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Replies to post #32545 on Elray Resources Inc (ELRA)
Since the filing of its quarterly report on Form 10-Q for the period ended March 31, 2104, Elray Resources, Inc., a Nevada corporation (the “Company”), has sold a total of 9,449,082.
On January 23, 2014, the Company issued a Convertible Promissory Note in the principal amount of $2.8 million to Gold Globe Investments Limited, a BVI company (“GGI”) and issued a Convertible Promissory Note in the principal amount of $1.5 million to Virtual Technology Group LLC, a Nevada limited liability company (“VTG”). These Convertible Promissory Notes (the “Notes) were issued in consideration for the sale by GGI and VTG to the Company of certain proprietary assets, intellectual property and know pursuant to a written Asset Purchase Agreement dated January 16, 2014.
Pursuant to the terms of these convertible promissory notes, the holders have the right to convert any portion of the principal amount thereof at the average of the Company’s share closing price over the last 7 trading days prior to the holder’s election to convert. The holders also have the right to assign any portion of the Notes, or assign the shares to be issued upon any conversion of the Notes, to other parties.
During the month of August 2014, VTG provided notices of its election to convert a total of $240,000 of its Note into shares, which totaled 41,022,260 shares, to the following entities:
Name of Party to whom shares were issued Price
# of Shares
Issued
Conversion
Price
VTG
6,603,774 $ 0.01
Pancar Capital LLC
6,965,174 $ 0.005743
Portspot Consultant Ltd.
8,928,571 $ 0.0056
Robert Francis Edwin Burr
9,043,928 $ 0.005529
Universal Technology Investments Limited
9,480,813 $ 0.006329
During the month of August 2014, GGI provided notices of its election to convert a total of $225,000 of its Note into shares, which totaled 18,426,822 shares, to the following entities:
Name of Party to whom shares were issued Price
# of Shares
Issued
Conversion
Price
GGI
3,747,283 $ 0.0095
Sarafese Holdings Limited
4,337,464 $ 0.019986
MBD Holdings Limited
4,981,025 $ 0.01506
Universal Development Enterprises N.V.
5,361,050 $ 0.006523
ASSETS
Current assets:
Cash
$ 99,663 $ 9,097
Accounts receivable
39,500 -
Other receivable
31,925 -
Prepaid expenses
21,952 41,452
Total current assents
193,040 50,549
Rent deposit
7,535 7,535
Intangible assets, net
2,986,112 -
Total assets
$ 3,186,687 $ 58,084
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities
$ 1,135,457 $ 1,989,369
Accounts payable – related parties
934,102 732,484
Advances from shareholders
58,491 55,991
Settlement payable
2,450,410 -
Notes payable
45,429 292,929
Convertible notes payable, net of discounts
305,357 1,417,822
Derivative liabilities - note conversion feature
4,840,121 439,424
Total current liabilities
9,769,367 4,928,019
Long – term convertible notes payable
1,334,499 -
Total liabilities
11,103,866 4,928,019
Commitments and contingencies
Shareholders' deficit:
Series A preferred stock, par value $0.001, 300,000,000 shares authorized, 0 issued and outstanding
- -
Series B preferred stock, par value $0.001, 280,000,000 shares authorized, 118,000,000 shares issued and outstanding
118,000 118,000
Series C preferred stock, par value $0.001, 10,000,000 shares authorized, 0 shares issued and outstanding
- -
Common stock, par value $0.001, 890,000,000 shares authorized, 35,721,302 and 3,405,661 shares issued and outstanding, respectively
35,719 3,406
Additional paid-in capital
9,724,407 8,038,693
Subscriptions receivable
(161,589 ) (88,000 )
Accumulated deficit during the development stage
(17,633,716 ) (12,942,034 )
Total shareholders' deficit
(7,917,179 ) (4,869,935 )
Total liabilities and shareholders' deficit
$ 3,186,687 $ 58,084
Notes payable
Notes payable at June 30, 2014 and December 31, 2013 consisted of the following:
Final Maturity
Interest Rate
June 30,
2014
December 31,
2013
C. Smith
9/18/11
8 % $ - $ 14,850
D. Radcliffe
9/18/11
8 % - 49,500
L. Kaswell
9/18/11
8 % - 99,000
M. Trokel
9/18/11
8 % - 49,500
Radcliffe Investment Partners I
9/18/11
8 % - 34,650
Morchester International Limited
7/14/12
15 % 35,429 35,429
Morchester International Limited
7/14/12
8 % 10,000 10,000
Total
$ 45,429 $ 292,929
On December 9, 2011, Elray entered into an Amended Splitrock Agreement whereby the Company acquired certain assets and liabilities of Splitrock. As part of the liabilities assumed in terms of the Amended Splitrock Agreement, the Company assumed notes payable of $292,929 bearing interest of 8% or 15% per annum. All of these notes are past due and currently in default.
