At December 31, 2006 we owed a total of $584,813 under a convertible debenture, notes payable and notes payable - related party, an increase of $334,361 or approximately 134%. These amounts included:
• $125,000 due at each of December 31, 2006 and 2005 related to the litigation involving Mr. Webster as described earlier in this report under Part I., Item 3. Legal Proceedings,
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On May 4, 2004 a judgment was granted against the Company in a lawsuit filed in the Superior Court for Orange County, California. The suit sought collection of legal fees and costs totaling $50,714 including accrued interest at the rate of 10% per annum, attorney’s fees and court costs. The balance of the judgment is $61,637 at December 31, 2006 and is included in accounts payable. This liability was subsequently converted to equity of the Company (see Note 9).
NOTE 9 - SUBSEQUENT EVENTS
On January 1, 2007, the Company entered into an employment agreement with an individual to act as Chief Executive and Finance Officer of the Company through December 31, 2012. The agreement calls for a salary of: $200,000 per year for 2007; $250,000 per year for 2008; $300,000 per year for 2009; $350,000 per year for 2010; $400,000 per year for 2011; and, $450,000 per year for 2012. In addition, a total of 12,000,000 common stock options were granted, to be issued at the rate of 500,000 shares per quarter, fully vested on the first day of the quarter, exercisable for five years at a price of $0.07 per share.
On January 1, 2007, the Company granted its Chief Executive and Finance Officer 500,000 options to purchase common stock at $0.07 per share in accordance with an employment agreement.
On January 22, 2007, the Company’s Chief Executive and Finance Officer and a related party company elected to convert all of the Company’s outstanding 1,637 shares of Series AA Preferred Stock into 16,370,000 common stock shares.
On February 1, 2007, the Company entered into an agreement with Drexal Investments, Inc. (Drexal), whereby the Company agreed that Drexal could convert certain outstanding liabilities of the Company purchased by Drexal into common stock of the Company.
On February 1, 2007, the Company increased its note payable for back due wages to its Chief Executive and Finance Officer by $33,333, increasing the total balance of the note to $347,333.
On February 7, 2007, the Company’s Chief Executive and Finance Officer agreed to convert $350,000 of amounts due him under notes payable into 7,000,000 shares of common stock.
On February 7, 2007, the Company entered into an agreement to convert two notes payable totaling $60,000 and all accrued interest into 1,200,000 shares of the Company’s common stock.
On February 15, 2007, the Company amended its agreement with Drexal to provide for the delivery of 2,671,400 shares of common stock for converting $26,714 of $50,714 of outstanding debt of the Company that was acquired by Drexal, and an additional 2,400,000 shares upon conversion of an additional $24,000 in Company debt to be acquired by Drexel. In connection with the agreement, Drexel agreed to forgive $13,467 in expenses and accrued interest on the acquired debt. All of the 5,071,000 shares of common stock have since been issued in satisfaction of the debt.
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