XML 49 R10.htm IDEA: XBRL DOCUMENT

NOTES PAYABLE

3 Months Ended

Mar. 31, 2013

NOTE 5 NOTES PAYABLE

Notes Payable – Related Parties

Funds are advanced to the Company from various related parties, including from Mr. Robert Lutz. Other shareholders fund the Company as necessary to meet working capital requirements and expenses. The following is a summary of amounts due to related parties, including accrued interest separately recorded, as of March 31, 2013:

Related party	Nature of relationship	Terms of the agreement	Principal amount	Accrued Interest
Lutz, Investments LP	Mr. Lutz is the CEO of t he Company	Convertible note payable due March 31, 2012. The note is convertible at $0.19 per share. As of March 31, 2013 the note has not been converted and is past due.	$200,000	$16,614

Dr. Philip J. Rubinfeld	Mr. Rubinfeld is a member of the Board of Directors	See “Third Quarter Secured Promissory Notes” As of March 31, 2013 $100,000 of this note remains due.	100,000	10,934

Araldo A. Cossutta	Mr. Cossutta is a member of the Board of Directors	See “Third Quarter Secured Promissory Notes” As of March 31, 2013 $75,000 of this note remains due.	75,000	8,200

MAH Holding, LLC	MAH Holding, LLC has provided previous lines of credit to affiliates of WMT.	Unsecured note with interest accrued at 10% per annum, due on demand.	40,620	7,640
Total			$415,620	$43,388

Notes Payable

The following is a summary of amounts due to unrelated parties, including accrued interest separately recorded, as of March 31, 2013:

Note Payable	Terms of the agreement	Principal Amount	Discount	Principal Net of Discount	Accrued Interest
March 4, 2011 Note Payable	$223,500 note payable; (i) interest accrues at 13% per annum; (ii) maturity date of September 4, 2011; (iii) $20,000 fee due at maturity date with a $1,000 per day fee for each day the principal and interest is late. This note is currently the subject of litigation (see Note 3 “Significant Transactions -"Litigation)	$223,500	-	$223,500	$36,803

Purchase Order Financing Agreement	$50,000 note payable; (i) interest accrues at 10% per annum; (ii) proceeds used to purchase inventory; (iii) lender will be reimbursed $25 per gram as the inventory is sold. As of March 31, 2013 the lender is due $16,575 of sales proceeds.	38,822	-	38,822	1,660

Third Quarter 2012 Secured Subordinated Promissory Notes	Seventeen notes (including two with related parties mentioned above) in the original aggregate principal amount of $1,055,000; (i) 5% interest due on maturity date; (ii) maturity date of October 12, 2012; (iii) after the maturity date interest shall accrue at 18% per annum and the Company shall pay to the note holders on a pro rata basis, an amount equal to twenty percent of the sales proceeds received by the Company and its subsidiary, WCI, from the sale of surgical powders, until such time as the note amounts have been paid in full. As of March 31, 2013 fifteen of these notes remain due, of which thirteen are with unrelated parties in the aggregate principal amount of $610,000.	860,000	-	860,000	94,024

September 19, 2012 Promissory Note	$20,000 note payable; (i) interest accrues at 10% per annum; (ii) maturity date of December 31, 2012; (iii) warrant to purchase 20,000 shares of common stock at an exercise price of $0.15 per share to be issued upon default. As of December 31, 2012 this note was not paid and the 20,000 warrants were issued to the note holder. As of March 31, 2013 the $20,000 balance is past due.	20,000	-	20,000	1,063

September 28, 2012 Promissory Note	$51,300 note payable (i) interest accrues at 10% per annum; (ii) maturity date of December 31, 2012; (iii) default interest rate of 15 per annum. As of March 31, 2013 this note is past due.	51,300	-	51,300	2,594

