NOTE 4 – CONVERTIBLE NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE RELATED PARTIES, NET OF DISCOUNTS AND PREMIUMS
Notes and convertible notes payable, all classified as current at March 31, 2014 and December 31, 2013, consists of the following:
Convertible notes,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of discounts
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal,
|
|
|
|
|
|
|
|
|
|
|
|
Principal,
|
|
|
|
|
|
|
Put
|
|
|
Debt
|
|
|
net of
|
|
|
|
|
|
Put
|
|
|
Debt
|
|
|
net of
|
|
|
|
Principal
|
|
|
Premium
|
|
|
Discounts
|
|
|
Discounts
|
|
|
Principal
|
|
|
Premium
|
|
|
Discounts
|
|
|
Discounts
|
|
Coventry Capital, LLC (1)
|
|
$
|
30,000
|
|
|
$
|
3,333
|
|
|
$
|
-
|
|
|
$
|
33,333
|
|
|
$
|
30,000
|
|
|
$
|
3,333
|
|
|
$
|
-
|
|
|
$
|
33,333
|
|
Coventry Capital, LLC (1)
|
|
|
50,000
|
|
|
|
5,556
|
|
|
|
-
|
|
|
|
55,556
|
|
|
|
50,000
|
|
|
|
5,556
|
|
|
|
-
|
|
|
|
55,556
|
|
Coventry Capital, LLC (1)
|
|
|
20,000
|
|
|
|
2,222
|
|
|
|
-
|
|
|
|
22,222
|
|
|
|
20,000
|
|
|
|
2,222
|
|
|
|
-
|
|
|
|
22,222
|
|
Coventry Capital, LLC (1)
|
|
|
35,000
|
|
|
|
3,889
|
|
|
|
-
|
|
|
|
38,889
|
|
|
|
35,000
|
|
|
|
3,889
|
|
|
|
-
|
|
|
|
38,889
|
|
Coventry Capital, LLC (1)
|
|
|
50,000
|
|
|
|
5,556
|
|
|
|
-
|
|
|
|
55,556
|
|
|
|
50,000
|
|
|
|
5,556
|
|
|
|
-
|
|
|
|
55,556
|
|
Avanti Distribution, Inc. (1)
|
|
|
9,560
|
|
|
|
4,097
|
|
|
|
-
|
|
|
|
13,657
|
|
|
|
9,560
|
|
|
|
4,097
|
|
|
|
(3,074
|
)
|
|
|
10,583
|
|
RJR Manufacturers' Agent, Inc.
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
RJR Manufacturers' Agent, Inc.
|
|
|
100,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100,000
|
|
RJR Manufacturers' Agent, Inc.
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
100,000
|
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
(30,000
|
)
|
|
|
70,000
|
|
Black Mountain Equities, Inc.
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
55,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
55,000
|
|
TCA Global Credit Master Fund, LP
|
|
|
1,379,207
|
|
|
|
1,500,000
|
|
|
|
(724,320
|
)
|
|
|
2,154,887
|
|
|
|
950,003
|
|
|
|
1,000,000
|
|
|
|
(582,822
|
)
|
|
|
1,367,181
|
|
LG Capital Funding, LLC
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
76,500
|
|
|
|
62,591
|
|
|
|
-
|
|
|
|
139,091
|
|
Black Mountain Equities, Inc.
|
|
|
55,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
55,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
1,828,767
|
|
|
$
|
1,574,653
|
|
|
$
|
(724,320
|
)
|
|
$
|
2,679,100
|
|
|
$
|
1,476,063
|
|
|
$
|
1,137,244
|
|
|
$
|
(615,896
|
)
|
|
$
|
1,997,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) At 12/31/13, classified as long-term liability.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On August 15, 2012, the Company executed a convertible promissory note with Coventry Capital, LLC (“Coventry Capital”) for $30,000. The note bears interest at the rate of 10% per annum which accrues. As of March 31, 2014 and December 31, 2013, the accrued interest was $5,035 and $4,285, respectively. The note matures on August 15, 2014. The conversion price is equal to 90% of the average of the closing prices of the Company’s common stock for the preceding five trading days. Due to the lack of trading and no market for the common stock of the Company, any discount value is unable to be calculated at this time.
On August 29, 2012, Green Hygienics executed a convertible promissory with Kachess Financial Corporation (“Kachess”) for $19,500. The note bears interest at the rate of 12% per annum which accrues. The conversion price is the lower of $0.01 per share or 70% of the average of the closing prices of the Company’s common stock for the preceding three trading days. As part of the acquisition of Green Hygienics by Green Innovation, the notes were assumed by Green Innovations. Due to the lack of trading and no market for the common stock of the Company, any discount value is unable to be calculated at this time. On February 13, 2013, the Company repaid the principal and accrued interest of $1,077 for a total payment of $20,577.
On August 30, 2012, Green Hygienics executed a convertible promissory with Kachess for $20,000. The note bears interest at the rate of 12% per annum which accrues. The conversion price is the lower of $0.01 per share or 70% of the average of the closing prices of the Company’s common stock for the preceding three trading days. As part of the acquisition of Green Hygienics by Green Innovation, the notes were assumed by Green Innovations. Due to the lack of trading and no market for the common stock of the Company, any discount value is unable to be calculated at this time. On February 13, 2013, the Company repaid the principal and accrued interest of $1,098 for a total payment of $21,098.
On September 4, 2012, Green Hygienics executed a convertible promissory with Kachess for $6,800. The note bears interest at the rate of 12% per annum which accrues. As of March 31, 2014 and December 31, 2012, the accrued interest was $60 and $0, respectively. The conversion price is the lower of $0.01 per share or 70% of the average of the closing prices of the Company’s common stock for the preceding three trading days. As part of the acquisition of Green Hygienics by Green Innovation, the notes were assumed by Green Innovations. Due to the lack of trading and no market for the common stock of the Company, any discount value is unable to be calculated at this time. On February 13, 2013, the Company repaid the principal and accrued interest of $362 for a total payment of $7,162.
On October 4, 2012, Green Hygienics executed a convertible promissory with Kachess for $3,000. The note bears interest at the rate of 12% per annum which accrues. The conversion price is the lower of $0.01 per share or 70% of the average of the closing prices of the Company’s common stock for the preceding three trading days. As part of the acquisition of Green Hygienics by Green Innovation, the notes were assumed by Green Innovations. Due to the lack of trading and no market for the common stock of the Company, any discount value is unable to be calculated at this time. On February 13, 2013, the Company repaid the principal and accrued interest of $130 for a total payment of $3,130.
On October 17, 2012, the Company executed a convertible promissory note with Coventry Capital for $50,000. The note bears interest at the rate of 10% per annum which accrues. As of March 31, 2014 and December 31, 2013, the accrued interest was $7,291 and $6,041, respectively. The note matures on October 17, 2014. The conversion price is equal to 90% of the average of the closing prices of the Company’s common stock for the preceding five trading days. Due to the lack of trading and no market for the common stock of the Company, any discount value was not calculated.
