XML 33 R17.htm IDEA: XBRL DOCUMENT v2.4.0.6
Subsequent Events
6 Months Ended
Mar. 31, 2013
Subsequent Events [Abstract]  
Subsequent Events
Note 12 – Subsequent Events
 
Additional 10% Convertible Debentures:
 
Subsequent to the period ended March 31, 2013 the Company received additional funding of $150,000 in principal amount of 10% Convertible Promissory Notes which have not yet been converted into shares of our common stock.  The notes are convertible at any time at the option of the holders into shares of our common stock at a conversion price based on 80% of the average of the three lowest closing prices for the common stock during the ten consecutive trading days immediately preceding the conversion request, however the conversion price may not exceed $0.04, and may not be lower than $0.02 per share.  Based on the outstanding principal amount of these notes and assuming that interest accrued through December 31, 2014, the due date, the notes would be convertible into approximately 7,000,000 shares of our common stock at a conversion price of $0.02 a share.
 
Additional 6% Convertible Redeemable Note:
 
Subsequent to the period ended March 31, 2013 the Company received an advance of $50,000 in principal amount based on the 6% Convertible Redeemable Note agreement.
 
JMJ Financial Convertible Promissory Note
 
On April 11, 2013 (the “JMJ Effective Date”), the Company issued a Convertible Promissory Note to JMJ Financial (the “JMJ Note”) in the principal amount of $75,000 (the “JMJ Principal Amount”), including a 10% original issue discount, at a conversion price equal to 60% of the three (3) lowest closing price of the Company’s common stock for a period of twenty (20) trading days, but no lower than $0.03 per share.  The JMJ Note matures on April 11, 2014. The Company has an optional right of redemption at any time before ninety (90) days from the JMJ Effective Date, after which prepayment may not be made without prior approval from the lender and a one-time interest charge of 12% will be applied to the JMJ Principal Amount. The JMJ Note also provides for up to an additional $175,000 to be provided to the Company at the lender’s sole discretion.
 
The shares underlying conversion of the JMJ Note have piggyback registration rights and if the Company fails to register such shares in its next registration statement filed with the SEC a liquidated damage charge of 25% of the outstanding principal balance, but not less than $25,000, shall be added to such outstanding balance.
 
Tonaquint Convertible Promissory Note
 
On April 19, 2013, pursuant to the terms and conditions of that certain securities purchase agreement, by and between the Company and Tonaquint, Inc. (“Tonaquint), the Company issued to Tonaquint: i) a convertible promissory note (the “Tonaquint Note”) in the principal amount of $155,000 (the “Tonaquint Principal Amount”), including a 10% original issue discount, maturing on August 19, 2014 (the “Maturity Date”) and ii) a five (5) year warrant (the “Tonaquint Warrant”) to purchase that number of shares of the Company’s Common Stock equal to $62,000, convertible at a conversion price as set forth in the Tonaquint Note and exercisable at $0.06 per share, as adjusted pursuant to the terms and conditions of the Tonaquint Warrant. The Company paid fees of $5,000 incurred by Tonaquint in connection with the funding of this loan. The Company has the optional right to prepay any portion of the Tonaquint Principal Amount upon providing Tonaquint with five (5) days’ notice of such prepayment, provided that the Company must pay Tonaquint 135% of the amount of the Tonaquint Principal Amount it elects to prepay. Interest on the Tonaquint Note shall accrue at 8% per annum, provided that upon an Event of Default (as defined in the Tonaquint Note) the interest rate shall increase to 18%.
 
The conversion price for each share of Common Stock issuable pursuant to the Tonaquint Note and the Tonaquint Warrant will be $0.03 (the “Conversion Price”), subject to adjustments as set forth in the Tonaquint Note and the Tonaquint Warrant; provided, however, that, beginning on a date that is 180 days after the date of issuance of the Tonaquint Note, the Company shall pay, on a monthly basis, the greater of (i) $15,500, plus the sum of any accrued and unpaid interest as of the applicable installment date and accrued, and unpaid late charges, if any, under the Tonaquint Note as of the applicable installment date, and any other amounts accruing or owing to Tonaquint and (ii) the then outstanding balance of the Tonaquint Note divided by the number of installment dates remaining prior to the Maturity Date (each, an “Installment Amount’). Notwithstanding any other provision of the Tonaquint Note, if any Installment Amount is greater than the then outstanding balance of the Tonaquint Note, such Installment Amount shall be reduced to equal such then outstanding balance. The applicable Installment Amount may be paid in cash or in shares of the Company’s Common Stock (a “Company Conversion”). In the event of a Company Conversion the number of shares of Common Stock due to Tonaquint will be based on a conversion price that is equal to the lower of i) the Conversion Price and ii) 70% of the three (3) lowest closing volume-weighted average prices (“VWAPs”) of the Company’s Common Stock for a period of twenty (20) trading days, provided, however, that if the arithmetic average of the three (3) lowest VWAPs of the shares of Common Stock during any twenty (20) consecutive trading day period is less than $0.01, then the conversion described above will be based on 65% of the VWAPs.