Montavo, Inc.(fka MTVO)

[dmoinvest]

No Debt? Start with Note 4 (see below), then read Note 5 and Note 6 to get a sense of their total obligations of Convertible Notes, Warrants, Options, Shares for Services and this was at June 30, 2011.

There was no revenue, no money, just debt! BK was not far off, only chance was product development. Only way MDA with software company to develop product was through payment with shares for services in the amount of $500k plus previous debt. Only way to satisfy MDA was with RS, otherwise they wouldn't have done the deal. If they didn't do the deal, BK was inevitable.

Like it or not, this is what needed to be done.

For the quarterly period ended June 30, 2011

http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=8112079

Note 4. Notes Payable

In September 2008, we entered into a promissory note with a stockholder in the principal amount of $25,000 with a stated interest rate of 12%. Interest expense related to this note was not material in the three months ended June 30, 2011 and 2010 and the period from inception to June 30, 2011.

On January 16, 2009, we entered into a convertible promissory note for $4,950 at a stated interest rate of 5% per annum. On January 16, 2009, we entered into a convertible promissory note for $5,000 at a stated interest rate of 7% per annum. On January 26, 2009, we entered into a convertible promissory note for $5,062 at a stated interest rate of 5%. In April 2009, we entered into a convertible promissory note to a related party for $3,200 at a stated interest rate of 5% per annum. The notes and related accrued interest were convertible into shares of our common stock at $0.20 per share at the option of the holder. In March 2009, the first three notes discussed above were converted into 75,060 shares of common stock at a conversion rate of $0.20 per share. On April 15, 2009, we issued 16,221 shares of our common stock at $0.20 per share pursuant to the conversion of a related party promissory note with a principal balance of approximately $3,200.

On April 6, 2009, we entered into a convertible promissory note for $23,000 at a stated rate of 7% per annum. The note and related accrued interest were convertible into shares of our common stock at $0.10 per share beginning May 30, 2009. In April 2009, the notes and accrued interest were converted into 232,683 shares of common stock.

On September 8, 2009, we entered into a convertible promissory note for $20,000 at a stated interest rate of 15%. The promissory note is due within twenty-four months after date of issue, and on demand thereafter. The note is convertible into shares of our common stock at $0.10 per share. Terms of the convertible note provided that the conversion price of the notes be reduced in the event of subsequent financings. This provision expired as of September 8, 2010. In accordance with the authoritative guidance related to convertible notes with down-round protection, we recorded a fair value liability for price adjustable convertible notes of $12,330 at issuance. The fair value liability was revalued quarterly utilizing Black-Scholes valuation model computations with the increase or decrease in fair value being reported in the statement of operations as other income (expense). At June 30, 2010, the Black-Scholes assumptions utilized were as follows: stock price of $0.015, volatility of 162%, risk-free rate of 0.42%, expected life of 0.75 year, dividend yield of 0.0% and we recorded a decrease in the fair value liability of approximately $600 and $3,000 as other income during the three and six months ended June 30, 2010, respectively.

On March 1, 2010, we entered into a promissory note for $7,000 at a stated interest rate of 8% per annum, payable upon demand by the holder. We repaid the promissory note in May 2010.

On March 8, 2010, we entered into a promissory note for $6,000 at a stated interest rate of 8% per annum, payable upon demand by the holder. On March 8, 2010, in accordance with the terms of the promissory note, we issued 100,000 shares of our common stock to the holder as loan fees. The loan was repaid in March 2010.
--------------------------------------------------------------------------------
On April 15, 2010, we entered into a promissory note for $3,000 at a stated interest rate of 8% per annum, payable upon demand by the holder. On April 15, 2010, in accordance with the terms of the promissory note, we issued 100,000 shares of our common stock to the holder as loan fees. In December 2010, this promissory note was settled in connection with a transaction with the same holder. See discussion below.

On May 4, 2010, we entered into a convertible promissory note for $40,000 at a stated interest rate of 12%. The note was due on November 3, 2010, and carries a default rate of interest of 18%. The note is convertible into shares of our common stock at a variable conversion price, such that the average of the lowest Trading Prices (as determined by averaging the highest closing bid and lowest closing ask prices) of the Company’s common stock as listed on the OTCBB during the five (5) trading day period ending one (1) day prior to the date the conversion notice is sent by the holder to the Company multiplied by 35%. In accordance with the authoritative guidance related to convertible notes with down-round protection, we recorded a fair value liability for price adjustable convertible notes of $34,000 at issuance. The fair value liability is revalued quarterly utilizing Black-Scholes valuation model computations with the increase or decrease in fair value being reported in the statement of operations as other income (expense). At June 30, 2010, the Black-Scholes assumptions utilized were as follows: stock price of $0.015, volatility of 162%, risk-free rate of 0.22%, expected life of 0.4 year, dividend yield of 0.0% and we recorded an increase in the fair value liability of approximately $8,000 as other expense for the three months ended June 30, 2010. At June 30, 2011, the embedded derivative fair value liability did not materially change.

