Securities Purchase Agreement with Asher Enterprises, Inc. ("Asher"), for the sale of an 8% convertible note in the principal amount of $58,000 (the "Asher Note"). The financing closed on January 14, 2014. The Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on October 9, 2014. The Note is convertible into common stock, at Asher’s option, at a 45% discount to the average of the three lowest closing bid prices of the Company’s common stock during the 10 trading day period prior to conversion.
The Asher Note is subject to prepayment penalties up to a 140% multiple of the principal, interest and other amounts owing, as defined. Asher has agreed to restrict its ability to convert the Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 9.99% of the then issued and outstanding shares of common stock. The total net proceeds the Company received from this Offering was $58,000, less financing costs of $3,000.
On April 15, 2014, the Company received a notice of default demanding immediate payment of a sum representing 150% of the outstanding principal plus default interest.
10
NOTE 3 – DEBT (CONTINUED)
On March 17, 2014, the Company entered into a second Securities Purchase Agreement with Asher, for the sale of an 8% convertible note in the principal amount of $22,500 (the "Asher Note"). The Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on December 9, 2014. The Note is convertible into common stock, at Asher’s option, at a 45% discount to the average of the three lowest closing bid prices of the Company’s common stock during the 10 trading day period prior to conversion.
The Asher Note is subject to prepayment penalties up to a 140% multiple of the principal, interest and other amounts owing, as defined. Asher has agreed to restrict its ability to convert the Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 9.99% of the then issued and outstanding shares of common stock. The total net proceeds the Company received from this Offering was $22,500, less financing costs of $1,500.
The Company determined a beneficial conversion feature existed at the commitment date for both notes. A beneficial conversion feature of approximately $26,000 was recorded as a discount to the first note and a beneficial conversion feature of $10,000 was recorded as a discount to the second note and both are being amortized over the term of the loans. The unamortized debt discount recorded at March 31, 2014 for both notes totaled approximately $31,000. The Asher notes have an effective interest rate of approximately 51%.
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