News 
Market Data 
Discover
Replies to post #8550 on Nutra Pharma Corp (NPHC)
01/14/13 10:12 AM
(1) During the third quarter of 2010 we borrowed $200,000 from one of our directors. We repaid $10,000 during the third quarter of 2012. Under the terms of the loan agreement this loan was expected to be repaid in nine months to a year from the date of the loan along with interest calculated at 10% for the first month plus 12% after 30 days from funding. We are in default regarding this loan. At September 30, 2012 and December 31, 2011, we owed this director accrued interest of $78,259 and $54,423, respectively.
(2) At September 30, 2012, the balance consisted of the following loans:
· In May 2011, the Company received two loans for a total of $50,000 from non-related parties. These loans were expected to be repaid no later than December 31, 2011, along with interest calculated at 10% for the first month plus 12% after 30 days from funding. These loans are guaranteed by an officer of the Company. The Company was unable to repay the loans and they continue to accrue interest. At September 30, 2012 and December 31, 2011, the accrued interest payable was $14,417 and $8,899, respectively.
· In September and October 2011, the Company borrowed $250,000 each (aggregating $500,000) from two non-related parties. The principal of these loans was to be repaid with a balloon payment on or before October 1, 2012. On October 19, 2012 the parties amended the notes to include a conversion feature that would allow the holders to convert some or all of their outstanding notes into restricted Company stock at a 15% discount to the average closing market price of the Company's stock traded over the previous 5 days. The Company will also issue a total of 4,000,000 restricted shares to the note holders per the amendment. Interest on these loans is payable monthly beginning in November 2011 with interest calculated at 20% and 12%, each, respectively. At September 30, 2012 and December 31, 2011, the accrued interest was $6,666 at each period end.
· On August 2, 2011 under a settlement agreement with Liquid Packaging Resources, Inc. (“LPR”), the Company agreed to pay LPR a total of $350,000 in monthly installments of $50,000 beginning August 15, 2011 and ending on February 15, 2012. This settlement amount was recorded as general and administrative expenses on the date of the settlement. We did not make the December 2011 or January 2012 payments and on January 26, 2012, we signed the first amendment to the settlement agreement whereunder we agreed to pay $175,000 which was the balance outstanding at December 31, 2011(this includes a $25,000 penalty for non-payment).
The Company repaid $25,000 during the three months ended March 31, 2012. The Company did not make all of the payments under such amendment and as a result pursuant to the original settlement agreement, LPR had the right to sell 5,714,326 shares of the Company’s free trading stock held in escrow by their attorney and receive cash settlements for a total amount of $450,000 (the initial $350,000 plus total default penalties of $100,000). The $100,000 default was expensed during the quarter ended March 31, 2012. On June 11, 2012, LPR sold the note to Southridge Partners, LLP (“Southridge”). Once the debt is satisfied, LPR will return all of the Company's collateral shares currently held by LPR's attorney. The Company is currently negotiating with Southridge Partners to arrange a settlement of the debt. The balance due LPR at September 30, 2012 is $250,000.
· On March 22, 2012 the Company issued a promissory note to the Michael McDonald Trust in the amount of $75,000. $25,000 of the funds was received during the first quarter of 2012. The remaining amount of $50,000 was received during the third quarter of 2012. The note is due and payable on the date that is six months from the execution and funding of the note. Interest is based on a rate of three (3%) percent per month to be accrued from the later of the date of the note or receipt of funds until all principal has been paid. In August 2012, McDonald Trust sold their debt to Southridge Partners, LLP in an agreement to be paid out over time. The Company is currently negotiating with Southridge Partners to arrange a settlement of the debt.
· On March 26, 2012, the Company issued a promissory note to Southridge Partners II, LP in the amount of $4,000. The term of the note was 45 days and bears a flat interest of $500. On October 26, 2012 Southridge converted the note into 497,238 shares of restricted common stock in full satisfaction of the note.
(3) Convertible Notes – At Fair Value
Convertible Note Payable Dated October 27, 2011 at Fair Value
On October 27, 2011 the Company entered into a convertible note payable with a corporation. The convertible note payable, with a face value of $53,000, bears interest at 8.0% per annum and was due on July 31, 2012. The convertible note payable is convertible, at the holder’s option, into the Company’s common shares at a variable conversion price which is 58% multiplied by the average of the lowest three (3) trading prices for the Common Stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the Holder to the Borrower. The conversion feature is subject to full-ratchet, anti-dilution protection if the Company sells shares or share-indexed financing instruments at less than the conversion price. The holder has the option to redeem the convertible note payable for cash in the event of defaults or certain other contingent events (the “Default Put”).