On December 6, 2012, the Company executed a convertible promissory note with Coventry Capital for $20,000. The note bears interest at the rate of 10% per annum which accrues. As of March 31, 2014 and December 31, 2013, the accrued interest was $2,642 and $2,142, respectively. The note matures on December 6, 2014. The conversion price is equal to 90% of the average of the closing prices of the Company’s common stock for the preceding five trading days. Due to the lack of trading and no market for the common stock of the Company, any discount value was not calculated.
On December 18, 2012, the Company executed a convertible promissory note with Coventry Capital for $35,000. The note bears interest at the rate of 10% per annum which accrues. As of March 31, 2014 and December 31, 2013, the accrued interest was $4,509 and $3,634, respectively. The note matures on December 8, 2014. The conversion price is equal to 90% of the average of the closing prices of the Company’s common stock for the preceding five trading days. Due to the lack of trading and no market for the common stock of the Company, any discount value was not calculated.
On December 28, 2012, the Company executed a convertible promissory note with Coventry Capital for $50,000. The note bears interest at the rate of 10% per annum which accrues. As of March 31, 2014 and December 31, 2013, the accrued interest was $6,305 and $5,055, respectively. The note matures on December 28, 2014. The conversion price is equal to 90% of the average of the closing prices of the Company’s common stock for the preceding five trading days. Due to the lack of trading and no market for the common stock of the Company, any discount value was not calculated.
On March 14, 2013, the Company executed a convertible promissory note with Avanti Distribution, Inc. for $9,560. The note bears interest at the rate of 12% per annum which accrues. As of March 31, 2014 and December 31, 2013, the accrued interest was $1,208 and $921, respectively. The note matures on March 14, 2015. The conversion price is equal to 70% of the average of the closing prices of the Company’s common stock for the preceding five trading days. The Company recorded a debt discount of $3,756.
On April 4, 2013, RJR Manufacturers’ Agent, an independent consultant of the Company, requested that the Company convert its accrued compensation balance of $50,000 into a convertible note payable with 12% interest per annum, with a conversion feature of $0.68 per share, the closing price of the prior day, or a 30% discount at the date of conversion, whichever is lesser. A beneficial conversion feature of $31,513 was recorded and will be accreted monthly from the issuance date of the note through maturity. As of March 31, 2014 and December 31, 2013, the accrued interest was $5,988 and $4,488, respectively. The note matured on October 4, 2013. The maturity date was extended to December 31, 2013. On January 1, 2014, the note was extended to March 31, 2014. On March 31, 2014, the note was extended to June 30, 2014. As a condition of the October 4, 2013 extension, the Company agreed to modify the conversion terms to a discount of 40% of the average of the lowest five days closing price from the date of the note until the conversion date.
On April 15, 2013, the Company entered into a one year convertible promissory note agreement for up to $500,000 with JMJ Financial (“JMJ”). The note has an interest rate of 5% per annum of the $500,000 earned as of the 91
st
day of the note. The note, at the holder’s option, is convertible at $1.04 per share and if the price per share at the time of conversion is greater than $1.04 per share, on average for the previous 25 trading days, the conversion rate shall have a 25% discount, with the minimum price of $1.04 per share. On April 17, 2013, the Company received $100,000. A beneficial conversion feature of $33,333 was recorded and will be accreted monthly from the issuance date of the note through maturity. On June 26, 2013, JMJ amended the agreement and funded the Company an additional $50,000. A beneficial conversion feature of $39,216 was recorded and will be accreted monthly from the issuance date of the note through maturity. As of September 30, 2013, the accrued interest was $60,000. On October 17, 2013, JMJ filed a conversion of $24,660 into 300,000 shares of common stock based on the calculated price of $0.0822. The Company, per the provisions of the note, issued an objection to the conversion. On October 30, 2013, the Company settled on a repayment of $150,000 thereby extinguishing the note and all related liabilities in their entirety. JMJ returned to the Company the previously issued shares of stock of the Company (see Note 8).
On May 8, 2013, the Company entered into a convertible promissory note with Avalon Capital Corp. (“Avalon”) for $100,000. The note bears interest at 12% per annum, matured on November 8, 2013, and converts at the lesser of $0.55 per share or a 40% discount at the time of conversion. A beneficial conversion feature of $100,000 was recorded and will be accreted monthly from the issuance date of the note through maturity. On November 10, 2013, Avalon assigned this note to RJR Manufacturers’ Agent. As of March 31, 2014 and December 31, 2013, the accrued interest was $10,858 and $7,858, respectively. The note matured on November 8, 2013. The note was extended to December 31, 2013. On January 1, 2014, the note was extended to March 31, 2014. On March 31, 2014, the note was extended to June 30, 2014. As a condition of the November 8, 2013 extension, the Company agreed to modify the conversion terms to a discount of 40% of the average of the five lowest closing prices from the date of the note until the conversion date.
On May 20, 2013, the Company entered into a convertible promissory note agreement for $105,000 with Evolution Capital, LLC (“Evolution”). The note has an interest rate of 12% per annum and is accrued. The note, at the holder’s option, is convertible at the lesser of $0.54 or 40% of the average 10 days prior to conversion. A beneficial conversion feature of $105,000 was recorded and will be accreted monthly from the issuance date of the note through maturity. As of September 30, 2013, the accrued interest was $4,626. The note matured on February 20, 2014. On November 26, 2013, the Company and Evolution entered into a Note Termination Agreement as the Company paid Evolution a settlement of $147,000, of which $4,626 was accrued interest and $37,374 was recorded as a loss on settlement of liability.
On May 30, 2013, the Company entered into a convertible promissory note with Avalon Capital Corp. (“Avalon”) for $50,000. The note bears interest at 12% per annum, matured on November 30, 2013, and converts at the lesser of $0.55 per share or a 40% discount at the time of conversion. A beneficial conversion feature of $50,000 was recorded and was accreted monthly from the issuance date of the note through June 30, 2013. This note was not to have been issued as it was paid back to Avalon by RJR Manufacturers’ Agent. The note was cancelled on August 31, 2013, retroactive to May 30, 2013 for accounting purposes and the accretion was reversed accordingly.
On June 7, 2013, the Company entered into a convertible promissory note agreement for $76,500 with LG Capital Funding, LLC (“LG Capital”). The note has an interest rate of 8% per annum and is accrued. The note, at the holder’s option, is convertible at a 45% discount to market on average of the lowest 2 days over the prior 10 trading days. A beneficial conversion feature of $76,500 was recorded and will be accreted monthly from the issuance date of the note through maturity. As of September 30, 2013, the accrued interest was $1,945. The note matures on March 7, 2014. On December 6, 2013, the Company paid LG Capital $119,340 as a settlement to terminate the loan. $3,052 of the payment was accrued interest and $39,788 was recorded as a loss on settlement of liability.