On July 28, 2010, we entered into a promissory note for $10,200 at a stated interest rate of 10% per annum, or $12,000, whichever is higher.

In August and September 2010, we entered into convertible promissory notes in the aggregate amount of $40,000 together with two-year warrants to purchase 3,750,000 shares of our common stock at an exercise price of $0.02 per share. The promissory notes bear interest at a rate of 12% per annum, and the notes are due in one year. Upon default, the interest rate is 18%. As the Company is currently seeking to raise financing under a private placement transaction, the promissory notes contain an optional conversion clause whereby, during a 30-day period after the completion of such private placement transaction raising in excess of $250,000, the holders may either convert the promissory note at the share price of such private placement transaction or demand repayment out of the proceeds of such financing. Under the terms of the promissory note agreement, if the share price of such private placement is below $0.02 (the strike price of the warrants), the strike price of the warrants will be downward adjusted to such share price of the private placement. In accordance with the authoritative guidance related to instruments with down-round protection, we recorded a fair value liability of $16,800 at issuance. The fair value liability is revalued quarterly utilizing Black-Scholes valuation model computations with the increase or decrease in fair value being reported in the statement of operations as other income (expense). At June 30, 2011, the Black-Scholes assumptions utilized were as follows: stock price of $0.01, volatility of 162%, risk-free rate of 0.19%, expected life of 1.25 years, dividend yield of 0.0% and we recorded a decrease in the fair value liability of approximately $1,800 and $28,000 for the three and six months ended June 30, 2011, respectively, as other income.

In August 2010, we entered into a promissory note for $1,000 at a stated interest rate of 8% per annum, payable upon demand by the holder. In December 2010, we entered into a convertible promissory note with the same holder in the aggregate amount of $25,000 together with two-year warrants to purchase 1,875,000 shares of our common stock at an exercise price of $0.02 per share, whereby we received $20,000 in cash and the April promissory note for $3,000, the August $1,000 promissory note and $1,000 in accounts payable to the same party were settled. The December 2010 promissory note bears interest at a rate of 12% per annum, and the note is due in one year. Upon default, the interest rate is 18%. As the Company is currently seeking to raise financing under a private placement transaction, the promissory note contains an optional conversion clause whereby, during a 30-day period after the completion of such private placement transaction raising in excess of $250,000, the holder may either convert the promissory note at the share price of such private placement transaction or demand repayment out of the proceeds of such financing. Under the terms of the promissory note agreement, if the share price of such private placement is below $0.02 (the strike price of the warrants), the strike price of the warrants will be downward adjusted to such share price of the private placement. In accordance with the authoritative guidance related to instruments with down-round protection, we recorded a fair value liability of approximately $25,000 at issuance. The fair value liability is revalued quarterly utilizing Black-Scholes valuation model computations with the increase or decrease in fair value being reported in the statement of operations as other income (expense). At June 30, 2011, the Black-Scholes assumptions utilized were as follows: stock price of $0.01, volatility of 162%, risk-free rate of 0.45%, expected life of 1.5 years, dividend yield of 0.0% and we recorded a decrease in the fair value liability of approximately $1,000 and $17,600 for the three and six months ended June 30, 2011, respectively, as other income.

In September 2010, we transferred $20,000 of accounts payable due to our CEO to a third party. These amounts were then converted into a convertible promissory note for $20,000 together with two-year warrants to purchase 1,500,000 shares of our common stock at an exercise price of $0.02 per share. The promissory note bears interest at a rate of 12% per annum, and the note is due in one year. Upon default, the interest rate is 18%. As the Company is currently seeking to raise financing under a private placement transaction, the promissory note contains an optional conversion clause whereby, during a 30-day period after the

--------------------------------------------------------------------------------
completion of such private placement transaction raising in excess of $250,000, the holder may either convert the promissory note at the share price of such private placement transaction or demand repayment out of the proceeds of such financing. Under the terms of the promissory note agreement, if the share price of such private placement is below $0.02 (the strike price of the warrants), the strike price of the warrants will be downward adjusted to such share price of the private placement. In accordance with the authoritative guidance related to instruments with down-round protection, we recorded a fair value liability of approximately $8,300 at issuance. The fair value liability is revalued quarterly utilizing Black-Scholes valuation model computations with the increase or decrease in fair value being reported in the statement of operations as other income (expense). At June 30, 2011, the Black-Scholes assumptions utilized were as follows: stock price of $0.01, volatility of 162%, risk-free rate of 0.19%, expected life of 1.25 years, dividend yield of 0.0% and we recorded a decrease in the fair value liability of approximately $1,000 and $14,100 for the three and six months ended June 30, 2011, respectively, as other income.

