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Replies to post #12556 on Bitzio, Inc. (fka BTZO)
01/07/15 2:12 PM
.0001's have returned because people wanted a quick flip and are tired of waiting. Just another day in pinkie land. Holding for now. GLTA
NOTE 7 – CONVERTIBLE NOTES PAYABLE
Exchange of Convertible Debentures
Immediately subsequent to its purchase of 500,000 shares of Series B Preferred Stock on November 18, 2013 (see note 9), 112359 Factor Fund, LLC (“Factor Fund”) entered into assignment agreements with seven holders of eight convertible promissory notes issued by the Registrant in 2012 and 2013. The aggregate of the principal balance and accrued interest on the notes was $779,591, and all of the notes were past due and otherwise in default. The assignment agreements provided that Factor Fund transferred the 500,000 shares of Series B Preferred Stock to the note holders, and the note holders assigned the eight notes to Factor Fund.
Immediately thereafter, Factor Fund entered into eight Exchange Agreements with the Registrant. The Exchange Agreements provided that Factor Fund would surrender the eight convertible promissory notes and receive in exchange eight Amended and Restated Convertible Debentures (“A&R Debentures”). The principal amount of each A&R Debenture equalled approximately 128.3% of aggregate principal and accrued interest surrendered in exchange for the A&R Debenture. The primary terms of the A&R Debentures are:
? Interest will accrue on the principal balance at the lesser of 8% per annum or the applicable federal rate.
? Principal and interest are due on December 31, 2015.
? The Company may prepay the A&R Debentures at any time, but must issue, as a prepayment penalty, common stock with a market value equal to 5% of the principal amount prepaid.
? The holder may convert the principal and interest accrued on the A&R Debentures into common stock at a conversion price equal to 100% of the average of the five (5) lowest closing market prices for the common stock for the thirty trading days preceding conversion, but may not convert into a number of shares that would result in the holder owning beneficially more than 4.99% of the Registrant’s outstanding shares.
? The holder may not sell the shares issued on conversion at a rate that exceeds 20% of the average monthly trading volume for the Company’s Common Stock.
The Company determined per ASC 470-50-40-10a, that the fair value of the embedded conversion option in the reissued convertible notes as a result of the change in conversion price and term, increased by more than 10% from the original notes. Therefore, debt extinguishment accounting rules apply. Accordingly, the reissued convertible notes payable were initially recorded at fair value, with a loss on extinguishment of debt of $220,408 for the difference in the fair value of the new notes compared to the carrying value of the old notes.
During the nine months ended September 30, 2014 $285,162 of principal was converted into 318,693,890 shares of the Company’s common stock. The balance of the note as of September 30, 2014 is $702,522 with accrued interest of $54,045.
On March 4, 2014, the Company issued an 8% convertible promissory note in the aggregate principal amount of $37,500 to an accredited investor. The note has a maturity date of December 10, 2014. The note is convertible into shares of our common stock at a conversion price of 59% of the average of the three (3) lowest per share market values during the ten (10) trading days immediately preceding a conversion date. During the nine months ended September 30, 2014, the Company recorded an interest expense of $1,225. As of September 30, 2014, the note and accrued interest was fully repaid.
On April 14, 2014, the Company issued an 8% convertible promissory note in the aggregate principal amount of $37,500 to an accredited investor. The note has a maturity date of January 18, 2015. The note is convertible into shares of our common stock at a conversion price of 59% of the average of the three (3) lowest per share market values during the ten (10) trading days immediately preceding a conversion date. During the nine months ended September 30, 2014, the Company recorded an interest expense of $1,398. The Company accounted for the conversion feature as a derivative valued at $48,244, of which $37,500 was recorded as a debt discount to be amortized over the life of the note. The remaining $10,744 was expensed immediately to interest expense. The balance of the note as of September 30, 2014 is $37,500 with accrued interest of $1,398.
On May 5, 2014, the Company issued an 8% convertible promissory note in the aggregate principal amount of $32,500 to an accredited investor. The note has a maturity date of February 9, 2015. The note is convertible into shares of our common stock at a conversion price of 59% of the average of the three (3) lowest per share market values during the ten (10) trading days immediately preceding a conversion date. During the nine months ended September 30, 2014, the Company recorded an interest expense of $1,059. The Company accounted for the conversion feature as a derivative valued at $36,411, of which $32,500 was recorded as a debt discount to be amortized over the life of the note. The remaining $3,911 was expensed immediately to interest expense. The balance of the note as of September 30, 2014 is $32,500 with accrued interest of $1,059.
