25 per share, collateralized (pari passu basis with other OID note holders) by Mr. West’s equity ownership in the case of default along with a default conversion price per share reduction to $0.01	242,740
Total notes payable	$          302,740

The Company entered into Original Issue Discount (OID) notes payable with various individuals and business entities. The Company entered into OID’s totaling $172,740 from July 1, 2013 through August 13, 2013. Of this amount $115,000 was recognized through the assumption of various payables due and owing by AmerElite. As part of the Stock Purchase and Reorganization Agreement (the SPA) RWI was required to fund escrow in order to pay for various liabilities of the Company in order to complete the reverse acquisition. Assumption and conversion of accounts payable, notes payable of the Company, along with various payments through escrow and extension payments of the letter of intent and amendments, the Company paid $150,000. The remainder of the OID entered into was $67,740, was received in cash. A total of $242,740 in OID note payables have been issued to 7 investors. The OID notes are discounted 50% requiring payment of $2.00 for each $1.00 borrowed. The OID notes are collateralized (pari passu) by Mr. West’s shares. Upon default the collateralized shares shall be transferred pro-rata. Upon default OID holders may exercise the default conversion rate of $0.01 per share for all principal and interest due, a change in control would occur upon default. OID note holders prior to maturity, December 31, 2013, may exercise their entire principal and interest or a portion thereof into common stock at $0.25 per share. OID note holders prior to maturity may convert into 1,941,920 shares of common stock of the Company, and upon default into 48,548,000 shares of common stock of the Company, along with a distribution of Mr. West’s shares.

During 2012 the Company converted $230,000 in accounts payable into a demand note payable accruing interest at 2% per annum. The Company recognized no beneficial conversion feature expense associated with the note. The note payable contained the right to convert into common stock of the Company at $0.125 per share (which expired on September 12, 2103), or 46,000,000 shares of common stock (pre-reverse stock split adjusted). The conversion feature was considered to be fair market value of the Company’s common stock at the time. On August 15, 2013 the holders of the $230,000 demand note payable instructed the Company that they wanted to convert the entire principal and interest at the time into common stock of the Company. The holders received 2,032,672 shares of common stock for the principal and interest. The Company recognized $20,269 in interest expense in the conversion for shares as well as the extinguishment of $230,000 in debt.