October 1, 2012 Promissory Note	$75,000 note payable; (i) interest accrues at 9% per annum; (ii) the principal is due and payable as follows: (a) $10,000 on October 31; and (b) $15,000 each on November 30, 2012 December 31, 2012 and January 31, 2013 and (c) $20,000 on February 28, 2013 the maturity date; (iii) the Company will issue to Lender five-year warrant to purchase a total of 225,000 shares of common Stock at a price of $0.15 per share. As of March 31, 2013, the $15,000 payment due in January was paid and the due date of the final $20,000 payment extended. As of the date of this filing the note and all related accrued interest has been paid in full.	20,000	-	20,000	265


December 7, 2012 Promissory Note	$75,000 note payable; (i) interest accrues at 10% per annum; (ii) the principal is due and payable as follows: (a) $10,000 each on January 15, 2013 and February 15, 2013; and (b) $15,000 on March 15, 2013 and (c) $20,000 each on April 15, 2013 and May 15, 2013 the maturity date; (iii) the Company will issue to Lender five-year warrant to purchase a total of 350,000 shares of common Stock at a price of $0.075 per share. As of March 31, 2013 $35,000 in principal has been paid. As of the date of this filing an additional payment of $20,000 has been made leaving a balance due of $20,000.	40,000	-	40,000	178

December 11, 2012 Promissory Note	$50,000 note payable; (i) interest accrues at 9% per annum; (ii) the principal is due and payable as follows: (a) $5,000 each on February 11, 2013 and March 11, 2013; and (b) $10,000 on April 11, 2013 and May 11, 2013 and (c) $20,000 on June 11, 2013 the maturity date; (iii) the Company will issue to Lender five-year warrant to purchase a total of 225,000 shares of common Stock at a price of $0.09 per share. Additionally, the Company will i ssue warrants to purchase 375,000 common shares at $0.09 exercisable only upon an event of default. As of March 31, 2013 $10,000 in principal has been paid. As of the date of this filing an addition $20,000 in principal has been paid leaving a balance of $20,000 due.	40,000	-	40,000	1,411

June 21, 2011 Note	Convertible promissory note in the principal amount of $560,000; (i) interest accrues at 12% per annum; (ii) maturity date of June 21, 2015; (iii) upon closing the Company issued to the lender 100,000 shares of Common Stock valued at $60,000 and two warrants to purchase 250,000 shares of common stock each, with exercise prices of $0.50 $1.00; (iv) the debt is convertible at a 30% discount on the fair market value of the stock. The Company measured the fair value of the warrants and the beneficial conversion feature of the note and recorded a discount against the principal of the note. (see Note 6 "Significant Transaction - Forbearance Agreement")	200,000	-	200,000	-

March 2012 Convertible Notes	Three convertible notes in the principal amount of $25,000, $50,000 and $100,000 respectively; (i) issued between March 3 and March 22, 2012; (ii) convertible at $0.19 per share; (iii) interest accrues at 5% per annum; (iv) interest accrues at 9% per annum after the due dates between March 31 and June 30, 2012. As of the date of this filing these notes are past due.	175,000	-	175,000	13,468

Second Quarter 2012 Convertible Notes	Two $25,000 notes; (i) issued on April 3 and April 23, respectively; (ii) convertible at $0.19 per share; (iii) interest accrues at 5% per annum; (iv) interest accrues at 9% per annum after the due dates of April 30 and June 30, 2012, respectively. On September 20, 2012, 222,420 shares of Common Stock were issued in conversion of the April 23 note. As of the date of this filing the April 3 note is past due.	25,000	-	25,000	1,941

May 30, 2012 Convertible Note	Note in the principal amount of up to $275,000 including an approximate original issue discount of 10%; (i) maturity date one year from the effective date (ii) convertible at the lesser of $0.19 or a 30% discount on the fair market value of the Company's common stock; (iv) one time interest charge of 5% will be applied if the note is not repaid within the first 90 days.	78,577	(32,736)	45,841	4,125

February 19, 2013 Convertible Note	Two $250,000 promissory notes; (i) due upon the Company’s achievement of certain revenue targets; (ii) interest accrues at 10% per annum (iii) convertible at the option of the holder into shares of the Company’s common stock at a conversion price of $.07 per share, or into an equivalent number of shares of the Company’s Series C Preferred Stock.	500,000	-	500,000	5,616

