XML 10 R9.htm IDEA: XBRL DOCUMENT v2.4.0.6
4. NOTES PAYABLE
9 Months Ended
Sep. 30, 2012
Debt Disclosure [Abstract]  
NOTE 4 - NOTES PAYABLE

During the nine month periods ended September 30, 2012, the Company borrowed an aggregate of $540,000 from third parties under various promissory note agreements.  The promissory notes all bear interest at 12.0% per annum, and are due on or before February 21, 2015.  No principal or interest payments have been made on these notes.  As of September 30, 2012 and December 31, 2011, the Company had total notes payable amounting to $971,882 and $753,139 respectively, net of loan fees of $56,693 and $0 respectively.

 

During the three months ended September 30,2012, the Company entered in various convertible  note agreements (included in the total above) totaling $250,000 due by September 2013 at an interest rate of 8% per annum.  The outstanding principal balances of the notes are convertible into common shares at the conversion price of $0.50 per share.   The Company also issued warrants to purchase up to 70,000 shares of common stock for $1.00 as part of the convertible note issuance.   The value attributed to the warrants was $46,094, treated as additional paid-in capital.  The warrants were using the Black Scholes model for warrants, with volatility of 308% to 493% and risk free interest rates of 0.17%.to 0.20%.   The market prices of the common stock on the dates of the grants were $0.85 to $1.10.   An additional $203,906 was recorded as additional paid-in capital for the value of the conversion feature of the notes.   The Company issued an additional 65,400 share of common stock valued at $59,086 as payment of financing fees in connection with these loans.   $150,000 was received in October 2012 and is included in Other Receivables at September 30, 2012.

 

During the three months ended September 30, 2012 the Company entered in various note agreements (included in the total above) totaling $60,000 due by May 2013 at an interest rate of 8% per annum.  After a holding period of six months, the outstanding principal balance of the notes are convertible into common shares at the conversion price equal to 55% of the average of the lowest three trading prices during the ten day trading period before the conversion.

 

The interest expense on these notes payable for the nine months ended September 30, 2012 and 2011 amounted to $116,506 and $73,980, respectively.