NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements of Elray Resources, Inc. (“Elray” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report for the year ended December 31, 2012 on Form 10-K filed on April 5, 2013.
In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for the most recent fiscal year ended December 31, 2012 have been omitted.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents. The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (“FDIC”).
Subsequent Events
Elray evaluated subsequent events through the date these financial statements were issued for disclosure purposes.
Recent Accounting Pronouncements
Elray’s management does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.
NOTE 2 – GOING CONCERN
The accompanying unaudited consolidated financial statements of Elray have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company sustained a net loss of $2,491,151 and utilized cash for operating activities of $235,124 for the nine months ended September 30, 2013. The Company had a working capital deficit, stockholders’ deficit and accumulated deficit of $4,572,356, $4,564,821 and $12,079,156, respectively, at September 30, 2013. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. Without realization of additional capital, it would be unlikely for Elray to continue as a going concern. Elray's management plans on raising cash from public or private debt or equity financing, on an as needed basis, and in the longer term, revenues from the gambling business. Elray's ability to continue as a going concern is dependent on these additional cash financings, and, ultimately, upon achieving profitable operations through the development of its gambling business.
NOTE 3 – NOTES PAYABLE
Notes payable
Notes payable at
September 30
, 2013 and December 31, 2012 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C. Smith
|
9/18/11
|
|
8
|
%
|
|
$
|
14,850
|
|
|
$
|
14,850
|
|
D. Radcliffe
|
9/18/11
|
|
8
|
%
|
|
|
49,500
|
|
|
|
49,500
|
|
L. Kaswell
|
9/18/11
|
|
8
|
%
|
|
|
99,000
|
|
|
|
99,000
|
|
M. Trokel
|
9/18/11
|
|
8
|
%
|
|
|
49,500
|
|
|
|
49,500
|
|
Radcliffe Investment Partners I
|
9/18/11
|
|
8
|
%
|
|
|
34,650
|
|
|
|
34,650
|
|
Morchester International Limited
|
7/14/12
|
|
15
|
%
|
|
|
35,429
|
|
|
|
35,429
|
|
Morchester International Limited
|
7/14/12
|
|
8
|
%
|
|
|
10,000
|
|
|
|
10,000
|
|
Total
|
|
|
|
|
|
$
|
292,929
|
|
|
$
|
292,929
|
|
On December 9, 2011, Elray entered into an Amended Splitrock Agreement whereby the Company acquired certain assets and liabilities of Splitrock. As part of the liabilities assumed in terms of the Amended Splitrock Agreement, the Company assumed notes payable of $292,929 bearing interest of 8% or 15% per annum. All of these notes are past due and currently in default.
Convertible notes payable
Convertible notes payable, net of discounts, at
September 30
, 2013 and December 31, 2012 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal, net of discounts
|
|
|
|
|
|
|
|
|
Principal, net of discounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a)
Alan Binder
|
|
$
|
25,000
|
|
|
$
|
-
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
-
|
|
|
$
|
25,000
|
|
b)
JSJ Investments, Inc.
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25,000
|
|
|
|
(2,801
|
)
|
|
|
22,199
|
|
c)
JSJ Investments, Inc.
|
|
|
50,000
|
|
|
|
(17,500
|
)
|
|
|
32,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
d)
Asher Enterprises, Inc.
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,500
|
|
|
|
(5,639
|
)
|
|
|
26,861
|
|
e)
Asher Enterprises, Inc.
|
|
|
5,500
|
|
|
|
(680
|
)
|
|
|
4,820
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
f)
Asher Enterprises, Inc.
|
|
|
37,500
|
|
|
|
(12,311
|
)
|
|
|
25,189
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
g)
Asher Enterprises, Inc.
|
|
|
32,500
|
|
|
|
(18,520
|
)
|
|
|
13,980
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
h)
Asher Enterprises, Inc.
|
|
|
37,500
|
|
|
|
(28,813
|
)
|
|
|
8,687
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
i)
Asher Enterprises, Inc.
|
|
|
37,500
|
|
|
|
(33,862
|
)
|
|
|
3,638
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
j)
Rousay Holdings Ltd.