On June 12, 2013, the Company entered into a convertible promissory note agreement for $55,500 with Black Mountain Equities, Inc. (“Black Mountain”). The note has an interest rate of 10% per annum and is accrued. The note, at the holder’s option, is convertible at the lesser of $0.50 or a 25% discount to market on average of the prior 20 trading days. A beneficial conversion feature of $41,111 was recorded and will be accreted monthly from the issuance date of the note through maturity. As a condition of the agreement, the Company issued 10,000 shares of common stock (see Note 8). As of December 31, 2013, the accrued interest was $5,000. The note matures on January 15, 2014. On December 5, 2013, the Company and Black Mountain entered into a Release and Lock Up Leak Out Agreement whereas Black Mountain would be limited to daily sales no greater than 10% of that day’s cumulative trading volume. On January 8, 2014, Black Mountain converted $10,000 of principal into 263,505 shares based on a discounted conversion price of $0.03795 (see Note 8). On January 24, 2014, Black Mountain converted $50,500 of principal and interest into 1,231,708 shares based on a discounted conversion price of $0.0755 (see Note 8). The discounts were recorded as a loss.
On February 20, 2014, the Company received $50,000 cash from Black Mountain under the provision in their note that provided, at Black Mountain’s election, the right to fund an additional $50,000 to the Company. An amendment to the convertible note was executed under the same terms and conditions as the original note. The note was recorded as $55,000 which reflects the $5,000 in origination fees associated with the execution of the amendment
.
On July 5, 2013, the Company entered into a convertible promissory note agreement for $76,500 with LG Capital Funding, LLC (“LG Capital”). The note has an interest rate of 8% per annum and is accrued. The note matures on April 5, 2014. The note, at the holder’s option, is convertible at a 45% discount to market on average of the lowest 2 days over the prior 10 trading days. As of December 31, 2013, the accrued interest was $3,035. On January 6, 2014, the Company terminated the note with a payment of $119,340.
On October 24, 2013, the Company secured financing from TCA Global Credit Master Fund, LP, a Cayman Islands limited partnership (“TCA”). Effective on October 24, 2013, we entered into a Senior Secured Revolving Credit Facility Agreement (the “Credit Agreement”), pursuant to which TCA agreed to loan up to a maximum of $5 million to us for working capital purposes. A total of $892,830 was funded by TCA in connection with the closing. The amounts borrowed pursuant to the Credit Agreement are evidenced by a Revolving Convertible Promissory Note (the “Revolving Note”), the repayment of which is secured by Security Agreements executed by us and our wholly-owned subsidiary, Green Hygienics, Inc. Pursuant to the Security Agreements, the repayment of the Revolving Note is secured by a security interest in substantially all of our assets in favor of TCA. The initial Revolving Note in the amount of $1,000,000 is due and payable along with interest thereon on April 24, 2014, and bears interest at the minimum rate of 18% per annum, increasing to 24% per annum upon the occurrence of an event of default. The conversion rate is 85% of the lowest VWAP of the Company’s stock for the five days preceding the conversion date. We also agreed to pay TCA a fee of $250,000, payable in the form of 2,316,595 shares of common stock. On January 17, 2014, the Company and TCA entered into Amendment No. 1 of the agreement which provided the Company with an additional $500,000. As a condition of the Amendment No. 1, the note maturity date was extended an addition six months. We also agreed to pay TCA a fee of $112,500, payable in the form of 2,684,964 shares of common stock. Both issuances of common stock have a guaranteed value, and any deficiency would require the issuance of additional shares, whereas TCA has a ceiling of the $250,000 and $112,500, respectively, and upon the selling of securities, once those balances are met, the remaining shares of common stock will be returned to the Company for cancellation.
On February 3, 2014, the Company and its subsidiary, Green Hygienics, Inc., filed a Complaint in the Circuit Court of the 17
th
Judicial Circuit in and for Broward County, Florida, against TCA Global Credit Master Fund, LP (“TCA”), regarding a dispute among the parties about the lock-box provisions of the Credit Agreement. On March 17, 2014, the Company settled with TCA and subsequently dismissed the Complaint without prejudice. As part of the settlement and contingent upon the parties’ full performance under the settlement agreement, the parties agreed (1) that the note’s maturity date would be extended to October 25, 2014; (2) that a total amount of $1,506,134.50 was due to TCA under the Credit Agreement and Revolving Note, as amended, as of March 17, 2014; and (3) that $116,982.72 would be wired to TCA within two business days of settlement, and that upon TCA’s receipt of the wire, $1,389,151.78 in principal would be considered outstanding, and no interest and fees would be considered outstanding. As of March 31, 2014, the principal and accrued interest balances were $1,379,207 and $5,057, respectively.
On November 1, 2013, RJR Manufacturers’ Agent, an independent consultant of the Company, requested that the Company convert its accrued compensation balance of $50,000 into a convertible note payable with 12% interest per annum, with a conversion feature of $0.14 per share, the closing price of the prior day, or a 40% discount of the five lowest closing prices from the date of the note until the date of conversion, whichever is lesser. A beneficial conversion feature of $50,000 was recorded and will be accreted monthly from the issuance date of the note through maturity. As of March 31, 2014 and December 31, 2013, the accrued interest was $2,503 and $1,003, respectively. The note matured on March 31, 2014. On March 31, 2014, the note was extended until June 30, 2014.
Convertible notes,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of discounts
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal,
|
|
|
|
|
|
|
|
|
|
|
|
Principal,
|
|
|
|
|
|
|
Put
|
|
|
Debt
|
|
|
net of
|
|
|
|
|
|
Put
|
|
|
Debt
|
|
|
net of
|
|
|
|
Principal
|
|
|
Premium
|
|
|
Discounts
|
|
|
Discounts
|
|
|
Principal
|
|
|
Premium
|
|
|
Discounts
|
|
|
Discounts
|
|
Bruce Harmon
|
|
$
|
50,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
50,000
|
|
Bruce Harmon
|
|
$
|
50,000
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
100,000
|
|
|
$
|
50,000
|
|
|
|
50,000
|
|
|
|
(30,000
|
)
|
|
|
70,000
|
|
Lakeport Business Services, Inc.
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
-
|
|
|
|
200,000
|
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
-
|
|
|
|
200,000
|
|
Total
|
|
$
|
200,000
|
|
|
$
|
150,000
|
|
|
$
|
-
|
|
|
$
|
350,000
|
|
|
$
|
200,000
|
|
|
$
|
150,000
|
|
|
$
|
(30,000
|
)
|
|
$
|
320,000
|
|
On April 4, 2013, Harmon, an officer and director of the Company, requested that the Company convert his accrued compensation balance of $50,000 into a convertible note payable with 12% interest per annum, with a conversion feature of $0.68 per share, the closing price of the prior day, or a 30% discount at the date of conversion, whichever is lesser. A beneficial conversion feature of $31,513 was recorded and will be accreted monthly from the issuance date of the note through maturity. As of March 31, 2014 and December 31, 2013, the accrued interest was $5,988 and $4,488, respectively. The note matured on October 4, 2013. The maturity date was extended until December 31, 2013. On January 1, 2014, the note was extended to March 31, 2014. On March 31, 2014, the note was extended until June 30, 2014. As a condition of the January 1, 2014 extension, the Company agreed to modify the conversion terms to a discount of 40% of the lowest five days prior to the conversion date.