On January 27, 2014, the court granted an approval of the settlement agreement with Tarpon whereby the Company would issue shares to Tarpon for resale to pay off certain liabilities. Principal of $247,500 and associated accrued interest acquired by Tarpon were reclassified to settlement payable during the six months ended June 30, 2014.
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Convertible notes payable
Convertible notes payable, net of discounts, at June 30, 2014 and December 31, 2013 consisted of the following:
June 30, 2014
December 31, 2013
Principal
Unamortized discount
Principal, net of discounts
Principal
Unamortized discount
Principal, net of discounts
a. Alan Binder
$ - $ - $ - $ 25,000 $ - $ 25,000
b. JSJ Investments, Inc.
10,670 - 10,670 38,600 - 38,600
c. JSJ Investments, Inc.
75,000 (48,146 ) 26,854 - - -
d. Asher Enterprises, Inc.
- - - 37,500 (15,492 ) 22,008
e. Asher Enterprises, Inc.
- - - 37,500 (20,989 ) 16,511
f. Asher Enterprises, Inc.
- - - 27,500 (21,689 ) 5,811
g. Asher Enterprises, Inc.
28,770 (9,048 ) 33,452 42,500 (38,298 ) 4,202
h. Asher Enterprises, Inc.
32,500 (13,382 ) 19,118 - - -
i. Asher Enterprises, Inc.
32,500 (17,574 ) 14,926 - - -
j. KBM Worldwide, Inc.
32,500 (21,982 ) 10,518 - - -
k. KBM Worldwide, Inc.
37,500 (31,847 ) 5,653 - - -
l. GEL Properties, LLC
37,000 (7,955 ) 29,045 50,000 (42,235 ) 7,765
m. LG Capital Funding, LLC
40,500 (7,922 ) 32,578 50,000 (42,075 ) 7,925
n. LG Capital Funding, LLC
37,000 (25,591 ) 11,409 - - -
o. LG Capital Funding, LLC
50,000 (38,953 ) 11,047 - - -
p. Virtual Technology Group, Ltd
1,500,000 (1,035,289 ) 464,711 - - -
q. Gold Globe Investments Ltd
2,800,000 (1,932,541 ) 867,459 - - -
r. Vista Capital Investments, LLC.
25,000 (22,671 ) 2,329 - - -
s. Rousay Holdings Ltd.
- - - 1,290,000 - 1,290,000
t. Tarpon Bay Partners, LLC.
13,050 (6,438 ) 6,612 - - -
u. ASC Recap
132,000 (24,795 ) 107,205 - - -
Total
$ 4,883,990 $ (3,244,134 ) $ 1,639,856 $ 1,598,600 $ (180,778 ) $ 883,386
The table below presents the changes of debt discount during the six months ended June 30, 2014:
December 31, 2013
$ 180,778
Additions
3,946,742
Amortization
(883,386 )
June 30, 2014
$ 3,244,134
a. On December 9, 2011, as a result of the Splitrock transaction, the Company assumed a $25,000 convertible note. The note was due on August 4, 2012 with 10% annual interest. The note was convertible to Splitrock’s common stock at $0.10 per share prior to December 9, 2011 and is now convertible to 7,545 shares of the Company’s common stock. The note was acquired by Tarpon on January 27, 2014. See Note 3.