In October 2010, we transferred $25,000 of accounts payable due to our CEO to a third party. These amounts were then converted into a convertible promissory note for $25,000 at a stated interest rate of 12%, together with two-year warrants to purchase 1,875,000 shares of our common stock at an exercise price of $0.02 per share. The promissory note is due within one year. Upon default, the interest rate is 18%. As the Company is currently seeking to raise financing under a private placement transaction, the promissory notes contain an optional conversion clause whereby, during a 30-day period after the completion of such private placement transaction raising in excess of $250,000, the holders may either convert the promissory note at the share price of such private placement transaction or demand repayment out of the proceeds of such financing. Under the terms of the promissory note agreement, if the share price of such private placement is below $0.02 (the strike price of the warrants), the strike price of the warrants will be downward adjusted to such share price of the private placement. In accordance with the authoritative guidance related to instruments with down-round protection, we recorded a fair value liability of $25,000 at issuance. The fair value liability is revalued quarterly utilizing Black-Scholes valuation model computations with the increase or decrease in fair value being reported in the statement of operations as other income (expense). At June 30, 2011, the Black-Scholes assumptions utilized were as follows: stock price of $0.01, volatility of 162%, risk-free rate of 0.45%, expected life of 1.25 years, dividend yield of 0.0% and we recorded a decrease in the fair value liability of approximately $1,100 and $17,500 for the three and six months ended June 30, 2011, respectively, as other income.

In October and December 2010, we entered into convertible promissory notes in the aggregate amount of $37,500 together with two-year warrants to purchase 2,812,500 shares of our common stock at an exercise price of $0.02 per share. The promissory notes bear interest at a rate of 12% per annum, and the notes are due in one year. Upon default, the interest rate is 18%. As the Company is currently seeking to raise financing under a private placement transaction, the promissory notes contain an optional conversion clause whereby, during a 30-day period after the completion of such private placement transaction raising in excess of $250,000, the holders may either convert the promissory note at the share price of such private placement transaction or demand repayment out of the proceeds of such financing. Under the terms of the promissory note agreement, if the share price of such private placement is below $0.02 (the strike price of the warrants), the strike price of the warrants will be downward adjusted to such share price of the private placement. In accordance with the authoritative guidance related to instruments with down-round protection, we recorded a fair value liability of $28,000 at issuance. The fair value liability is revalued quarterly utilizing Black-Scholes valuation model computations with the increase or decrease in fair value being reported in the statement of operations as other income (expense). At June 30, 2011, the Black-Scholes assumptions utilized were as follows: stock price of $0.01, volatility of 162%, risk-free rate of 0.19%, expected life of 1.25 years, dividend yield of 0.0% and we recorded an increase in the fair value liability of approximately $24,600 for the three months ended June 30, 2011 as other expense, and a decrease in the fair value liability of approximately $1,700 for the six months ended June 30, 2011 as other income.