On July 12, 2013, the Company entered into a convertible promissory note agreement for $100,000 with Bruce Harmon, an officer and director of the Company. The note has an interest rate of 12% per annum and is accrued. The note matured on October 12, 2013. The note, at the holder’s option, is convertible at the lesser of $0.31 per share or at a 30% discount to market on the date prior to conversion. As of March 31, 2014 and December 31, 2013, the accrued interest was $8,721 and $5,721, respectively. The note was extended to December 31, 2013. On January 1, 2014, the note was extended to March 31, 2014. On March 31, 2014, the note was extended to June 30, 2014. As a condition of the January 1, 2014 extension, the Company agreed to modify the conversion terms to a discount of 40% of the lowest five days prior to the conversion date.
On November 1, 2013, Harmon, an officer and director of the Company, requested that the Company convert his accrued compensation balance of $50,000 into a convertible note payable with 12% interest per annum, with a conversion feature of $0.14 per share, the closing price of the prior day, or a 40% discount of the average of the lowest five closing prices from the date of the note until the date of conversion, whichever is lesser. A beneficial conversion feature of $50,000 was recorded and will be accreted monthly from the issuance date of the note through maturity. As of March 31, 2014 and December 31, 2013, the accrued interest was $2,503 and $1,003, respectively. The note matured on March 31, 2014. On March 31, 2014, the note was extended to June 30, 2014.
NOTE 5 – COMMITMENTS AND CONTINGENCIES
Legal Matters
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of October 21, 2013, there were no pending or threatened lawsuits except as noted below.
Ironridge Global IV, Ltd.
On July 24, 2013, we entered into a stipulation for settlement of claims with Ironridge Global IV, Ltd. (“Ironridge”), pursuant to which we resolved $2,621,037 of our accounts payable that Ironridge had agreed to purchase from our creditors in exchange for payment in full in cash. Pursuant to an order approving stipulation for settlement of claims that we jointly requested from the Los Angeles, California Superior Court, we agreed to issue to Ironridge shares of our common stock with an aggregate value equal to 105% of the claim amount plus reasonable attorney fees, divided by 80% of the following: the closing price of our stock on July 24, 2013, not to exceed the arithmetic average of the volume weighted average prices of any five trading days during a period equal to that number of consecutive trading days following the date of initial receipt of shares required for the aggregate trading volume, excluding after-hours trades, to exceed $25 million, less $0.01 per share, as reported by the Bloomberg Professional service of Bloomberg LP.
Under the terms of the agreement, Ironridge is prohibited from receiving any shares of common stock that would cause it to be deemed to beneficially own more than 9.99% of our total outstanding shares at any one time. Ironridge received an initial issuance of 3,600,000 common shares, 3,000,000 on September 25, 2013, 4,200,000 on October 23, 2013, and 4,400,000 on December 16, 2013, and may be required to return or be entitled to receive shares, based on the calculation summarized in the prior paragraph. For example, Ironridge would be entitled to approximately 10,922,864 additional shares based on a $0.078 per share closing price of our common stock on December 31, 2013, and that there are 26,249,158 shares of common stock issued and outstanding as of December 31, 2013, and ignoring the 9.99% limitation.
Ironridge is prohibited from holding any short position in our common stock, and may not to engage in or effect, directly or indirectly, any short sale until at least 180 days after the end of the calculation period described above.
In addition, for so long as Ironridge holds any shares, it is prohibited from, among other actions: (1) voting any shares of issuer common stock owned or controlled by them, exercising any dissenter’s rights, executing or soliciting any proxies or seeking to advise or influence any person with respect to any voting securities of the issuer; (2) engaging or participating in any actions or plans that relate to or would result in, among other things, (a) acquiring additional securities of the issuer, alone or together with any other person, which would result in them collectively beneficially owning or controlling, or being deemed to beneficially own or control, more than 9.99% of the total outstanding common stock or other voting securities of the issuer, (b) an extraordinary corporate transaction such as a merger, reorganization or liquidation, (c) a sale or transfer of a material amount of assets, (d) changes in the present board of directors or management of the issuer, (e) material changes in the capitalization or dividend policy of the issuer, (f) any other material change in the issuer’s business or corporate structure, (g) actions which may impede the acquisition of control of the issuer by any person or entity, (h) causing a class of securities of the issuer to be delisted, (i) causing a class of equity securities of the issuer to become eligible for termination of registration; or (3) any actions similar to the foregoing.
On July 25, 2013, we issued shares of our common stock to Ironridge. The issuance is exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, as the issuance of securities was in exchange for bona fide outstanding claims, where the terms and conditions of such issuance were approved by a court after a hearing upon the fairness of such terms and conditions.
On September 25, 2013, we issued 3,000,000 shares of our common stock to Ironridge. The issuance is exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, as the issuance of securities was in exchange for bona fide outstanding claims, where the terms and conditions of such issuance were approved by a court after a hearing upon the fairness of such terms and conditions.
On October 23, 2013, we issued 4,200,000 shares of our common stock to Ironridge. The issuance is exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, as the issuance of securities was in exchange for bona fide outstanding claims, where the terms and conditions of such issuance were approved by a court after a hearing upon the fairness of such terms and conditions. See Notes 7 and 8.
On December 16, 2013, we issued 4,400,000 shares of our common stock to Ironridge. The issuance is exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, as the issuance of securities was in exchange for bona fide outstanding claims, where the terms and conditions of such issuance were approved by a court after a hearing upon the fairness of such terms and conditions. See Notes 7 and 8.
On January 31, 2014, we issued 4,000,000 shares of our common stock to Ironridge. The issuance is exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, as the issuance of securities was in exchange for bona fide outstanding claims, where the terms and conditions of such issuance were approved by a court after a hearing upon the fairness of such terms and conditions. See Notes 7 and 8.
On March 20, 2014, we issued 4,500,000 shares of our common stock to Ironridge. The issuance is exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, as the issuance of securities was in exchange for bona fide outstanding claims, where the terms and conditions of such issuance were approved by a court after a hearing upon the fairness of such terms and conditions. See Notes 7 and 8.
Oasis Brands, Inc.
On October 16, 2013, the Company received a letter from the attorneys for Oasis Brands, Inc. (“Oasis Brands”), a competitor of the Company and the former employer of Philip Rundle, the Company’s chief executive officer, Jeff Thurgood, the Company’s vice president of sales, and Awie Kardiman, the Company’s controller. The letter alleges infringement of Oasis Brands’ intellectual property, specifically, their trademark “Fiora.” The letter further requests a cease and desist on the Company’s trademark, “Flora,” as issued by the United States Patent and Trademark Office. Oasis Brands has threaten a lawsuit if the Company does not comply with their demand. The Company, due to information provided by Mr. Rundle, who served as chief executive officer of Oasis Brands and was the signer for the application for Oasis Brands’ trademark “Fiora,” contends that “Fiora” was named after a river in Italy whereas “Flora” is the Spanish word for “flower.” Oasis Brands contends that “Fiora” means flower which the Company adamantly contests due to the information from Mr. Rundle and there is no documented validation that “Fiora” means flower. The Company, in an effort to avoid confrontation, will rename its product, even though this is being done voluntarily to avoid the cost of litigation which would delay the launch of its products for the Spanish market. Furthermore, the Company alleges that this incident is related to Oasis Brands concern over the influence the former key members of Oasis Brands will have for the Company. On December 27, 2013, Oasis Brands filed a Notice of Voluntary Dismissal Without Prejudice of Complaint.