|
|
|
1,290,000
|
|
|
|
-
|
|
|
|
1,290,000
|
|
|
|
1,290,000
|
|
|
|
-
|
|
|
|
1,290,000
|
|
Total
|
|
$
|
1,515,500
|
|
|
$
|
(111,686
|
)
|
|
$
|
1,403,814
|
|
|
$
|
1,372,500
|
|
|
$
|
(8,440
|
)
|
|
$
|
1,364,060
|
|
a)
|
On December 9, 2011, as a result of the Splitrock transaction, the Company assumed a $25,000 convertible note. The note was due on August 4, 2012 with 10% annual interest. The note was convertible to Splitrock’s common stock at $0.10 per share prior to December 9, 2011 and is now convertible to 75,453 shares of the Company’s common stock. The Company did not repay the note on August 4, 2012 and this note is currently in default.
|
b)
|
On January 19, 2012, the Company entered into an agreement with JSJ Investment, Inc. (“JSJ”) in which JSJ agreed to loan the Company $25,000 (the “Second JSJ note”). The note is for one year and bears interest at a rate of 10% per annum. From July 19, 2012 to July 19, 2013, the note holder has the option to convert the note to common shares in the Company at a discount of 50% of the average of the preceding seven days closing price. On May 28, 2013, JSJ converted this note into 327,120 shares of common stock.
|
c)
|
On May 31, 2013, the Company entered into a convertible promissory note with JSJ for $50,000 (the "Third JSJ Note"). The principal was received and recorded on June 5, 2013. The note bears interest at 10% and matures on December 2, 2013. From November 31, 2013 to November 31, 2014, the note holder has the option to convert the note to common shares in the Company at a discount of 50% of the average closing price over the last 120 days prior to conversion, or the average closing price over the last seven days prior to conversion.
|
d)
|
On June 5, 2012, the Company entered into a convertible promissory note with Asher Enterprises, Inc. (“Asher”) for $32,500 (the “Third Asher Note”). The principal was received and recorded on July 3, 2012. The note bears interest at 8% and matures on March 7, 2013. In the event that the note remains unpaid at that date, the Company will pay default interest of 22%. Asher has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 58% of the average lowest three closing prices during the ten trading days prior to the conversion date. During the nine months ended September 30, 2013, the Company issued 1,460,769 shares of common stock for the conversion of the Third Asher Note in the amount of $32,500.
|
e)
|
On January 30, 2013, the Company entered into a convertible promissory note with Asher for $47,500 (the "Fourth Asher Note"). The principal was received and recorded on February 15, 2013. The note bears interest at 8% and matures on November 1, 2013. In the event that the note remains unpaid at that date, the Company will pay default interest of 22%. Asher has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 45% of the average lowest three closing prices during the ten trading days prior to the conversion date. During the nine months ended September 30, 2013, the Company issued 1,511,088 shares of common stock for the conversion of the Fourth Asher Note in the amount of $42,000. There was principal of $5,500 which has not been converted at September 30, 2013.
|
f)
|
On March 21, 2013, the Company entered into a convertible promissory note with Asher for $37,500 (the "Fifth Asher Note"). The principal was received and recorded on April 5, 2013. The note bears interest at 8% and matures on December 26, 2013. In the event that the note remains unpaid at that date, the Company will pay default interest of 22%. Asher has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 45% of the average lowest three closing prices during the ten trading days prior to the conversion date.
|
g)
|
On May 29, 2013, the Company entered into a convertible promissory note with Asher for $32,500 (the "Sixth Asher Note"). The principal was received and recorded on June 5, 2013. The note bears interest at 8% and matures on March 4, 2014. In the event that the note remains unpaid at that date, the Company will pay default interest of 22%. Asher has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 45% of the average lowest three closing prices during the ten trading days prior to the conversion date.
|
h)
|
On July 15, 2013, the Company entered into a convertible promissory note with Asher for $37,500 (the "Seventh Asher Note"). The principal was received and recorded on August 1, 2013. The note bears interest at 8% and matures on April 17, 2014. In the event that the note remains unpaid at that date, the Company will pay default interest of 22%. Asher has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 45% of the average lowest three closing prices during the ten trading days prior to the conversion date.
