CONVERTIBLE DEBENTURES

12 Months Ended

Dec. 31, 2013

Debt Disclosure [Abstract]

CONVERTIBLE DEBENTURES

NOTE 6: CONVERTIBLE DEBENTURES

At December 31, 2013, the Company had convertible debt, net of premiums and discounts of $105,706 as follows:

Convertible Debentures	$	108,000
Plus:  Put Premiums		33,000
Less:  Beneficial Conversion Feature Discount		(35,294	)
Convertible Debentures, net		105,706

On May 31, 2013, the Company issued a convertible debenture for the sum of $100,000 in exchange for cash.  The Company agreed to accrue interest on the outstanding principal at the rate of twelve percent (12%) per annum beginning on May 31, 2013 and due on the maturity date of August 30, 2013.  The Company has the right of prepayment at any time.  Immediately following the date on which the Company mergers with or becomes a public company, the holder of the convertible debenture is entitled to convert all amounts due into shares of the entity which succeeds the Company (the “Successor Entity”) at the conversion price of $0.33 per share.  In addition, the convertible debenture automatically converts into common stock of the Successor Entity at $0.33 per share once the Company mergers with or becomes a public company and has entered into a firm commitment for no less than $50,000,000 of debt or equity financing.  There was no beneficial conversion feature (BCF) recorded at May 31, 2013 because the per share conversion price was greater than the fair value of the common stock per share.  On October 3, 2013, the holder of this note, exercised the right to convert the amount of $100,000 plus accrued interest of $2,992 into 312,096 shares of common stock at a rate of $0.33 per share per the terms of the agreement.

In August 2013, the Company entered into three convertible debentures for the total sum of $30,000.  The Company agreed to pay interest and outstanding principal at the rate of eight percent (8%) per annum beginning on August 12, 2013, August 12, 2013, and August 20, 2013 and due on the maturity date of one year from the date of the agreements.  Beginning on the respective dates of issuance of the debentures, the Company also has the right of prepayment at any time and the holder has the right to convert the outstanding debt into shares of Aegea, Inc.’s Common Stock at a conversion price using the volume weighted average price of Aegea, Inc.’s common stock over seven (7) trading days prior to the date of conversion then multiplying the result by 50%.  Under ASC 480 “Distinguishing Liabilities from Equity”, the notes will be considered stock settled debts since any future shares of common stock issued upon conversion will have a fair market value of $60,000.  Therefore, the Company recorded interest expense of $30,000 on the dates of the notes to reflect the put premium.  In November and December 2013, the Company converted debt from these three (3) convertible debentures totaling $30,000 and accrued interest of $536 into 166,134 shares at the conversion rate of $0.61, $0.07 and $1.12 per share per the terms of the agreements.

In October and November 2013, the Company entered into nine (9) separate convertible debentures for the total sum of $110,000.  The Company agrees to pay interest and outstanding principal at the rate of eight percent (8%) per annum on the total amount of these debentures and an additional thirty-two percent (32%) strictly in common stock on two of these debentures totaling $20,000 beginning on the date of each agreement and due on the maturity date of one year from the date of the agreements.  Beginning on the date of issuance, the Company has the right of prepayment at any time.  Beginning on the date of issuance, the holder also has the right to convert all of the outstanding debt into shares of the Company’s Common Stock at the Conversion Price using the volume weighted average price of the Company’s Common Stock over seven (7) trading days prior to the Conversion Date then multiplying the result by 50%.  These notes will be considered a stock settled debt since any future stock issued upon conversion will have a fair market value of $220,000.  The Company therefore accreted a premium of $110,000 into interest expense immediately since these notes are convertible on the issuance date.  In November and December 2013, the Company converted debt from five (5) of these convertible debentures totaling $50,000 and accrued interest of $112 into 44,742 shares at the conversion rate of $1.12 per share and two (2) of these convertible debentures totaling $40,000 and accrued interest of $381 into 555,074 shares at the conversion rate of $0.73 per share per the terms of the agreements.

On October 29, 2013, the Company issued a convertible debenture for the sum of $75,000.  The Company agrees to accrue interest on outstanding principal at the rate of twenty-five percent (25%) per annum beginning on October 29, 2013 and payable in quarterly payments at the end of each calendar quarter until the maturity date of February 25, 2014.  Upon maturity, the Holder is entitled to convert all amounts due into shares of the Company’s Common Stock at the Conversion Price of $0.33 per share, or to request repayment in cash.   A beneficial conversion feature (BCF) value was recorded as debt discount in the amount of $75,000.  Since the actual intrinsic value exceeds the face value of the debt, the BCF equals the amount of the convertible debt.  The Company recorded $39,706 of amortization of the debt discount into interest expense at December 31, 2013.  In February 2014, the maturity date of the convertible debenture was extended until August 31, 2014 (See Note 11).

In October 2013, the Company issued two (2) convertible debentures for the total sum of $13,000. The Company agreed to pay interest and outstanding principal at the rate of eight percent (8%) in cash and seventeen percent (17%) in common stock per annum on the total amount of these debentures beginning on the date of each agreement and due on the maturity date of one year from the date of the agreements. Beginning on the date of issuance, the Company has the right of prepayment at any time. Beginning on the date of issuance, the holder also has the right to convert all of the outstanding debt into shares of the Company’s Common Stock at the Conversion Price using the volume weighted average price of the Company’s Common Stock over seven (7) trading days prior to the Conversion Date then multiplying the result by 50%. These notes will be considered a stock settled debt since any future stock issued upon conversion will have a fair market value of $26,000. The Company therefore accreted a premium of $13,000 into interest expense immediately since these notes are convertible on the issuance date.

In December 2013, the Company issued a convertible debenture in the amount of $10,000 which was originally received in September 2013 as a short-term loan from a related party (See Note 5), and two (2) separate convertible debentures in the aggregate principal amount of $50,000.  The Company agreed to pay interest and outstanding principal at the rate of eight percent (8%) per annum beginning on the respective dates of the agreements, and due on the maturity date of one year from the dates of the agreements.  Beginning on the respective dates of issuance of the debentures, the Company also has the right of prepayment at any time and the holder has the right to convert the outstanding debt into shares of Aegea, Inc.’s Common Stock at a conversion price using the volume weighted average price of Aegea, Inc.’s common stock over seven (7) trading days prior to the date of conversion then multiplying the result by 50%.  Under ASC 480 “Distinguishing Liabilities from Equity”, the notes will be considered stock settled debts since any future shares of common stock issued upon conversion will have a fair market value of $120,000.  Therefore, the Company recorded interest expense of $60,000 on the dates of the notes to reflect the put premium.  On December 12, 2013, the Company converted debt from these three (3) convertible debentures totaling $60,000 and accrued interest of $194 into 824,573 shares at the conversion rate of $0.073 per share per the terms of the agreements.