CONVERTIBLE NOTES PAYABLE

3 Months Ended

Mar. 31, 2013

CONVERTIBLE NOTES PAYABLE [Abstract]

CONVERTIBLE NOTES PAYABLE

NOTE 5 - NOTES PAYABLE

Convertible Notes:

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. 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%. The Company sold $3,086,388 of notes in 2011 through November 2012. 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, which occured on February 21, 2013.

By their original terms, the Notes and accrued interest become 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's stock became public. The Company recorded the beneficial conversion feature as a discount to the note and is amortizing the amount to interest over the term of the notes. Approximately $211,600 has been amortized through March 31, 2013. During the three months ended March 31, 2013, there were $830,984 of Notes and accrued interest converted into 417,827 common shares at conversion prices between $1.82 and $2.30 per share. The unamortized debt discount and beneficial conversion feature that was expensed upon these conversions was $346,685.

Promissory Note:

During the quarter ended March 31, 2013, the Company issued a promissory note with an aggregate face amount of $200,000, along with a warrant to purchase 50,000 shares of the Company's common stock. This note bears interest at 5% per annum, is unsecured, and has a maturity date which is concurrent with the date that the current common stock offering closes, which is expected to occur in the second quarter of 2013. The holder of the note received additional consideration in the form of a fully vested stock warrant for the purchase of 50,000 common shares at an exercise price of $0.50 per share exercisable for three years from the date of execution of the note. The Company determined the relative fair value of the warrant to be approximately $44,000 which has been recorded as a discount to the note payable and is being amortized over approximately three months (Note 8).