|
i)
|
On August 28, 2013, the Company entered into a convertible promissory note with Asher for $37,500 (the "Eighth Asher Note"). The principal was received and recorded on September 4, 2013. The note bears interest at 8% and matures on May 30, 2014. In the event that the note remains unpaid at that date, the Company will pay default interest of 22%. Asher has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 40% of the average lowest three closing prices during the ten trading days prior to the conversion date.
|
j)
|
On April 25, 2012, the Company entered into a promissory note with Rousay Holdings Ltd. (“Rousay”) for $10,000,000 (“Original Rousay Note”). During year 2012, $2 million of the promissory note had been funded and $710,000 has been repaid. On October 8, 2012, the Company issued a new promissory note to Rousay to replace the Original Rousay Note, where the face of the note is $1,290,000. The new note was due on April 26, 2013 with an interest rate of 20% per annum. On April 26, 2013, Rousay has an option of receiving an amount of restricted common stock of the Company equal to 10% of the then outstanding and issued common stock of the Company in lieu of payment of principal and interest. In connection with the replacement of Original Rousay Note, the Company issued 1,018,648 common shares, valued at $81,492, to Rousay and recorded a loss on extinguishment of debt. The Company did not repay the note on April 26, 2013 and the note holder did not convert the note. This note is currently in default.
|
Due to the JSJ and Asher notes’ conversion feature, the actual number of shares of common stock that would be required if a conversion of the note was made through the issuance of common stock cannot be predicted, and the Company could be required to issue an amount of shares that may cause it to exceed its authorized common share amount. As a result, the conversion feature requires derivative accounting treatment and has been bifurcated from the note and is “marked to market” each reporting period through the statements of operations.
The conversion feature of the Fourth Asher Note, Fifth Asher Note, Sixth Asher Note, Seventh Asher Note, Eighth Asher Note and the Third JSJ Note was valued at $90,063, $66,738, $58,102, $65,879, $75,817 and $72,656, respectively, on the issuance date. As a result, these notes were fully discounted and the fair value of the conversion feature in excess of the principal amount of the note of $42,562, $29,238, $25,602, $28,379, $38,317 and $22,656 respectively, was expensed immediately as additional interest expense.
Loans from shareholders
On September 5, 2008, Elmside Pty Ltd, a company related to a former director, agreed to an interest free loan of $55,991 to the Company on an as-needed basis to fund the business operations and expenses of the Company until December 9, 2011, the due date of the loan. The note is in default.
NOTE 4 – DERIVATIVE LIABILITIES – NOTE CONVERSION FEATURE
Due to the conversion feature contained in the JSJ and Asher notes issued, the actual number of shares of common stock that would be required if a conversion of the note as further described in Note 3 was made through the issuance of the Company’s common stock cannot be predicted, and the Company could be required to issue an amount of shares that may cause it to exceed its authorized share amount. As a result, the conversion feature requires derivative accounting treatment and will be bifurcated from the note and “marked to market” each reporting period through the income statement. The fair value of the conversion future of these notes was recognized as a derivative liability instrument and will be measured at fair value at each reporting period.
The Company remeasured the fair value of the instrument as of September 30, 2013, and recorded an unrealized loss of $9,407 for the nine months ended September 30, 2013. At September 30, 2013 and December 31, 2012, the derivative liability associated with the note conversion feature was $307,489 and $65,693, respectively. The Company determined the fair values of these liabilities using a Black-Scholes valuation model with the following assumptions:
|
|
December 31,
2012
|
|
|
February 15,
2013
|
|
|
April 5,
2013
|
|
|
June 5,
2013
|
|
|
August 1,
2013
|
|
|
September 4,
2013
|
|
|
September 30,
2013
|
|
Stock price on measurement date
|
|
$
|
0.010
|
|
|
$
|
0.080
|
|
|
$
|
0.06
|
|
|
$
|
0.165
|
|
|
$
|
0.110
|
|
|
$
|
0.056
|
|
|
$
|
0.038
|
|
Exercise price
|
|
$
|
0.005
|
|
|
$
|
0.036
|
|
|
$
|
0.027
|
|
|
$
|
0.074
|
|
|
$
|
0.050
|
|
|
$
|
0.025
|
|
|
$
|
0.017
|
|
Discount rate
|
|
|
0.11
|
%
|
|
|
0.13
|
%
|
|
|
0.10
|
%
|
|
|
0.10
|
%
|
|
|
0.08
|
%
|
|
|
0.05
|
%
|
|
|
0.04
|
%
|
Expected volatility
|
|
|
306
|
%
|
|
|
242
|
%
|
|
|
203
|
%
|
|
|
237
|
%
|
|
|
232
|
%
|
|
|
231
|
%
|
|
|
228
|
%
|
Expected dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
NOTE 5 – COMMITMENTS AND CONTINGENCIES
Legal Proceedings
From time to time, we may be party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not involved currently in legal proceedings other than those detailed in Note 7 that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.