Total		$2,272,199	$(32,736)	$2,239,463	$163,148

2010 Debentures

On March 30, 2010, the Company entered into a Securities Purchase Agreement and, pursuant to this agreement, a total of $1,000,000 in principal amount of convertible debentures (the “Debentures”), with a maturity date of March 2013, could be sold to investors. The Debentures could be converted into shares of the Company’s common stock at a conversion price equal to seventy percent (70%) of the lowest closing bid price per share for the twenty (20) trading days immediately preceding the date of conversion; provided that no holder could convert Debentures into, nor shall the Company issue to such holder, shares of common stock to the extent that the conversion would result in a holder and its affiliates together beneficially owning more than 4.99% of the then issued and outstanding shares of the Company’s common stock. This ownership restriction could be waived, however, by a holder upon sixty-one (61) days prior written notice.

The Debentures could be redeemed by the Company at any time or from time to time at a price equal to (x) one hundred twenty percent (120%) of the principal amount of the Debenture if the Debenture is called for redemption prior to the expiration of six months from the issuance date, or one hundred thirty one percent (131%) if called for redemption thereafter, plus (y) interest accrued through the day immediately preceding the date of redemption.

During 2010, the Company issued Debentures in the aggregate principal amount of $695,000. In accordance with ASC Topic No. 470-20-25-4, a discount in the amount of $297,857 was calculated as the total value of the beneficial conversion feature, which was amortized over the term of the debt. The unamortized discount balance at December 31, 2011 was $160,349 for a total debenture balance, net of discount, of $534,651. In addition, debt issuance costs of $102,850 were deferred and amortized over the term of the debt. The unamortized balance of deferred loan costs at December 31, 2011 was $54,878. Interest expense on the debentures accrued at 6% per annum. The Company made a cash payment on accrued debenture interest in the amount of $61,113 in the fourth quarter of 2011 leaving an accrued interest balance of $5,000 as of December 31, 2011.

In April of 2012, 4 million shares of common stock were issued to Commercial Holding, AG, a related party and holder of the debentures, in conversion of the $695,000 of debentures and all remaining accrued interest payable.

2012 Debentures

On March 27, 2012, the Company entered into a Securities Purchase Agreement and sold $400,000 of convertible debentures with a maturity date of March 27, 2015, to an unrelated party for $360,000. The Debentures may be converted into Common Stock at a conversion price equal to seventy percent (70%) of the lowest closing bid price per share for the twenty (20) trading days immediately preceding the date of conversion; provided that no holder may convert Debentures into, nor shall the Company issue to such holder, shares of common stock to the extent that the conversion would result in a holder and its affiliates together beneficially owning more than 4.99% of the then issued and outstanding shares of Common Stock. Additionally, the Securities Purchase Agreement entitled the purchaser to 200,000 shares of Common Stock

In accordance with ASC Topic No. 470-20-25-4, a discount in the amount of $171,429 was calculated as the total value of the beneficial conversion feature, which is being amortized over the term of the debt. Additionally, a discount of $35,676 was allocated to 200,000 shares of Common Stock based on the relative fair market value of the stock and convertible debt at the time of the agreement.

In October of 2012, the debenture holder elected to convert $30,000 in principal into 571,428 shares of Common Stock and in November the holder converted an addtional $20,000 of principal into 816,326 shares of Common Stock. In February of 2013, the holder converted $50,000 of principal into 1,587,301 shares of Common Stock. A pro rata share of the discount associated with the debentures was expensed with each issuance of Common Stock.

The unamortized discount balance of the debentures outstanding at March 31, 2013 is $125,532 for a total debenture balance, net of discount, of $174,468. In addition, total debt issuance costs of $115,350 have been deferred and are being amortized over the term of the debt. The unamortized balance of deferred loan costs at March 31, 2013 is $7,969. Interest expense on the debentures accrues at 6% per annum. The balance of accrued interest payable at March 31, 2013 is $23,122.