CONVERTIBLE NOTES PAYABLE

12 Months Ended

Dec. 31, 2012

CONVERTIBLE NOTES PAYABLE [Abstract]

CONVERTIBLE NOTES PAYABLE

NOTE 5 - CONVERTIBLE NOTES PAYABLE

Beginning in October 2011, the Company began selling 5% promissory notes (the "Notes") along with shares of the Company's common stock. Investors received one share of common stock for each one dollar of principal amount loaned to the Company. Through December 31, 2011, the Company sold Notes with a face amount of $537,500 along with 354,947 shares of common stock for cash of $537,500. In this placement, the Company sold $25,000 of Notes and common stock to a related party management company (Note 9). The Company allocated the proceeds received between the Notes and the common stock based on their relative fair value at issuance. The fair values of the Notes and common stock issued was determined to be $456,875 and $80,625, respectively. Consequently the Company recorded a discount of $80,625 at the issuance date of the Notes, with an offsetting increase to paid-in capital on the Company's balance sheet. The debt discount is being amortized to interest expense using the effective interest method over the terms of the related Notes.

Between January 1, 2012, and November 1, 2012, the Company sold additional Notes along with 1,615,515 shares of common stock for total proceeds of $2,446,337. The Company also issued Notes along with 67,637 shares of common stock to third-parties for $102,500 of services provided to the Company. The Company allocated the proceeds and services received between discount on Notes and additional paid-in capital of $1,040,601 of which $88,936 of debt discount was amortized for the year ended December 31, 2012 (Note 8).

The Notes bear interest at 5% per annum, they are unsecured, and their maturity dates are seven years from their issue date. The effective interest rate on the Notes is approximately 15%. Quarterly payments will be applied against accrued interest first, then principal. The minimum aggregate quarterly payment to Note holders is 2.5% of the Company's portion of gross quarterly revenues from each restaurant. The first minimum quarterly payment will be due 45 days after the first calendar quarter in which the Denver restaurant opens on February 21, 2013.

By their original terms, the Notes and accrued interest becomes convertible, at the option of the holder, upon the Company's common stock becoming publicly traded. The conversion price is 80% of the 20-day average closing sales price on the date conversion is elected, but not less than $0.50 per share. The Company has determined that there is a beneficial conversion feature associated with the Notes in the amount of $283,500 related to the intrinsic value of the conversion feature before the Company stock became public. The Company recorded the beneficial conversion feature as a discount to the note and will amortize over the term of the notes. Approximately $7,900 has been amortized as of December 31, 2012. In December 2012, there were $1,477,191 of Notes and accrued interest converted to 993,376 common shares at the conversion prices between $1.41 and $1.78 per share. The unamortized debt discount and beneficial conversion feature that was expensed upon these conversions was $623,076.

Subsequent to year end, additional notes and accrued interest of $641,420 were converted to 389,614 common shares.