|
NOTE 6. CONVERTIBLE DEBT - RELATED PARTY
|
6 Months Ended |
|---|---|
|
Jun. 30, 2013
|
|
| Disclosure Text Block [Abstract] | |
| Long-term Debt [Text Block] |
NOTE
6. CONVERTIBLE DEBT – RELATED PARTY
On
June 17, 2013, the Company entered into a Convertible
Secured Note and Warrant Purchase Agreement (the
“Purchase Agreement”) with Rick
Wilber. Pursuant to the Purchase Agreement, the
Company agreed to sell, and Mr. Wilber agreed to buy, for
aggregate consideration of $350,000, a convertible secured
promissory note in the principal amount of $350,000 (the
“Note”) convertible at $0.30 per share, and a
warrant to purchase 1,000,000 shares of the Company’s
common stock (the “Warrant”) at an exercise
price of $0.80 per share. The Company analyzed
the convertible debt and the warrants issued for derivative
accounting consideration and determined that derivative
accounting is not applicable for these debts. The warrants
vest immediately and have a term of 10 years. The
relative fair value of the warrants was measured using the
Black-Scholes option pricing model and determined to be
$148,925, which was recorded as a debt
discount. Variables used in the Black-Scholes
option pricing model for the warrants included: (1)
discount rate of 2.19%, (2), expected life of ten years,
(3) expected volatility of 196% and (4) zero expected
dividends. The note was then evaluated for
a beneficial conversion feature and it was determined that
a beneficial conversion feature existed. The
intrinsic value of the beneficial conversion feature was
determined to be $102,259 and was recorded as a debt
discount. The debt discounts are being amortized
over the life of the note using the effective interest
method.
|