Financial condition
As of September 30, 2015, we had cash and cash equivalents totaling $115,662, a working capital deficit of $832,724 and stockholders’ deficit of $1,379,603. We do not have a line of credit facility and have relied on short-term borrowings, convertible debt and the sale of common stock to provide cash to finance our operations. We will need to raise additional capital during the next twelve months to sustain our operations and fund future acquisitions. We plan to seek additional equity and debt financing to provide funding for operations and future acquisitions.
As a result of recent declines in the fair value of the Company’s common stock, the Company does not currently have sufficient authorized shares to satisfy in full its obligations under several existing convertible notes payable. Accordingly, certain of the note holders have the right to accelerate the payment due under the terms of their note. In addition, they have the right to require that additional shares and/or monies be paid in connection with this technical default. At September 30, 2015, the Company has accrued $31,346 of penalty interest associated with one of these notes. The Company intends to request shareholder approval to increase the number of authorized shares of common stock in the near future in order to satisfy its obligations under these notes.
At December 31, 2014 our registered independent public accounting firm expressed substantial doubt as to our ability to continue as a going concern because we have incurred substantial losses and negative cash flows from operations. Management’s plans in order to meet our operating cash flow requirements include (i) financing activities such as private placements of common stock, and issuances of debt and convertible debt instruments, (ii) the establishment of strategic relationships which we expect will lead to the generation of additional revenue or acquisition opportunities and (iii) the acquisition of complementary businesses, including Rontan.
We will need to secure additional funds to finance our operations during the next twelve months, but there are no assurances that such additional funding will be achieved or that we will succeed in our future operations. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Note 6 – Notes Payable
Convertible Notes Payable with Embedded Derivative Liabilities (Conversion Options)
During the nine months ended September 30, 2015, we entered into convertible notes payable with embedded derivative liabilities (conversion options). At September 30, 2015, these notes consist of the following:
September 30,
2015
Convertible note payable for $78,750 to LG Capital Funding, LLC (“LG Capital”) dated January 16, 2015, due January 16, 2016, of which $28,750 was repaid by conversion as of September 30, 2015, bearing interest at the rate of 8% per annum. Note may be converted by LG Capital into shares of our common stock at a conversion price equal to a 40% discount of the lowest closing bid price for 20 prior trading days including the notice of conversion date. (1)(2) $ 50,000
Convertible note payable for $66,000 to JSJ Investments Inc. (“JSJ”) dated January 26, 2015, due January 26, 2016, of which $57,495 was repaid by conversion as of September 30, 2015. The note was issued with an original issue discount of $6,000 and bears interest at 10% per annum. The note may be converted by JSJ into shares of our common stock at a conversion price equal to the lower of (i) a 40% discount of the lowest trading price during the previous twenty (20) trading days prior to the date of conversion; or (ii) a 40% discount to the lowest trading price during the previous twenty (20) trading days before the date that the note was executed. (1)(2) 8,505
Convertible note payable for $35,000 to Adar Bays, LLC (“Adar Bays”) dated January 26, 2015, due January 26, 2016, of which $22,250 was repaid by conversion as of September 30, 2015, bearing interest at the rate of 8% per annum. The note may be converted by Adar Bays into shares of our common stock at a conversion price equal to a 40% discount of the lowest closing bid price for 20 prior trading days including the notice of conversion date. (1)(2) 12,750
Convertible note payable for $250,000 to JMJ Financial (“JMJ”) of which $82,500 was deemed funded on January 28, 2015 and $27,500 was deemed funded on April 20, 2015, of which $40,930 was repaid by conversion as of September 30, 2015. The note was issued with an original issue discount of 10% of amounts funded. The principal amount matures 24 months from the date of each funding, has a one-time 12% interest charge as it was not repaid within 90 days of the effective date, and is convertible at any time at the option of JMJ into shares of our common stock at the lesser of $0.075 per share or 60% of the average of the trade price in the 25 trading days prior to conversion. JMJ has the option to finance additional amounts up to the balance of the $250,000 during the term of the note. (1)(2)(3)
69,070