At September 30, 2012 and December 31, 2011, this convertible note payable, at fair value, was recorded at $105,361 and $120,044.
Convertible Note Payable Dated December 5, 2011 at Fair Value
On December 5, 2011 the Company entered into a convertible note payable with a corporation which had a face value of $37,500, a coupon rate of 8.0% per annum and maturity date of September 5, 2012. The convertible note payable is convertible, at the holder’s option, into the Company’s common shares at a variable conversion price which is 58% multiplied by the average of the lowest three (3) trading prices for the Common Stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the Holder to the Borrower. The conversion feature is subject to full-ratchet, anti-dilution protection if the Company sells shares or share-indexed financing instruments at less than the conversion price. The holder has the option to redeem the convertible note payable for cash in the event of defaults or certain other contingent events (the “Default Put”).
At September 30, 2012 and December 31, 2011, this convertible note payable, at fair value, was recorded at $74,548 and $86,819.
During October 2012, both of these notes were acquired by a third party from Asher Enterprises for an aggregate amount of $100,000, and then converted into 20,000,000 restricted common shares at $0.005 per share.
Convertible Note Payable Dated February 3, 2012 at Fair Value
On February 3, 2012, the Company issued a Convertible Debenture in the amount of $40,000 to Redwood Management, LLC. The note carries interest at 12% and is due on February 13, 2013, unless converted into shares of restricted common stock. Redwood Management, LLC has the right to convert the note, until is no longer outstanding, into shares of Common Stock at a price of Fifty Percent (50%) of the lowest closing price, determined on the then current trading market for the Company’s common stock, during the 15 trading days prior to conversion (the “Set Price”). On September 12, 2012, TCN International (TCN) completed the purchase and transfer of this note including penalties and unpaid interest, for the sum of $52,500. Redwood Management, LLC has acknowledged the full payment of the Note, in favor of Nutra Pharma Corporation and releases Nutra Pharma Corporation from all obligations under the Note. Upon the request of TCN, the Board of Directors of the Company approved the conversion of these notes into Restricted Common Stock of the Company at the recent low bid of $0.007 per share, providing 7,500,000 (seven million, five hundred thousand) shares of Nutra Pharma common stock to relinquish the total debt of $52,500.
At September 30, 2012, this convertible note payable, at fair value, was recorded at $109,386.
Convertible Note Payable Dated March 16, 2012 at Fair Value
On March 16, 2012 the Company signed a secured convertible Promissory Note in the amount of $75,000 in favor of Southridge Partners II, LLC. The note was due November 16, 2012 and carries interest at 8% annum. Southridge Partners II, LLC was entitled after nine months to convert all or a portion of the principal and interest accrued into shares of common stock at a conversion price of each share equal to the Market Price multiplied times 70%. (the “conversion price”). The Market Price is equal to the average of the two lowest bids closing prices for the five trading days ending before the conversion date. In the evaluation of these financing arrangements, the Company concluded that these conversion features did not meet the conditions set forth in current accounting standards for equity classification. Since equity classification is not available for the conversion feature, it requires bifurcation and liability classification, at fair value. The Company also concluded that the Default Put required bifurcation because, while puts on debt instruments are generally considered clearly and closely related to the host, the Default Put is indexed to certain events that are not associated with the convertible note payable.
At September 30, 2012, this convertible note payable, at fair value, was recorded at $105,725.
The Company elected to account for these hybrid contracts under the guidance of ASC 815-15-25-4. The fair value has been defined as the common stock equivalent value, enhanced by the fair value of the default put plus the present value of the coupon.
In connection with the issuance of these convertible notes payable, the Company encountered a day-one derivative loss of $100,914 and $103,244, respectively at September 30, 2012 and December 31, 2011 related to the recognition of (i) the hybrid note and (ii) the derivative instrument arising from the fair value measurement due to the fair value of the hybrid note and embedded derivative exceeding the proceeds that the Company received from the arrangement. Therefore, the Company was required to record a loss on the derivative financial instrument. In addition, the fair value will change in future periods, based upon changes in the Company’s common stock price and changes in other assumptions and market indicators used in the valuation techniques. These future changes will be currently recognized in other expense or other income on the Company’s statement of operations. Accordingly, the Company recognized the change in fair value of derivative in the amount of $27,756 and $13,119 during the nine months ended September 30, 2012 and the year of 2011.
