America West Resources, Inc.(fka AWSRQ)

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the loan agreement...

Through multiple amendments between February 11, 2011 and March 31, 2011, all debt and interest owed to a third party was modified and consolidated into one convertible loan with a principal amount of $10,765,839. This loan includes $9,125,088 of principal and $1,640,751 of accrued interest converted to principal. The modified note bears interest at the rate of 8% per annum and matures on June 1, 2014. The modified note requires monthly principal and interest payments of $221,259 beginning on July 1, 2011 with a final payment upon maturity of the unpaid principal and interest. The note is secured by essentially all of the assets of America West, subject to the Hidden Splendor (wholly-owned subsidiary) bankruptcy security requirements. As part of the loan agreement, the Company must comply with certain covenants which, among other matters, include restrictions in the amounts of capital stock and stock options that can be issued for each of the years 2011, 2012 and 2013. America West is also not allowed to incur or assume any debt or contingent liabilities not provided for in the loan agreement.


America West evaluated the modification under FASB ASC 470-50 and determined that the modification was substantial due to a substantive conversion option being added and the revised terms constituted a debt extinguishment. At any time prior to the full payment of the note, the creditor has the option to convert all or any portion of the unpaid balance of the note into shares of common stock. The first 50% of the debt is convertible at $1.00 per share, the next 25% is convertible at $1.25 per share and the last 25% is convertible at $1.50 per share. If the entire principal balance was converted, 9,330,394 shares of America West’s common stock would be issued.

http://sec.gov/Archives/edgar/data/867687/000107878211001361/amwest10q033111.htm