Commitments and Contingencies
In October 2011, the Company entered into a one-year agreement with consultants to provide services relating to the development of an online gaming site. In return for such services, the Company paid the consultants $20,000 per month. During the nine months ended September 30, 2013, the Company settled a $60,000 payable to the consultant by issuing 1,280,453 shares valued at $105,293. As of September 30, 2013, the payable to the consultants was $478,000 which included amounts owed for services provided before the agreement was entered.
On June 1, 2012, the Company entered into an agreement with Ludlow Capital, Inc. (“Ludlow”) to provide investor relations services to the Company for six months. In consideration for such services, the Company agreed to issue 20,000 shares to Ludlow. On May 31, 2013, 20,000 shares were issued to Ludlow. On January 5, 2013, the Company entered into another agreement with Ludlow to provide investor relations services to the Company for six months. In consideration for such services, the Company agreed to issue 150,000 shares to Ludlow. On April 16, 2013, the Company issued 150,000 shares, valued at $24,000, to Ludlow for such services.
On January 5, 2013, the Company entered into an agreement with South Street Media, Inc. ("South Street") to provide investor relations services to the Company for six months. In consideration for such services, the Company agreed to issue 150,000 shares, valued at $24,000, to South Street. On April 16, 2013, the Company issued 150,000 shares to South Street for such services.
On May 10, 2013, the Company entered into an agreement with JSJ Investments, Inc. ("JSJ") to provide consulting services to assist the Company in raising capital and business planning for three months. In consideration for such services, the Company agreed to issue 175,000 shares to JSJ, valued at 33,250. On May 30, 2013, the Company issued 175,000 shares to JSJ for such services.
On July 1, 2013, the Company entered into a lease agreement for office space in Australia. The agreement terminates on December 31, 2014 with an option to renew for another year. Rent is $30,000 per year and the Company paid a $7,535 security deposit.
On July 14, 2013, the Company entered into a 12-month consultancy agreement with Virtual Technology Group, LLC ("Virtual Technology") to assist the Company in developing marketing and supporting the technology of virtual online horse racing products and to provide the Company the exclusive use right to certain website domains. In consideration for such services and domains, the Company agreed to issue 30,000,000 Series B Preferred shares to Virtual Technology. On August 5. 2013, the Company issued 15,000,000 Series B Preferred shares, valued at $21,000 and the remaining shares shall be issued 180 days from the effective date.
NOTE 6 – RELATED PARTY TRANSACTIONS
As of September 30, 2013 and December 31, 2012, loans from Elmside, a shareholder, were $55,991. The loans are currently in default.
As of September 30, 2013 and December 31, 2012, the Company had accounts payable of $571,962 and $275,558, respectively, to its chief executive officer and a company owned by the chief executive officer for reimbursement of expense, compensation, and liabilities assumed from Splitrock.
On May 15, 2013, the Company entered into an agreement with Jay Goodman, son of the Company’s chief executive officer, to provide consulting services assisting the Company with data segmentation, financial and statistical services. In consideration for such services, the Company pays $3,000 per month to Jay Goodman. As of September 30, 2013, the Company has a $13,500 payable to Jay Goodman.
NOTE 7 – EQUITY
On November 28, 2012, the Company's Board of Directors approved a reverse split of the Company's issued and outstanding shares of its common stock, par value $0.001, at a ratio of 100:1, such that every 100 shares of common stock becomes 1 share of common stock, without amending the Company's total number of authorized common shares. (“Reverse Stock Split”) Shareholders holding a majority of the voting stock voted in favour of the amendment to our Certificate of Incorporation to effect a reverse stock split of one hundred-for-one on January 24, 2013. All share number or per share information presented gives effect to the Reverse Stock Split.