The holder of this convertible note has substantial rights and protections regarding dilution if certain events, including a default were to occur. There are a number of events that could trigger a default, including but not limited to failure to pay principal or interest, failure to issue shares under the conversion feature, breach of covenants, breach of representations and warranties, appointment of a receiver or trustee, judgments, bankruptcy, delisting of common stock, failure to comply with the exchange act, liquidation, cessation of operations, failure to maintain assets, material financial statement restatement, reverse split of borrowers stock, etc. In the event of these events the lender may be entitled to receive significant amounts of additional stock above the amounts for conversion.
Furthermore, there are additional events that could cause the lender to be due additional shares of common stock above and beyond the shares due from a conversion. Some of these events include, but are not limited to a merger or consolidation of the Company, dividend distribution or spin off, dilutive issuances of the Company’s stock, etc. If the lender receives additional shares of the Company’s commons stock due to any of the foregoing events or for other reasons, then this may have an extremely dilutive effect on the shareholders of the Company. Such dilution would likely result in a significant drop in the per share price of the Company’s common stock. The potential dilutive nature of this note presents a very high degree of risk to the Company and its shareholders.
On October 26, 2012, Southridge converted the note into 5,919,495 shares of the Company's restricted common stock
6. STOCKHOLDERS' DEFICIT
Private Placements of Common Stock
In the third quarter 2012, the Company sold an aggregate of 27,000,000 shares of restricted common stock to one investor at a price of $0.01 per share and received $270,000. As a result of administrative delays the shares were not issued until October 2012 and are thus recorded as common stock issuable in the accompanying consolidated balance sheet. The Company issued a total of 27,000,000 warrants to purchase common stock at an exercise price of $0.10 per share in October 2012. The warrants expire on December 31, 2014.
Shares Issued to Employees and Directors
On February 3, 2012 the Board of Directors approved a resolution for the issuance of a total of 15,720,000 shares of the Company’s restricted common stock to the Directors and Employees of the Company. The issuance was valued at $0.0165 per share, which was the fair market value of the Company’s common stock on the date of issuance.
Common Stock Issued for Services
During March and August, 2012 the Company issued a total of 6,000,000 shares of the Company’s restricted common stock to JPU Ventures, Inc. under an agreement dated March 19, 2012 and August 13, 2012. The agreement was for investor relations services for a six months term. The shares were valued at $0.0186 and $0.007 per share, which was the fair market value of the Company’s common stock on the date of issuance.
On March 16, 2012 the Company entered into an agreement with Mark Bergman, a consultant. The contract is for an initial six months term. The shares were valued at $0.02 per share, which was the fair market value of the Company’s common stock on the date of issuance. Under the agreement the consultant’s services include the identification of international markets, funding sources for targeted companies and assistance with overall strategic planning and execution. As compensation under this agreement the Company issued 3,000,000 free trading, unrestricted shares on March 16, 2012.
On December 20, 2011 the Company entered into an agreement for investor relations services with a Consultant. The contract was for a six months term and calls as compensation the issuance of 1,000,000 shares of restricted common stock payable in four tranches of 250,000 each as follows: (I) January 10, 2012 (II) February 10, 2012 (III) March 10, 2012 (IV) April 10, 2012. The shares were valued and charged to operations on the dates they were issued. At each issuance date, the fair market value of the shares was adjusted to the actual price on those dates with any adjustments made through our consolidated statements of operations.