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b. On May 31, 2013, the Company entered into a convertible promissory note with JSJ for $50,000 (the "Third JSJ Note"). The note bears interest at 10% and matured on December 2, 2013. From November 31, 2013 to November 31, 2014, the note holder has the option to convert the note to common shares in the Company at a discount of 50% of the average closing price over the last 120 days prior to conversion, or the average closing price over the last seven days prior to conversion. During the six months ended June 30, 2014, JSJ converted $27,930 of its third note to 147,000 shares of common stock.
c. On January 30, 2014, the Company entered into a convertible promissory note with JSJ for $50,000 cash (the "Fourth JSJ Note"). The note bears interest at 10% and matured on January 30, 2015. Upon the maturity, the note has a cash redemption premium of 150% of the principal amount. The note is convertible to the Company’s common shares at a discount of 50% of the average of the three lowest bids on the twenty days before the date this note is executed, or 50% of the average of the three lowest bids during the twenty trading days preceding the delivery of any conversion notice, whichever is lower.
d. On July 15, 2013, the Company entered into a convertible promissory note with Asher for $37,500 (the "Seventh Asher Note"). The note bears interest at 8% and matures on April 17, 2014. In the event that the note remains unpaid at that date, the Company will pay default interest of 22%. Asher has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 45% of the average lowest three closing bid prices during the ten trading days prior to the conversion date. During the six months ended June 30, 2014, the Company issued 163,884 shares of common stock for the conversion of the Seventh Asher Note in the amount of $37,500 and accrued interest of $1,500.
e. On August 28, 2013, the Company entered into a convertible promissory note with Asher for $37,500 (the "Eighth Asher Note"). The note bears interest at 8% and matures on May 30, 2014. In the event that the note remains unpaid at that date, the Company will pay default interest of 22%. Asher has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 40% of the average lowest three closing bid prices during the ten trading days prior to the conversion date. During the six months ended June 30, 2014, the Company issued 370,940 shares of common stock for the conversion of the Eighth Asher Note in the amount of $37,500 and accrued interest of $1,500.
f. On October 24, 2013, the Company entered into a convertible promissory note with Asher for $27,500 (the "Ninth Asher Note"). The note bears interest at 8% and matures on July 28, 2014. In the event that the note remains unpaid at that date, the Company will pay default interest of 22%. Asher has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 40% of the average lowest three closing bid prices during the ten trading days prior to the conversion date. During the six months ended June 30, 2014, the Company issued 2,583,210 shares of common stock for the conversion of the Ninth Asher Note in the amount of $27,500 and accrued interest of $1,100.
g. On November 21, 2013, the Company entered into a convertible promissory note with Asher for $42,500 (the "Tenth Asher Note"). The note bears interest at 8% and matures on August 25, 2014. In the event that the note remains unpaid at that date, the Company will pay default interest of 22%. Asher has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 40% of the average lowest three closing bid prices during the ten trading days prior to the conversion date. During the six months ended June 30, 2014, the Company issued 2,692,157 shares of common stock for the conversion of the Tenth Asher Note in the amount of $13,730.
h. On January 9, 2014, the Company entered into a convertible promissory note with Asher for $32,500 (the "Eleventh Asher Note"). The note bears interest at 8% and matures on October 13, 2014. In the event that the note remains unpaid at that date, the Company will pay default interest of 22%. Asher has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 40% of the average lowest three closing bid prices during the ten trading days prior to the conversion date.
i. On February 20, 2014, the Company entered into a convertible promissory note with Asher for $32,500 (the "Twelfth Asher Note"). The note bears interest at 8% and matures on November 24, 2014. In the event that the note remains unpaid at that date, the Company will pay default interest of 22%. Asher has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 40% of the average lowest three closing bid prices during the ten trading days prior to the conversion date.
j. On March 24, 2014, the Company entered into a convertible promissory note with KBM Worldwide Inc., an affiliate of Asher, (the "First KBM Note") for $32,500. The note bears interest at 8% and matures on January 2, 2015. In the event that the note remains unpaid at that date, the Company will pay default interest of 22%. KBM has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 40% of the average lowest three closing bid prices during the ten trading days prior to the conversion date.