Preferred Stock – Series A
On March 22, 2012, Elray entered into a binding letter of intent with Golden Match Holdings Limited (“GM”), a company incorporated in the British Virgin Islands. Pursuant to the letter of intent, Elray and GM would enter into an acquisition agreement in which Elray was to acquire all of the outstanding shares of GM and the shareholders and consultants of GM was to acquire a minimum of 95% of the Company’s common stock. Pursuant to the agreement, Elray had 30 days to secure a $10,000,000 line of credit or loan before Elray and GM enter into a definitive purchase agreement.
On May 3, 2012, in anticipation of the imminent closing of the GM acquisition, the Company authorized the creation of 300,000,000 shares of Series A preferred stock. Prior to a planned reverse split of common shares at a ratio of 100:1, the Series A Preferred Series shares are convertible at a rate of 100 common shares for each Series A Preferred Share.
On May 4, 2012, the Company entered into an acquisition agreement (the “Acquisition Agreement”) under which the Company acquired all of the outstanding shares of GM. This follows the letter of intent previously signed on March 22, 2012. Under the terms of the acquisition agreement, Elray acquired 100% of GM, an investment holding company which has a profit sharing agreement with CALI Promocao de Jogos Sociedade Unipessoal Lda., a company incorporated under the laws of the Special Administrative Region of Macau. In the agreement, the Company transferred to the principals of GM 211,018,516 shares of its Series A Preferred Stock, which on a fully diluted basis, was equal to 95% of the Company's then outstanding shares. In accordance with the above-referenced agreement, Mr. Lao Sio I had been appointed to the Company’s Board of Directors. On July 1, 2012, the Board of Directors held a special board meeting, wherein a motion was approved to remove Mr. Lao Sio I as a director.
On September 27, 2013, the Company entered into a Termination Agreement (the “Termination Agreement”), with Mr. Lao Sio I, Millennium Commodity Trading Pty Ltd., a Hong Kong corporation (“Millennium”) and Millennium Holdings Pty Ltd., a Hong Kong corporation (“Millennium Holdings”), whereby the Company, Mr. Lao Sio I, Millennium and Millennium Holdings agreed to rescind the Acquisition Agreement dated May 4, 2012, entered into between the Company and Mr. Lao Sio I (the “Sale Agreement”). Following execution of the Acquisition Agreement, disputes arose between the Company, Mr. Lao Sio I, Millennium and Millennium Holdings regarding the parties’ obligations and performance under the Acquisition Agreement. As a result, legal proceedings were instituted in the District Court of Clark County in the State of Nevada and also in Juizo Civel, Tribunal Judicial de Base in Macau. The parties have now resolved all disputes related to the litigation and the Acquisition Agreement and have entered into a Settlement Agreement, which requires that the parties enter into and deliver the Termination Agreement. Pursuant to the terms of the Termination Agreement, the Company agreed to return to Mr. Lao Sio I, Millennium and Millennium Holdings all of the stock of Golden Match it received under the Acquisition Agreement and Mr. Lao Sio I, Millennium and Millennium Holdings agreed to return to the Company all of the stock of the Company they received under the Acquisition Agreement. Mr. Lao Sio I therefore has relinquished any right to be a member of the Company’s Board of Directors. All parties also agreed to release each other for any and all claims that they hold against each other.
As of September 30, 2013, the 211,018,516 shares of Series A Preferred Stock issued had been recorded at par value of $211,019, with a subscription receivable at the same amount.
Preferred Stock – Series B
On July 1, 2012, the Company authorized the creation of 100,000,000 shares of Series B preferred stock. One hundred shares of Series B preferred stock are convertible to one share of the Company’s common stock and has voting rights of 1,000:1 with common stock. On September 24, 2012, the authorized Series B Preferred Stock was increased from 100,000,000 to 280,000,000.
On July 3, 2012, the Company entered into an agreement with Maxwell Newbould to acquire certain assets and intellectual property related to Penny Auction Technology, in exchange for 88,000,000 shares of the Company’s Series B preferred stock. The shares were issued to Gold Globe Investments acting as an escrow agent. The Series B preferred shares are to be held by Gold Globe Investments until such time as the Company concludes its due diligence. Gold Globe Investments holds the voting rights to these shares whilst the due diligence is conducted. On completion of the due diligence to the satisfaction of the Company, Maxwell Newbould will be granted a seat on the Board of Directors of the Company and an additional 20,000,000 Series B Preferred Shares. The Company has recently extended the due diligence period for a further 120 days and expects to conclude its due diligence within year 2013.