On July 27, 2011 the Company signed an agreement for investor relations services with Synergy Financial, LLC. The contract was for a three months term beginning August 1, 2011 and continuing through November 1, 2011 and was renewable by the Company for an additional three months period. The agreement called for a monthly payment for each of the first three months of $5,000 beginning on August 1, 2011 plus the issuance of 300,000 shares of the Company’s restricted common stock on the signing of the agreement. The shares were valued at $0.06 per share, which was the fair market value of the Company’s common stock on the date of issuance. On October 15, 2011 the Company signed a contract extension agreeing to extend the original contract signed on July 27, 2011 for an additional three (3) months under the same terms. Under this extension the Company agreed to pay Synergy Financial, LLC $5,000 monthly on the first of each month starting in November 2011 plus the issuance of 300,000 shares of the company’s restricted common stock upon the signing of the extension agreement. The Company recorded a charge to operations on October 15, 2011 of $15,000, representing the shares to be issued valued at $0.05 per share which was the fair market value of the Company’s common stock on October 15, 2011. The shares were issued on January 12, 2012. On February 8, 2012, the Company further extended the Agreement for an additional 3 months beginning on Feb 9, 2012 and continuing until May 9, 2012. The new extension required the Company to pay Synergy Financial 500,000 shares of NPHC restricted common stock. On March 23, 2012 both parties agreed that Nutra Pharma would issue Synergy Financial 1 million shares of Nutra Pharma restricted common stock in lieu of $10K cash ($5K that was due on November 1, 2011 and $5K that was due on December 1, 2011). Both parties agree that all monthly compensation included in the contact dated on July 27, 2011 and all additional contract extensions have been satisfied in full.
On July 25, 2011 the Company signed an agreement for investor relations services with DRC Partners, LLC. The contract was on a month to month basis and calls for monthly payments of $5,000 in cash and 100,000 shares of restricted stock on the first day of each month of service, beginning August 1, 2011. The Company issued 100,000 shares of restricted common stock on August 22, 2011. The shares were valued at $0.06 per share, which was the fair market value of the Company’s common stock on the date of issuance. The Company did not issue additional shares under this contract. The Company entered into a separate agreement in January of 2012 for the settlement of the outstanding shares owed to DRC Partners, LLC for 400,000 shares.
In April 2011, the Company issued 250,000 shares of restricted common stock to Undiscovered Equities, a consultant for investor and public relations services. The agreement was for one year. Three additional tranches of 250,000 shares of restricted common stock were earned and issued on July 11, 2011, October 11, 2011 and January 11, 2012. At June 30, 2011, all of the shares of restricted stock under the agreement, one million, were valued at $0.07 per share, which was the fair market value of the Company’s common stock on April 11, 2011, the date of the agreement. At each issuance date, the fair market value of the shares is adjusted to the actual price on those dates with any adjustments made through our consolidated statements of operations.
Common Stock Held in Escrow
On July 27, 2011 the Company issued 5,714,286 shares of free trading common stock in certificate form which is held in escrow as security under an agreement reached with Liquid Packaging Resources, Inc. (“LPR”) on August 2, 2011.
Common Stock Issued for Debt
At December 31, 2011 the Company owed DRC Partners, LLC $16,239 plus 400,000 shares of restricted common stock under an agreement for investor relations services entered into July 25, 2011. In satisfaction of this debt our President, Rik Deitsch, assigned $175,000 of the debt owed to him by the Company to the principal of DRC Partners, LLC under an agreement dated January 2, 2012. On January 4, 2012 the Company approved the issuance of 7 million shares of its restricted common stock in satisfaction of the debt. The 7 million shares of restricted common stock were issued on January 6, 2012 and valued at $0.0221 per share, which was the fair market value of the Company’s common stock on the date of issuance. In connection with the settlement agreement for debt, the Company recognized the gain on settlement in the amount of $36,539 during the first quarter of 2012.
Common Stock Issued for Settlement of Accounts Payable & Debt
Following the agreement with Redwood (see Note 3), conversions were made for a total of 18,737,894 shares of the Company’s restricted stock, satisfying the note in full. The shares were valued at a total amount of $320,531, which was the fair value of convertible debts on the date of conversion.
Following the agreement with Coventry Enterprises, LLC (see Note 3), the conversion for a total of 8,672,090 shares of the Company’s restricted common stock satisfying the note in full was made on March 29, 2012, and issued on April 5, 2012. The shares were valued at $168,889, which was the fair value of convertible debts on the date of conversion.
Other Financing
On February 22, 2012 the Company engaged Capital Path Securities, LLC (“CPS”) as its exclusive advisor on a proposed placement by way of an equity line of approximately ten million dollars ($10,000,000) of the Company’s equity or equity linked securities. All upfront fees have been waived by CPS. The Company will pay CPS a cash placement fee equal to 5% of all principal amounts invested from the source originated by CPS. In addition at such time that the Company files an S-1 registration statement for the equity line of credit facilitated by CPS, the Company will include three million shares (3,000,000) registered in the name of Capital Path Securities, LLC. Additionally, for their services as our investment bankers we issued them an additional 10,000,000 restricted shares on October 26, 2012.
AI