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k. On May 14, 2014, the Company entered into a convertible promissory note with KBM Worldwide Inc. (the "Second KBM Note") for $37,500. The note bears interest at 8% and matures on February 16, 2015. In the event that the note remains unpaid at that date, the Company will pay default interest of 22%. KBM has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 40% of the average lowest three closing bid prices during the ten trading days prior to the conversion date.
l. On November 11, 2013, the Company entered into a convertible promissory note with GEL Properties LLC ("GEL") for $50,000. The note bears interest at 8% and matures on August 11, 2014. GEL has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 55% of the average lowest three closing bid prices during the ten trading days prior to the conversion date. During the six months ended June 30, 2014, the Company issued 1,320,244 shares of common stock for the conversion of GEL Note in the amount of $13,000.
m. On November 11, 2013, the Company entered into a convertible promissory note with LG Capital Funding LLC (the "First LG Note") for $50,000. The note bears interest at 8% and matures on August 11, 2014. LG has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 55% of the average lowest three closing bid prices during the ten trading days prior to the conversion date. During the six months ended June 30, 2014, the Company issued 941,106 shares of common stock for the conversion of LG Note in the amount of $9,500.
n. On March 6, 2014, the Company entered into a convertible promissory note with LG Capital Funding LLC (the "Second LG" Note) for $37,000. The note bears interest at 8% and matures on March 6, 2015. LG has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 50% of the average lowest three trading prices during the fifteen trading days prior to the conversion date.
o. On May 23, 2014, the Company entered into a convertible promissory note with LG Capital Funding LLC (the "First LG Backend" Note) for $50,000. The note bears interest at 8% and matures on November 11, 2014. LG has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 55% of the average lowest three trading prices during the fifteen trading days prior to the conversion date.
p. On January 23, 2014, the Company entered into a convertible promissory note with Virtual Technology Group LLC ("VTG") for $1,500,000. The note bears no interest and matures on January 23, 2017. VTG has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 100% of the average of the closing bid prices for the seven trading days prior to the conversion date when the Company’s shares are traded in the OTCQB or during the ten trading days prior to the conversion date when the Company’s shares are traded in other exchange.
q. On January 23, 2014, the Company entered into a convertible promissory note with Gold Globe Investments Limited for $2,800,000. The note bears no interest and matures on January 23, 2017. GGIL has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 100% of the average of the lowest three trading prices during the seven trading days prior to the conversion date when the Company’s shares are traded in the OTCQB or during the ten trading days prior to the conversion date when the Company’s shares are traded in other exchange.
r. On April 15, 2014, the Company entered into a convertible promissory note with Vista Capital Investments, LLC ("Vista") for $250,000. The note has an original issue discount of $25,000. The note bears interest at 12% and matures 2 years from the date of each payment of the principal from Vista. In the event that the note remains unpaid at maturity date, the outstanding balance shall immediately increase to 120% of the outstanding balance. Vista has the right to convert the outstanding balance into the Company’s common stock at a rate equal to the lesser of $0.008 or 60% of the lowest trade occurring during the twenty-five consecutive trading days preceding the conversion date. $25,000 was received and recorded on April 23, 2014.
s. On April 25, 2012, the Company entered into a promissory note with Rousay Holdings Ltd. (“Rousay”) for $10,000,000 (“Original Rousay Note”). During year 2012, $2 million of the promissory note had been funded and $710,000 has been repaid. On October 8, 2012, the Company issued a new promissory note to Rousay to replace the Original Rousay Note, where the face of the note is $1,290,000. The new note was due on April 26, 2013 with an interest rate of 20% per annum. On the event of default, interest rate increases to 25% per annum. On April 26, 2013, Rousay has an option of receiving an amount of restricted common stock of the Company equal to 10% of the then outstanding and issued common stock of the Company in lieu of payment of principal and interest. The note was acquired by Tarpon on January 27, 2014. See Note 3.
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t. On February 3, 2014, the Company entered into a convertible promissory note with Tarpon Bay Partners, LLC (“Tarpon”) in the amount of $25,000. The promissory note was issued in terms of a court granted and approved settlement agreement with Tarpon on January 27, 2014. See Note 3. The note bears interest at 10% and matures on October 2, 2014. Tarpon has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 50% of the lowest closing bid price in the 30 trading days prior to the conversion date, or $0.031, whichever is lesser. For interest that accrues pursuant to this note, the conversion price shall be at $0.001 regardless of the trading price. During the six months ended June 30, 2014, the Company issued 508,417 shares of common stock for the conversion of Tarpon Note in the amount of $11,950.
u. On February 3, 2014, the Company entered into a convertible promissory note with ASC Recap LLC (“ASC”) in the amount of $132,000. The promissory note was issued in terms of a court granted and approved settlement agreement with Tarpon on January 27, 2014. See Note 3. The note bears interest at 10% and matures on August 3, 2014. ASC has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 50% of the lowest closing bid price in the 20 trading days prior to the conversion date. For interest that accrues pursuant to this note, the conversion price shall be at $0.001 regardless of the trading price. The conversion price should also be adjusted if the Company issued any shares, prior to the conversion of the note, at a price lower than the conversion price.
