DISGUSTING..DD..FROM..$RITE..10Q
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company’s manufacturing facilities are being leased from the former sole shareholder of Goldfield on a month-to-month basis at $8,000 per month. The Company did not pay rent for the nine month period ended September 30, 2014 and the Company had an outstanding balance of $40,000 due on this obligation, which has been included in the Company’s accounts payable balance as of September 30, 2014.
On February 4, 2013, the Company issued Mr. Guy Peckham, the Company’s current president 2,000,000 shares of its common stock for services. The 2,000,000 shares were valued at $700,000, which is being charged to operations over the three year term of the underlying agreement.
As of June 30, 2014, certain shareholders have advanced the Company a total of $19,845 that is payable on demand and is non-interest bearing.
18
MINERALRITE CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
In connection with the acquisition of Goldfield, the Company entered into a consulting agreement with the former shareholder of Goldfield, whereby commencing May 1, 2013, the Company agreed to pay him a consulting fee of $5,000 per month over the 30 month term of the agreement. As of September 30, 2014, the Company had an outstanding balance of $38,000.
As discussed in Note 3, the Company entered into an agreement to acquire the personal goodwill of the former shareholder of Goldfield for $100,000 payable in three installments of $33,000 due April 1, 2013, $33,000 due May 1, 2013 and $34,000 due June 1, 2013. The debt was assigned to the Company’s President in June 2014 and was cancelled on July 1, 2014 through the issuance of 105,000 shares of the Company’s Series A Preferred Stock (See Note 10).
NOTE 7 – NOTES PAYABLE
On December 17, 2013, the Company borrowed $10,000 from an unrelated third party. The loan is assessed interest at an annual rate of 15% and matured on March 1, 2014, when the principal and accrued interest became fully due. Interest accrued and charged to interest expense for the three months and six months ended June 30, 2014 amounted to $370 and $370, respectively. The balance of the note and accrued interest totaling $10,427 was paid off during the three months ended June 30, 2014.
On September 17, 2014, the Company borrowed $25,000 from an unrelated third party. The loan is assessed interest at an annual rate of 12%. The loan matures on September 17, 2015 when the principal and accrued interest becomes fully due. Interest accrued and charged to interest expense for the three months and nine months ended September 30, 2014 amounted to $106 and $106, respectively. The balance of the note and accrued interest at September 30, 2014, amounted to $25,106. The principal and accrued interest became convertible on March 16, 2015.
On September 17, 2014, the Company borrowed $30,000 from an unrelated third party. The loan is assessed interest at an annual rate of 10%. A loan fee of $2,500 was assessed on the loan and is included in the principal balance and is being amortized into interest expense over the life of the loan. The loan matures on September 17, 2015 when the principal and accrued interest becomes fully due. Interest accrued and charged to interest expense for the three months and nine months ended September 30, 2014 amounted to $116 and $116, respectively. Amortization of the loan fee that was charged to interest expense for the three and nine months ended September 30, 2014 totaled $109. The balance of the note and accrued interest at September 30, 2014, net of the unamortized loan fee amounted to $30,225. The principal and accrued interest became convertible on March 16, 2015.
NOTE 8 – CONVERTIBLE DEBT
19
MINERALRITE CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
On December 31 2013, the Company borrowed $40,000 from an unrelated third party. The loan is secured by the Company’s accounts receivable. The terms of the loan includes a loan fee of $400, which is being amortized and charged to operations over the term of the loan. Under the terms of the loan, the Company was required to pay back a total of $57,600 at a rate of $444 per day (excluding weekends and bank holidays). The effective interest rate on this loan is in excess of 32% per annum. On August 19, 2014, the outstanding principal balance and accrued interest became convertible into the Company’s common stock at a conversion price equal to the 40% of the lowest trading price per share of the Company’s common stock reported for the 10 trading days prior to conversion.
On February 14 2014, the Company borrowed an additional $75,088 from same unrelated third party indicated above. The loan is secured by the Company’s accounts receivable. The Company was required to pay back a total of $111,750 at a rate of $860 per day (excluding weekends and bank holidays). The effective interest rate on this loan is in excess of 50% per annum. During the 2014, the Company has made principal payments totaling $10,836, of which the last payment of $436 was paid in April 2014. On August 19, 2014, the outstanding principal balance and accrued interest became convertible into the Company’s common stock at a conversion price equal to the 40% of the lowest trading price per share of the Company’s common stock reported for the 10 trading days prior to conversion.
During 2013 and 2014, the Company has received funds totaling $655,000 (net of reimbursable loan fees and costs) through the issuance of convertible promissory notes. In addition, the Company has also issued convertible promissory notes to vendors and other creditors in cancelation of amounts due them. These outstanding balances of these notes are convertible into a variable number of the Company’s common stock. Therefore the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts along with loan fees are being amortized to interest expense over the respective term of the related note. In determining the indicated values of the convertible notes issued in 2014, the Company used the Black Scholes Option Model with a risk-free interest rate of ranging from 0.02% to .13%, volatility ranging from 248.26% of 394,74%, trading price of $0,0002 and a conversion prices ranging from $0.00004 per share to $0.00064 per share.
Accrued interest on the above indicated notes that was charged to operations for the three months and nine months ended September 30, 2014 totaled approximately $36,689 and $117,792, respectively. Amortization of the discounts for the three months and nine months ended September 30, 2014 totaled $163,666 and $454,663, respectively, which was charged to interest expense. The balance of the convertible notes at September 30, 2014 including accrued interest and net of the discount amounted to $375,336.
A recap of the balance of outstanding convertible debt at September 30, 2014 is as follows:
9 months ended September 30, 2014
Principal balance
$ 691,707
Accrued interest
65,040
Less discounts and
Fees, net of accumulated amortization
(381,411)
Balance maturing for the period ending:
June 30, 2015
$ 375,336
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