TCA Global Credit Master Fund, LP
On February 3, 2014, the Company and its subsidiary, Green Hygienics, Inc., filed a Complaint in the Circuit Court of the 17
th
Judicial Circuit in and for Broward County, Florida, against TCA Global Credit Master Fund, LP (“TCA”), regarding a dispute among the parties about the lock-box provisions of the Senior Secured Revolving Credit Facility Agreement, as amended. On March 17, 2014, the Company settled with TCA, and on March 20, 2014, dismissed the Complaint without prejudice.
Lease Commitment
The Company had an office lease agreement for approximately 1,000 square feet in Cape Coral, Florida pursuant to a lease that will expire on May 31, 2015. Due to a change in ownership of the building, the Company took an opt out option on February 28, 2014. On March 1, 2014, the Company leased approximately 1,542 square feet in Cape Coral, Florida pursuant to a lease that will expire on February 28, 2019. This facility serves as our corporate headquarters. The Company entered into a one year warehouse agreement starting on November 1, 2013 in Ontario, California with approximately 50,000 square feet. The warehouse lease expires on October 31, 2016.
Future minimum lease payments under these leases are as follows:
2014
|
|
$
|
173,971
|
|
2015
|
|
|
233,009
|
|
2016
|
|
|
201,178
|
|
2017
|
|
|
14,868
|
|
2018
|
|
|
14,868
|
|
2019
|
|
|
3,304
|
|
|
|
|
|
|
Total
|
|
$
|
641,198
|
|
Rent expense for the three months ended March 31, 2014 and 2013 was $64,749 and $1,056, respectively.
Other
On April 4, 2013, Green Hygienics acquired certain assets via an asset purchase agreement (“APA”) with Clearly Herbal International Ltd., a British Virgin Islands corporation (“CHI”). The APA was to acquire certain assets, primarily the trademark “CLEARLY HERBAL” as registered with the United States Patent and Trademark Office. The Company paid the owner of CHI 300,000 shares of restricted common stock of the Company (see Note 2 and 8). As a condition of the acquisition, the Company guaranteed that the 10-day volume weighted average price on the date six months after closing to be at least $1.20. The Company will be obligated to issue additional shares of restricted common stock should the price be below $1.20. The Company was obligated to issue additional shares of restricted common stock should the price be below $1.20. On October 4, 2013, the common stock of the Company was $0.18 therefore, on October 7, 2013 an additional 1,700,000 shares of restricted stock were issued (see Notes 2 and 8).
On April 4, 2013, Green Hygienics contracted to acquire certain assets via an asset purchase agreement (“APA”) with Clearly Herbal International Ltd., a British Virgin Islands corporation (“CHI”). The APA was to acquire certain assets, primarily the trademark “CLEARLY HERBAL” as registered with in the United Kingdom. The closing date is set for July 4, 2013 or earlier. The Company will pay the owner of CHI 200,000 shares of restricted common stock of the Company (see Note 2 and 8). As a condition of the acquisition, the Company guaranteed that the 10-day volume weighted average price on the date six months after closing to be at least $1.20. The Company will be obligated to issue additional shares of restricted common stock should the price be below $1.20. The Company was obligated to issue additional shares of restricted common stock should the price be below $1.20. On October 4, 2013, the common stock of the Company was $0.18 therefore, on October 7, 2013 an additional 1,133,333 shares of restricted stock were issued (see Notes 2 and 8).
On May 16, 2013, the Company engaged Brunson Chandler & Jones, PLLC (“BCJ”) as its legal counsel. The engagement is for one year and requires a monthly payment of $6,000 beginning June 1, 2013, of which a minimum of $1,000 in cash is payable with the remaining portion payable in cash or common stock.
On July 26, 2013, the Company engaged RedChip Companies, Inc. (“RedChip”), a public and investor relations firm. As part of the eight month agreement, the Company is obligated for a monthly fee of $8,000. On February 7, 2014, the Company terminated the agreement with RedChip.
NOTE 6 – RELATED PARTIES
Bruce Harmon (“Harmon”), CFO, and Chairman of the Company, has payables and accruals due to him of $13 and $27,671, as of March 31, 2014 and December 31, 2013, respectively.
Philip Rundle (“Rundle”), CEO and Director of the Company, has payables due to him of $0 and $1,184, as of March 31, 2014 and December 31, 2013, respectively.
On September 26, 2012, with the acquisition of Green Hygienics by Green Innovations, Harmon was issued 49,500,000 shares of common in exchange for the common stock of Green Hygienics. On February 17, 2013, Harmon cancelled 45,000,000 shares of common stock in exchange for 5,000,000 shares of Series A preferred stock (see Note 8).
On November 19, 2012, a subsidiary of the Company acquired, via an APA, certain assets from SBI-TX, from W. Ray (“Tray”) Harrison, Jr. (“Harrison”), a former employee of Green Hygienics (see Note 2).
On February 7, 2013, the Company and Harmon executed a Share Cancellation / Exchange / Return to Treasury Agreement. Harmon returned to the Company 45,000,000 shares of common stock in exchange for 5,000,000 shares of Series A preferred stock. The common shares were cancelled (see Note 8).
On April 4, 2013, Harmon converted accrued compensation into a convertible note payable for $50,000 (see Note 4).
On April 4, 2013, Yogesh Parmar (“Y. Parmar”), a former member of the Advisory Board, purchased 100,000 shares of common stock at a discounted price of $0.54 per share for $50,000 (see Note 8).
On April 15, 2013, the Company issued 300,000 shares of common stock to Rundle (see Note 8) as part of his employment agreement.
On May 8, 2013, Nilesh Parmar (“N. Parmar”), a co-owner of American Hygienics Corporation, a supplier to the Company, purchased 125,000 shares of common stock at a discounted price of $0.40 per share for $50,000 (see Note 8).
On May 8, 2013, Kalpesh Parmar (“K. Parmar”), a former member of the Advisory Board and co-owner of American Hygienics Corporation, a supplier to the Company, purchased 125,000 shares of common stock at a discounted price of $0.40 per share for $50,000 (see Note 8).
On May 16, 2013, the Company amended the agreement with Harmon to issue shares equal to the contractual obligation to Rundle’s employment agreement. Harmon was issued 300,000 shares at a value of $168,000 or $0.56 per share (see Note 8).