Due to the conversion feature of JSJ, Asher, KBM, GEL, LG, VTG, Vista, Tarpon, ASC and GGIL notes, the actual number of shares of common stock that would be required if a conversion of the note was made through the issuance of common stock cannot be predicted, and the Company could be required to issue an amount of shares that may cause it to exceed its authorized common share amount. As a result, the conversion feature requires derivative accounting treatment and has been bifurcated from the note and is “marked to market” each reporting period through the statements of operations.
The conversion feature of the convertible notes issued during the six months ended June 30, 2014 was valued at $4,884,579 on the issuance date. As a result, these notes were fully discounted and the fair value of the conversion feature in excess of the principal amount of the note of $1,795,095 was expensed immediately as additional interest expense.
On January 1, 2014, the Company issued 51,032 shares of its common stock to settle accounts payable of $23,000 to Portspot Consultants Limited ("Portspot"). These shares were valued at $26,782 based on the market price on the issuance date. The Company recorded a loss of $3,782 related to the settlement.
On January 20, 2014, the Company issued 100,000 shares of its common stock to Gregory Caputo and Donald Radcliffe for consulting services over the prior six months. These shares were valued at $61,000 based on the market price on the issuance date.
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On January 25, 2014, the Company entered into an acquisition agreement with BetTek Inc. to acquire intellectual property and know-how to be utilized to build a virtual online horse racing product and other allied products. The Company issued 106,650 shares of its common stock for the acquisition. The closing of this transaction is contingent upon the Company’s satisfaction of the product and the product is currently under construction. The Company valued these shares based on the market price on the issuance date and recorded $73,589 subscription receivable for the shares issued.
On May 12, 2014, the Company issued 1,000,000 shares of its common stock to Gregory Caputo for a six-month consulting agreement. These shares were valued at $100,000 based on the market price on the issuance date.
On May 15, 2014, the Company issued 500,000 shares of its common stock to Harllon Holdings LLC for consulting services over the prior one month. These shares were valued at $25,250 based on the market price on the issuance date.
On June 15, 2014, the Company issued 500,000 shares of its common stock to JFEN Holdings LLC for consulting services. These shares were valued at $8,750 based on the market price on the issuance date.
On June 24, 2014, the Company issued 2,500,000 shares of its common stock to settle accounts payable of $50,000 to Mr. Goodman, 2,000,000 shares of its common stock to settle accounts payable of $40,000 to Pancar Capital LLC, and 2,000,000 shares of its common stock to settle accounts payable of $40,000 to Portspot.
On June 24, 2014, the Company issued 1,000,000 shares of its common stock to BetTek Inc. for consulting services by Altaire Inc. These shares were valued at $15,000 based on the market price on the issuance date.
On June 24, 2014, the Company issued 3,500,000 shares of common stock valued at $52,500, based on the stock price of grant date, to its six consultants for earlier services provided.
On June 24, 2014, the Company issued 2,000,000 shares of its common stock valued at $30,000, based on the stock price of grant date, to its directors for earlier services provided.
During the six months ended June 30, 2014, the Company issued 8,715,595 shares of common stock for the conversion of notes (see Note 5) and 11,364 shares of common stock, valued at $375 for legal services received for the note conversions.
During the six months ended June 30, 2014, the Company issued Tarpon 3,331,000 shares of its common stock according to the settlement agreement discussed in Note 3. The shares were valued at $454,500 based on the market price on the issuance date. $205,803 net proceeds from the sale were used to pay the original creditors of the claims Tarpon acquired. The remaining $258,697 was recorded as loss on settlement.
During the six months ended June 30, 2014, the Company issued 5,000,000 shares for cash of $150,000.