Convertible note payable for $250,000 to Vista Capital Investments, LLC (“Vista”) of which $55,000 was deemed funded on February 9, 2015 and including an additional $10,000, which became due in the three-months ended September 30, 2015 as a result of the conversion price dropping below $0.01, and of which $35,265 was repaid by conversion as of September 30, 2015. The note was issued with an original issue discount of $5,000. The note matures 24 months from the date funded, has a one-time 12% interest charge as it was not repaid within 90 days following the issuance date and may be convertible at the option of Vista at any time after the issuance date into shares of our common stock at the lesser of $0.10 per share or 60% of the lowest trade occurring during the twenty five (25) consecutive trading days immediately preceding the applicable conversion date on which the holder elects to convert all or part of the note, subject to adjustment. Vista has the option to finance additional amounts, up to the balance of the $250,000, during the term of the note. (1)(2)(3) 29,735
Convertible note payable for $115,000 to KBM Worldwide, Inc. (“KBM”) dated February 17, 2015, due February 17, 2016, of which $105,670 was repaid by conversion as of September 30, 2015. The note was issued with an original issue discount of $11,000 and bears interest at 8% per annum. The note is convertible at a price per share equal to 61% of the average of the lowest three trading prices of our common stock during the 10 trading days prior to conversion. If, at any time the note is outstanding, we issue or sell, or are deemed to have issued or sold, any shares of our common stock in connection with a subsequent placement for no consideration or for a consideration per share based on a variable price formula that is less than the conversion price in effect on the date of such issuance of shares of our common stock, then the conversion price will be reduced to the amount of the consideration per share received for such issuance.(1) (2) (4)
9,330
Convertible note payable for $68,000 to EMA Financial, LLC (“EMA”) dated February 19, 2015, due February 19, 2016, of which $22,819 was repaid by conversion as of September 30, 2015. The note was issued with an original issue discount of $6,800 and bears interest at 10% per annum. The note is convertible into shares of our common stock at a price per share equal to the lower of either (i) the closing sale price of our common stock on the day prior to the closing date, and (ii) 60% of the lowest trade price of our common stock during the twenty five (25) consecutive trading days prior to conversion.(1)(2) 45,181
Convertible note payable for $220,000 to Tangiers Investment Group, LLC (“Tangiers”) of which $82,500 was deemed funded on March 10, 2015, due March 8, 2016, of which $45,000 was repaid by conversion as of September 30, 2015. The note was issued an original issue discount of 10% of amounts funded and bears interest at the rate of 10% per annum. The note is convertible at any time into our common stock, at Tangiers's option, at a conversion price equal to the lower of $0.04 or 60% of the lowest trading price of our common stock during the twenty consecutive trading days prior to the date on which Tangiers elects conversion. Tangiers has the option to finance additional amounts, up to the balance of the $220,000, during the term of the note. (1) (2) 37,500
Convertible note payable for $50,000 to Vis Vires Group Inc. (“Vis Vires”) dated April 3, 2016 bearing interest at 8% per annum, due April 2, 2016. The note is convertible at a price per share equal to 60% of the average of the lowest trading price of our common stock during the 20 trading days prior to conversion.(1) (2) (4) 50,000
Total convertible notes payable with embedded derivative liability $ 312,071
12
(1) Note contains certain representations, warranties, covenants and events of default, and increases in the amount of the principal and interest rate under the note in the event of such defaults.
(2) The embedded derivative liability associated with the conversion option of the note was bifurcated from the note and recorded at its fair value on the date of issuance and at each reporting date.
(3) We have classified this note as current due to our expectation to convert the note on a current basis.
(4) Note was fully repaid in cash on October 1, 2015 in connection with a factoring agreement as more fully discussed in Note 16 – Subsequent Events.
(1) The following common stock equivalents outstanding as of September 30, 2015 and 2014 were not included in the computation of diluted loss per share because the net effect would have been anti-dilutive:
2015 2014
Warrants 4,250,000 4,250,000
Issued but unvested shares issued for services -- 375,000
Shares issuable upon conversion of notes payable and accrued interest 424,336,540 --
Restricted stock and restricted stock units 1,500,000 --
Options 6,900,000 5,840,000
Total common stock equivalents 436,986,540 10,465,000
http://www.sec.gov/Archives/edgar/data/1011662/000121390015008261/f10q0915_globaldigital.htm