In February 2011, we entered into a convertible promissory note in the amount of $25,000 together with two-year warrants to purchase 1,875,000 shares of our common stock at an exercise price of $0.02 per share. The promissory note bears interest at a rate of 12% per annum, and the note is due in one year. Upon default, the interest rate is 18%. As the Company is currently seeking to raise financing under a private placement transaction, the promissory note contains an optional conversion clause whereby, during a 30-day period after the completion of such private placement transaction raising in excess of $950,000, the holder may either convert the promissory note at the share price of such private placement transaction or demand repayment out of the proceeds of such financing. Under the terms of the promissory note agreement, if the share price of the first $750,000 of such private placement is below $0.02 (the strike price of the warrants), the strike price of the warrants will be downward adjusted to such share price of the private placement. In accordance with the authoritative guidance related to instruments with down-round protection, we recorded a fair value liability of approximately $15,000 at issuance. The fair value liability is revalued quarterly utilizing Black-Scholes valuation model computations with the increase or decrease in fair value being reported in the statement of operations as other income (expense). At June 30, 2011, the Black-Scholes assumptions utilized were as follows: stock price of $0.01, volatility of 162%, risk-free rate of 0.45%, expected life of 1.5 years, dividend yield of 0.0% and we recorded a decrease in the fair value liability of approximately $1,000 six months ended June 30, 2011 as other income. The change in fair value of the embedded derivative liability for the three months ended June 30, 2011 was not material.
--------------------------------------------------------------------------------
In March 2011, we entered into a convertible promissory note in the amount of $5,000 together with two-year warrants to purchase 375,000 shares of our common stock at an exercise price of $0.02 per share. The promissory note bears interest at a rate of 12% per annum, and the note is due in one year. Upon default, the interest rate is 18%. As the Company is currently seeking to raise financing under a private placement transaction, the promissory note contains an optional conversion clause whereby, during a 30-day period after the completion of such private placement transaction raising in excess of $250,000, the holder may either convert the promissory note at the share price of such private placement transaction or demand repayment out of the proceeds of such financing. Under the terms of the promissory note agreement, if the share price of the first $250,000 of such private placement is below $0.02 (the strike price of the warrants), the strike price of the warrants will be downward adjusted to such share price of the private placement. In accordance with the authoritative guidance related to instruments with down-round protection, we recorded a fair value liability of approximately $3,000 at issuance. The fair value liability is revalued quarterly utilizing Black-Scholes valuation model computations with the increase or decrease in fair value being reported in the statement of operations as other income (expense). At June 30, 2011, the Black-Scholes assumptions utilized were as follows: stock price of $0.01, volatility of 162%, risk-free rate of 0.80%, expected life of 2 years, dividend yield of 0.0%. The change in fair value of the embedded derivative liability for the three months ended June 30, 2011 was not material.

In April 2011, we entered into a convertible promissory note in the amount of $3,000 together with two-year warrants to purchase 225,000 shares of our common stock at an exercise price of $0.02 per share. The promissory note bears interest at a rate of 12% per annum, and the note is due in one year. Upon default, the interest rate is 18%. As the Company is currently seeking to raise financing under a private placement transaction, the promissory note contains an optional conversion clause whereby, during a 30-day period after the completion of such private placement transaction raising in excess of $750,000, the holder may either convert the promissory note at the share price of such private placement transaction or demand repayment out of the proceeds of such financing. Under the terms of the promissory note agreement, if the share price of the first $750,000 of such private placement is below $0.02 (the strike price of the warrants), the strike price of the warrants will be downward adjusted to such share price of the private placement. . In accordance with the authoritative guidance related to instruments with down-round protection, we recorded a fair value liability of approximately $1,500 at issuance. The fair value liability is revalued quarterly utilizing Black-Scholes valuation model computations with the increase or decrease in fair value being reported in the statement of operations as other income (expense). At June 30, 2011, the Black-Scholes assumptions utilized were as follows: stock price of $0.01, volatility of 162%, risk-free rate of 0.45%, expected life of 1.75 years, dividend yield of 0.0%. The change in fair value of the embedded derivative liability was not material.

In April, May and June 2011, we entered into convertible promissory notes in the aggregate principal amount of $41,500 together with two-year warrants to purchase 3,112,500 shares of our common stock at an exercise price of $0.02 per share. The promissory note bears interest at a rate of 12% per annum, and the note is due in one year. Upon default, the interest rate is 18%. As the Company is currently seeking to raise financing under a private placement transaction, the promissory note contains an optional conversion clause whereby, during a 30-day period after the completion of such private placement transaction raising in excess of $250,000, the holder may either convert the promissory note at the share price of such private placement transaction or demand repayment out of the proceeds of such financing. Under the terms of the promissory note agreement, if the share price of the first $250,000 of such private placement is below $0.02 (the strike price of the warrants), the strike price of the warrants will be downward adjusted to such share price of the private placement. In accordance with the authoritative guidance related to instruments with down-round protection, we recorded a fair value liability of approximately $16,000 at issuance. The fair value liability is revalued quarterly utilizing Black-Scholes valuation model computations with the increase or decrease in fair value being reported in the statement of operations as other income (expense). At June 30, 2011, the Black-Scholes assumptions utilized were as follows: stock price of $0.01, volatility of 162%, risk-free rate of 0.45%, expected life of 2.0 years, dividend yield of 0.0%. The change in fair value of the embedded derivative liability was approximately $4,200 for the three months ended June 30, 2011.