Thursday, March 07, 2013 10:48:08 AM
The Company was delinquent on certain filings and payments of required federal and state payroll taxes. The Company has provided an estimate of related penalty assessments and interest. The amount of payroll taxes, penalties and interest due at September 30, 2012 and December 31, 2011 totaled $872,270 and $797,422, respectively.
On August 9, 2012, the Company settled litigation with the holder of a $150,000 note bearing interest at 10% which was in default. Principal and accrued interest of the note was $300,497 as of August 9, 2012. Under the terms of the settlement, the Company will pay the note holder $300,000 with 8% interest accruing on the unpaid balance. The Company made two payments of $25,000 on August 13, 2012 and one payment of $30,000 on September 26, 2012. The Company will make 8 additional quarterly payments of $30,000 commencing on January 1, 2013 and continuing through October 1, 2014. A final payment of $4,265 is due on January 1, 2015. In the event of any default of this settlement agreement, the note holder can enter a stipulated judgment against the Company, CEO Barry Schwartz and President, Lisa Bershan, as individuals, in the amount of $1,197,190. The Company recognized a gain on settlement in the amount of $497 in the three months ending September 30, 2012.
On March 6, 2012, the Board of Directors authorized the Company to execute a Convertible Revolving Grid Note for a principal sum of up to $1,000,000 with CEO Barry Schwartz and President, Lisa Bershan. The Grid note bears interest at 10% per year and may be converted into common stock of the Company at a conversion price of $0.0022 any time before March 6, 2013. Neither Mr. Schwartz nor Ms. Bershan has advanced capital under the terms of the grid note as of November 14, 2012.
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