On May 31, 2013, the Company entered into a Licensing Agreement with Tauriga (see Note 2). Harmon, the CFO and Chairman of the Company, is also the former CFO of Tauriga.
On June 18, 2013, the Company issued 62,500 shares or 12,500 each, to its Advisory Board, Perfetti, Y. Parmar, K. Parmar, Sandberg, and DeFilippo. The shares were valued collectively at $28,750. See Note 8.
On July 9, 2013, W. Ray Harrison, Jr., a former employee of the Company, exercised his 500,000 warrants for common stock on a cashless basis using the prior day’s closing price of $0.3378 thereby a forfeiture of 14,801 shares with an issuance of 485,199 shares of common stock (see Note 2 and 8).
On July 12, 2013, W. Ray Harrison, Jr., a former employee of the Company, exercised his 250,000 options for common stock on a cashless basis based on the prior day’s closing price of $0.305 thereby a forfeiture of 8,196 shares with an issuance of 241,804 shares of common stock (see Note 8).
On July 12, 2013, Harmon loaned the Company $100,000 in the form of a convertible note (see Note 4).
On August 16, 2013, the Company issued Bruce Harmon, the Company’s CFO, 300,000 shares of common stock as compensation for services (see Note 8).
On September 5, 2013, the Company issued Jeff Thurgood, the Company’s Vice President of Sales, 250,000 shares of common stock as compensation for services (see Note 8).
On September 5, 2013, the Company issued Determinaction Business Advisory (“DBA”) 300,000 shares of common stock, as compensation for services. Awie Kardiman, the owner of DBA, serves as the Company’s Controller. See Note 8.
On September 10, 2013, the Company issued Rundle 300,000 shares of common stock as a condition of his employment agreement. See Note 8.
On September 10, 2013, the Company issued Harmon 300,000 shares of common stock as a condition of his employment agreement. See Note 8.
On October 7, 2013, the Company issued 62,500 shares or 12,500 each, to its Advisory Board, Perfetti, Y. Parmar, K. Parmar, Sandberg, and DeFilippo. The shares were valued collectively at $14,375. See Note 8.
On October 15, 2013, the Company issued 12,500 shares to Hilton Kahn, a new member of the Company’s Advisory Board. The shares were valued at $2,250. See Note 8.
On November 1, 2013, the Company issued 1,111,111 options for common stock to Bruce Harmon pursuant to the renewal of his employment agreement. The options were valued at $150,000. See Note 8.
On November 1, 2013, the Company issued 15,000 shares of common stock to Charles Andrews, a member of the Board of Directors of the Company. The shares were valued at $2,100. See Note 8.
On November 1, 2013, Harmon converted accrued compensation into a convertible note payable for $50,000 (see Note 4).
On April 1, 2014, the Company issued 1,111,111 options for common stock to Philip Rundle pursuant to the renewal of his employment agreement. The options were valued at $111,111. See Note 8.
On April 30, 2014, Harmon exchanged 250,000 shares of Series A Preferred Stock for 250,000 shares of Series B Preferred Stock (see Notes 8 and 10).
NOTE 7 – AMOUNTS PAYABLE IN COMMON STOCK AND DERIVATIVE LIABILITY
On July 24, 2013, we entered into a stipulation for settlement of claims with Ironridge, pursuant to which we resolved $2,621,037 of our accounts payable that Ironridge had agreed to purchase from our creditors in exchange for payment in full in cash. Pursuant to an order approving stipulation for settlement of claims that we jointly requested from the Los Angeles, California Superior Court, we agreed to issue to Ironridge shares of our common stock with an aggregate value equal to 105% of the claim amount plus reasonable attorney fees, divided by 80% of the following: the closing price of our stock on July 24, 2013, not to exceed the arithmetic average of the volume weighted average prices of any five trading days during a period equal to that number of consecutive trading days following the date of initial receipt of shares required for the aggregate trading volume, excluding after-hours trades, to exceed $25 million, less $0.01 per share, as reported by the Bloomberg Professional service of Bloomberg LP.
Under the terms of the agreement, Ironridge is prohibited from receiving any shares of common stock that would cause it to be deemed to beneficially own more than 9.99% of our total outstanding shares at any one time. Ironridge received an initial issuance of 3,600,000 common shares, 3,000,000 on September 25, 2013, 4,200,000 on October 23, 2013, 4,400,000 on December 16, 2013, 4,000,000 on February 4, 2014, and 4,500,000 on March 20, 2014, and may be required to return or be entitled to receive shares, based on the calculation summarized in the prior paragraph (see Note 5 and 8). For example, Ironridge would be entitled to approximately 33,789,820 additional shares based on a $0.10 per share closing price of our common stock on March 31, 2014, and that there are 72,586,231 shares of common stock issued and outstanding as of March 31, 2014, and ignoring the 9.99% limitation.
Ironridge is prohibited from holding any short position in our common stock, and may not to engage in or effect, directly or indirectly, any short sale until at least 180 days after the end of the calculation period described above.
In addition, for so long as Ironridge holds any shares, it is prohibited from, among other actions: (1) voting any shares of issuer common stock owned or controlled by them, exercising any dissenter’s rights, executing or soliciting any proxies or seeking to advise or influence any person with respect to any voting securities of the issuer; (2) engaging or participating in any actions or plans that relate to or would result in, among other things, (a) acquiring additional securities of the issuer, alone or together with any other person, which would result in them collectively beneficially owning or controlling, or being deemed to beneficially own or control, more than 9.99% of the total outstanding common stock or other voting securities of the issuer, (b) an extraordinary corporate transaction such as a merger, reorganization or liquidation, (c) a sale or transfer of a material amount of assets, (d) changes in the present board of directors or management of the issuer, (e) material changes in the capitalization or dividend policy of the issuer, (f) any other material change in the issuer’s business or corporate structure, (g) actions which may impede the acquisition of control of the issuer by any person or entity, (h) causing a class of securities of the issuer to be delisted, (i) causing a class of equity securities of the issuer to become eligible for termination of registration; or (3) any actions similar to the foregoing.
On or about July 25, 2013, we issued 3,600,000 shares of our common stock to Ironridge (see Note 8). The issuance is exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, as the issuance of securities was in exchange for bona fide outstanding claims, where the terms and conditions of such issuance were approved by a court after a hearing upon the fairness of such terms and conditions.
On September 25, 2013, we issued 3,000,000 shares of our common stock to Ironridge (see Note 8). The issuance is exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, as the issuance of securities was in exchange for bona fide outstanding claims, where the terms and conditions of such issuance were approved by a court after a hearing upon the fairness of such terms and conditions.
As of September 30, 2013, Ironridge has one additional funding of $506,239 to be made on or about October 30, 2013. As of September 30, 2013, $2,114,798 has been funded and 6,600,000 shares of common stock have been issued. The Company incurred $105,740 in fees associated with this transaction. The Company has recorded $1,135,978 as amounts payable in common stock and $417,027 as a derivative liability. See Notes 4 and 9.
