nice at 10% discount cbai is getting a better deal, I checked the F/S and the others wanted 15%, and one wanted the 5 lowest days out of 20. Guess cbai did get better terms ;)
Note 5. Commitments and Contingencies
JMJ FinancialOn January 12, 2011, the Company issued a $1,050,000 “Convertible Promissory Note” to JMJ Financial (“JMJ”), a private investor (the “2011
Note”). The 2011 Note bears interest in the form of a onetime interest charge of 10%, payable with the Note’s principle amount on the maturity date, January
12, 2014. All or a portion of the 2011 Note principle and interest is convertible at the option of JMJ from time to time, into shares of the Company’s common
stock, originally fixed at a per share conversion price equal to 85% of the average of the 5 lowest traded prices for the Company’s common stock in the 20
trading days previous to the effective date of each such conversion. At the same time, JMJ issued and delivered to the Company, a “Secured & Collateralized
Promissory Note” dated January 12, 2011, (the “JMJ Note”), which served as sole consideration to the Company for the Company’s issuance of the 2011 Note
to JMJ. The JMJ Note is in the principle amount of $1,000,000, bears interest in the form of a onetime interest charge of 10.5%, and interest is payable with
the JMJ Note’s principle on its maturity date, January 12, 2014.. The JMJ Note is secured by JMJ assets in the form of money market fund or similar
equivalent having a value of at least $1,000,000.
Under a previous outstanding Convertible Promissory Note having similar terms as described above and issued to JMJ and funded by JMJ in the amount of
approximately $1,750,000 (the “Earlier Notes”), the Company was obligated to deliver common shares which could be placed into the Automated System for
Deposits and Withdrawals of Securities (known as “DWAC”). At present the DWAC system is not available to Company shareholders for newly issued shares
of the Company’s common stock. As a result of this breach, on February 8, 2011, the Company entered into a settlement agreement with JMJ which contained
the following term, among others, in which the Company agreed to pay $671,385 to JMJ, both as liquidated damages to JMJ, and in consideration for an
additional $1 million in financing, which has been added to the principal amount of the Earlier Note.
Shelter Island Warrants And PutsAfter extensive negotiations with Shelter Island, the parties entered into a transaction on July 21, 2010, whereby the 36 million shares Warrant Agreement was
canceled, and the obligation represented by the Put Option Agreement was satisfied by the Company's delivery to Shelter Island of a new Senior Secured Note
in the principal amount of $1,590,400 (the "Replacement Note"). With this agreement, the derivative liability of $1,608,658 was reduced to $1,590,400 and
then reclassified on the balance sheet as a note payable. The Replacement Note matures on September 30, 2011, bears interest at 16% per annum, interest-only
is due, for the period July 31, 2010 through January 31, 2011, and is payable in six equal monthly installments of $265,067 each, commencing January 31,
2011. The Company, at its option, may pay the principal amount due on the Replacement Note by the issuance of unregistered Company Common Stock, to be
valued at an agreed conversion rate that is fixed for this purpose, subject to certain adjustments, at 85% of the market value of the Company's common stock,
calculated based on the five lowest daily closing prices for the stock over certain specified 20 day periods.On March 17, 2011, the parties entered into an Amendment for above said Replacement Note. The Amendment extends the commencement date of the six
monthly installments each in the amount of $ 248,400, to be paid at the option of the Company in cash or stock, to April 30, 2011 in exchange for continued
interest payments for February, March and April, along with a cash payment of $25,000 as an adjustment to the principal balance. Other terms of the
Replacement Note remain for the most part the same.
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