On July 14, 2013, the Company entered into a 12-month consultancy agreement with Virtual Technology Group, LLC ("Virtual Technology") to assist the Company in developing marketing and supporting the technology of virtual online horse racing products and to provide the Company the exclusive use right to certain website domains. In consideration for such services and domains, the Company agreed to issue 30,000,000 Series B Preferred shares to Virtual Technology. On August 5. 2013, the Company issued 15,000,000 Series B Preferred shares and the remaining shares shall be issued 180 days from the effective date.
The 88,000,000 shares of Series B Preferred stock issued have been recorded at par value of $88,000, with a subscription receivable at the same amount. The 15,000,000 shares of Series B Preferred stock issued have been recorded at market value of $21,000.
Common Stock
On February 22, 2013, the Company issued 857,143 shares of its common stock to settle accounts payable of $30,000 to Portspot Consultants Limited ("Portspot"). These shares were valued at $77,143 based on the market price on the settlement date. The Company recorded a loss of $47,143 related to the settlement.
On April 1, 2013, the Company issued 400,000 shares of common stock valued at $26,600, based on the stock price on the grant date, to its directors for services provided.
On April 4, 2013, the Company issued 1,128,827 shares of its common stock to settle accounts payable of $80,000 to Pancar Capital LLC. These shares were valued at $74,729 based on the market price on the settlement date. The difference between the value of these shares and the amount settled was recorded in additional paid-in capital.
On April 4, 2013, the Company issued 423,310 shares of its common stock to settle accounts payable of $30,000 to Portspot. These shares were valued at $28,023 based on the market price on the settlement date. The difference between the value of these shares and the amount settled was recorded in additional paid-in capital.
On April 24, 2013, the Company issued 3,650,700 shares of its common stock to settle accounts payable of $200,000 to Anthony Brian Goodman, the Company's Chief Executive Officer. These shares were valued at $365,070 based on the market price at the issuance date. The Company recorded a loss of $165,070 related to the settlement.
On May 20, 2013, the Company agreed to settle a payable of $60,000 to Pancar Capital LLC by issuing 833,333 shares of common stock, valued at $137,500, and recorded a $77,500 loss on settlement. The shares have not yet been issued and the $137,500 was recorded under accounts payable and accrued liabilities on the consolidated balance sheet at September 30, 2013.
On May 30, 2013, the Company issued 20,000 shares of its common stock valued at $600, based on the stock price on the service completion date of December 1, 2012, Ludlow for earlier consulting services provided.
On May 30, 2013, the Company issued 60,000 shares of its common stock valued at $33,000, based on the stock price on the grant date of July 12, 2012, to its directors for earlier services provided.
On May 30, 2013, the Company issued 200,000 shares of its common stock valued at $20,000, based on the stock price on the grant date of April 23, 2013, to David Price for services provided.
On May 30, 2013, the Company issued 175,000 shares of its common stock valued at $31,500, based on the stock price on the issuance date, to JSJ for consulting services provided.
During the nine months ended
September 30
, 2013, the Company issued 327,120, 1,460,769, and 1,511,088 shares of common stock for the conversion of the Second JSJ Note, Third Asher Note and Fourth Asher Note in the amount of $25,000, $32,500, $42,000, respectively (see Note 3).
NOTE 8 – SUBSEQUENT EVENTS
On October 24, 2013, the Company entered into a convertible promissory note with Asher for $27,500 (the "Ninth Asher Note"). The note bears interest at 8% and matures on July 28, 2014. In the event that the note remains unpaid at that date, the Company will pay default interest of 22%. Asher has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 40% of the average lowest three closing prices during the ten trading days prior to the conversion date.
In October 2013, the Company issued 2,573,643 shares of common stock for the conversion of the outstanding principal and accrued interest of the Fourth Asher Note in the amount of $7,400 and part of the outstanding principal of the Fifth Asher Note in the amount of $12,000.