On October 23, 2013, we issued 4,200,000 shares of our common stock to Ironridge. The issuance is exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, as the issuance of securities was in exchange for bona fide outstanding claims, where the terms and conditions of such issuance were approved by a court after a hearing upon the fairness of such terms and conditions. See Notes 5 and 8.
On December 16, 2013, we issued 4,400,000 shares of our common stock to Ironridge. The issuance is exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, as the issuance of securities was in exchange for bona fide outstanding claims, where the terms and conditions of such issuance were approved by a court after a hearing upon the fairness of such terms and conditions. See Notes 5 and 8.
On January 31, 2014, we issued 4,000,000 shares of our common stock to Ironridge. The issuance is exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, as the issuance of securities was in exchange for bona fide outstanding claims, where the terms and conditions of such issuance were approved by a court after a hearing upon the fairness of such terms and conditions. See Notes 5 and 8.
On March 20, 2014, we issued 4,500,000 shares of our common stock to Ironridge.
The issuance is exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, as the issuance of securities was in exchange for bona fide outstanding claims, where the terms and conditions of such issuance were approved by a court after a hearing upon the fairness of such terms and conditions. See Notes 5 and 8.
NOTE 8 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company authorized 50,000,000 shares of preferred stock with a par value of $0.0001. On November 7, 2012, the Company’s Board of Directors approved the filing of a Certificate of Designation of the Preferences and Rights of Series A Preferred Stock of Green Innovations Ltd. (“Certificate of Designation”) with the Secretary of State of the State of Nevada authorizing the creation of a new series of preferred stock designated as “Series A Preferred Stock” pursuant to the authority granted to the Board of Directors under the Company’s Amended and Restated Certificate of Incorporation and Section NRS 78.1955 of the Nevada General Corporation Law. The Certificate of Designation was filed with the Nevada Department of State on November 7, 2012. The Certificate of Designation created 5,000,000 shares of Series A Preferred Stock. Each holder of Series A Preferred Stock will be entitled to participate in dividends or distributions payable to holders of the Company’s common stock at a rate of the dividend payable to each share of Common Stock multiplied by the number of shares of Common Stock that each share of such holder’s Series A Preferred Stock is convertible into. Each share of Series A Preferred Stock is convertible, at the option of the holder of the Series A Preferred Stock, into one share of the Company’s common stock. Shares of the Series A Preferred Stock will be issued to certain officers of the Company as the Board determines for consideration of the exchange for shares of common stock of the Company. Each share of Series A Preferred Stock will be entitled to ten (10) votes on all matters submitted to a vote of the stockholders of the Company (“Enhanced Voting Rights”). Upon the liquidation, dissolution or winding up of the Company, the holders of the Series A Preferred Stock will participate in the distribution of the Company’s assets with the holders of the Company’s Common Stock pro rata based on the number of shares of Common Stock held by each (assuming conversion of all shares of Series A Preferred Stock). Due to the Enhanced Voting Rights, following the issuance of shares of Series A Preferred Stock, the holders of the Series A Preferred Stock may be able to exercise voting control over the Company. In such case, the holders of the Series A Preferred Stock may gain the ability to control the outcome of corporate actions requiring stockholder approval, including mergers and other changes of corporate control, going private transactions, and other extraordinary transactions. The concentration of voting control in the Series A Preferred Stock could discourage investments in the Company, or prevent a potential takeover of the Company which may have a negative impact on the value of the Company’s securities. In addition, the liquidation rights granted to the holders of the Series A Preferred Stock will have a dilutive effect on the distributions available to the holders of the Company’s common stock. As of March 31, 2014, there were 5,000,000 shares of Series A Preferred Stock issued or outstanding.
On February 7, 2013, the Company and Harmon executed a Share Cancellation / Exchange / Return to Treasury Agreement. Harmon returned to the Company 45,000,000 shares of common stock in exchange for 5,000,000 shares of Series A preferred stock (see Note 6). The preferred shares were recorded at a value of $500.
On April 11, 2014, the Company’s Board of Directors approved the filing of a Certificate of Designation of the Preferences and Rights of Series B Preferred Stock of Green Innovations Ltd. (“Certificate of Designation”) with the Secretary of State of the State of Nevada authorizing the creation of a new series of preferred stock designated as “Series B Preferred Stock” pursuant to the authority granted to the Board of Directors under the Company’s Amended and Restated Certificate of Incorporation and Section NRS 78.1955 of the Nevada General Corporation Law. The Certificate of Designation was filed with the Nevada Department of State on April 14, 2014. The Certificate of Designation designated 250,000 shares of the Company’s preferred stock as Series B Preferred Stock. Each holder of Series B Preferred Stock will be entitled to participate in dividends or distributions payable to holders of the Company’s common stock at a rate of the dividend payable to each share of Common Stock multiplied by the number of shares of Common Stock that each share of such holder’s Series B Preferred Stock is convertible into. Each share of Series B Preferred Stock is convertible, at the option of the holder of the Series B Preferred Stock, into one share of the Company’s common stock. Shares of the Series B Preferred Stock will be issued to certain officers of the Company as the Board determines for consideration of the exchange for shares of Series A Preferred Stock of the Company, as already issued. Each share of Series B Preferred Stock will be entitled to one thousand (1,000) votes on all matters submitted to a vote of the stockholders of the Company (“Enhanced Voting Rights”). Upon the liquidation, dissolution or winding up of the Company, the holders of the Series B Preferred Stock will participate in the distribution of the Company’s assets with the holders of the Company’s Common Stock pro rata based on the number of shares of Common Stock held by each (assuming conversion of all shares of Series B Preferred Stock). Due to the Enhanced Voting Rights, following the issuance of shares of Series B Preferred Stock, the holders of the Series B Preferred Stock may be able to exercise voting control over the Company. In such case, the holders of the Series B Preferred Stock may gain the ability to control the outcome of corporate actions requiring stockholder approval, including mergers and other changes of corporate control, going private transactions, and other extraordinary transactions. The concentration of voting control in the Series B Preferred Stock could discourage investments in the Company, or prevent a potential takeover of the Company which may have a negative impact on the value of the Company’s securities. In addition, the liquidation rights granted to the holders of the Series B Preferred Stock will have a dilutive effect on the distributions available to the holders of the Company’s common stock. As of March 31, 2014, there were no shares issued or outstanding. On April 30, 2014, Harmon returned to the Company 250,000 shares of Series A Preferred Stock in exchange for 250,000 shares of Series B Preferred Stock (see Notes 6 and 10).
Common Stock
The Company is authorized to issue 50,000,000 shares of common stock, as amended on August 15, 2012, with a par value of $0.0001. The common stock is voting. On September 24, 2012, the Company amended its authorized shares to 150,000,000.
On August 15, 2012, the Company had a forward split of its stock with twenty shares for one share as the effect. All instances where common stock is mentioned in these statements reflect the 20:1 split.
On September 26, 2012, the Company acquired Green Hygienics in exchange for 49,500,000 shares of common stock of the Company. These shares were issued in October 2012.
In October 2012, the two directors and former officers of the Company, Mordechai David and Shamir Benita, cancelled 79,500,000 shares of common stock issued to them.
On January 18, 2013, the Company sold 300,000 shares of restricted common stock to Belmont Group Ltd. for $180,000 at a price of $0.60 per share.
On February 4, 2013, the Company appointed K. Parmar to its Advisory Board. As compensation for the appointment, K. Parmar will be issued 12,500 shares quarterly for his service. As of March 31, 2014, these shares were issuable and recorded at a value of $0.83 per share (the closing price the previous day) or $10,375 (see Note 6).
On February 7, 2013, the Company and Harmon executed a Share Cancellation / Exchange / Return to Treasury Agreement. Harmon returned to the Company 45,000,000 shares of common stock in exchange for 5,000,000 shares of Series A preferred stock. The common shares were cancelled (see Note 6).
On February 11, 2013, the Company appointed Mark DeFilippo (“DeFilippo”) to its Advisory Board. As compensation for the appointment, DeFilippo will be issued 12,500 shares quarterly for his service. These shares were recorded at a value of $0.97 per share (the closing price the previous day) or $12,125. The shares were issued in April 2013 (see Note 6).
On February 12, 2013, the Company sold 107,143 shares of restricted common stock to Coventry Capital for $150,000 at a price of $1.40 per share (the closing price the previous day). The shares were recorded as issuable as of March 31, 2014 and were issued in April 2013.
On February 18, 2013, the Company appointed Sandy Greenberg (“Greenberg”) to its Advisory Board. As compensation for the appointment, Greenberg will be issued 12,500 shares quarterly for his service. These shares were recorded at a value of $2.22 per share (the closing price the previous day) or $27,750. The shares were issued in April 2013 (see Note 6).
On February 18, 2013, the Company appointed Michael Perfetti (“Perfetti”) to its Advisory Board. As compensation for the appointment, Perfetti will be issued 12,500 shares quarterly for his service. These shares were recorded at a value of $2.22 per share (the closing price the previous day) or $27,750. The shares were issued in April 2013 (see Note 6).
On February 19, 2013, the Company appointed Y. Parmar to its Advisory Board. As compensation for the appointment, Y. Parmar will be issued 12,500 shares quarterly for his service. These shares were recorded at a value of $2.22 per share (the closing price the previous day) or $27,750. The shares were issued in April 2013 (see Note 6).
On February 19, 2013, the Company declared a share dividend on a basis of 1.24:1 as of the record date of February 19, 2013, thereby all common shareholders shall receive 0.24 of a share for every one share owned. The Company’s issued and outstanding shall increase from 25,000,000 to 31,000,000 shares of common stock. The shares issued to Y. Parmar, DeFilippo, Greenberg, Perfetti and K. Parmar were not eligible for the dividend as they were not issued. The shares of common stock purchased by Coventry Capital on February 12, 2013 were not issued prior to the dividend therefore the Company issued and additional 46,611 shares of common stock to Coventry Capital for the dividend (see Note 8). The total shares issued for the dividend was 6,046,611 (see Note 8).
On February 22, 2013, the Company appointed Rundle to its Advisory Board. As compensation for the appointment, Rundle wasto be issued 12,500 shares quarterly for his service. These shares were recorded at a value of $0.51 per share (the closing price the previous day) or $6,375. The shares were issued in April 2013 (see Note 6).
On February 22, 2013, the Company contracted with Vincent & Rees (“V&R”) to serve as the Company’s legal counsel. As compensation for the agreement, V&R received 250,000 shares of restricted common stock of the Company. These shares were recorded at a value of $0.51 per share (the closing price the previous day) or $127,500. The shares were issued in April 2013.
On April 4, 2013, in exchange for certain assets of Clearly Herbal International Ltd., a British Virgin Islands corporation (“CHI”), the Company paid the owner of CHI 300,000 shares of restricted common stock for an United States trademark (see Note 2). Additionally, the Company has issuable 200,000 shares of restricted common stock for an United Kingdom trademark (see Note 2). The value of the two transactions was $600,000 or $1.20 per share. As a condition of the acquisition, the Company guaranteed that the 10-day volume weighted average price on the date six months after closing to be at least $1.20. The Company was obligated to issue additional shares of restricted common stock should the price be below $1.20. On October 4, 2013, the common stock of the Company was $0.18 therefore, on October 7, 2013 an additional 1,700,000 shares of restricted stock were issued (see Notes 2 and 5).
On April 4, 2013, Y. Parmar, a member of the Advisory Board, purchased 100,000 shares of common stock at a discounted price of $0.54 per share for $50,000 (see Note 6).
On April 4, 2013, Alain Cameron purchased 55,555 shares of common stock at a discounted price of $0.54 per share for $30,000.
On April 15, 2013, the Company granted 300,000 shares of common stock to Rundle, the chief executive officer of the Company, as part of his employment agreement. The Company recorded the value of the shares at $268,750 or $0.90 per share (see Note 6).
On May 8, 2013, N. Parmar, a co-owner of American Hygienics Corporation, a supplier to the Company, purchased 125,000 shares of common stock at a discounted price of $0.40 per share for $50,000.
On May 8, 2013, K. Parmar, a member of the Advisory Board and co-owner of American Hygienics Corporation, a supplier to the Company, purchased 125,000 shares of common stock at a discounted price of $0.40 per share for $50,000 (see Note 6).
On May 16, 2013, the Company amended the agreements with Harmon and RJR Manufacturers’ Agent (“RJR”) to issue shares equal to the contractual obligation to Rundle’s employment agreement. Harmon was issued 300,000 shares and RJR has 300,000 shares issuable, at a value of $168,000 each or $0.56 per share. See Note 6 in regards to Harmon.
On June 15, 2013, the Company issued 20,000 shares of common stock to a consultant for services rendered for June. The shares were recorded at a cost of $9,300.
On June 18, 2013, the Company issued to BCJ, the Company’s corporate counsel, 111,905 shares of common stock as part of its annual engagement with BCJ, 100,000 shares due on June 1, 2013, and 11,905 shares for the partial month of May, for legal services. The shares were issued at the previous day’s closing price of $0.49 or $54,833. The 100,000 shares will be amortized over one year.
On June 18, 2013, the Company issued 10,000 shares of common stock to Black Mountain Equities, Inc. as a conditional of financing (see Note 4). The shares were recorded as a debt discount of $5,000 as the stock was valued at $0.50 per share.
On June 18, 2013, the Company issued 62,500 shares or 12,500 each, to its Advisory Board, Perfetti, Y. Parmar, K. Parmar, Sandberg, and DeFilippo. The shares were valued collectively at $28,750. See Note 6.
On June 18, 2013, the Company issued 20,000 shares of common stock as compensation to a consultant in regards to services rendered.
On June 30, 2013, the Company recorded 22,635 shares of common stock issuable to BCJ for June legal fees. The shares were valued at $8,375, or $0.37 per share, and due to an averaging method of calculation, a $3,375 loss on issuance was recorded. The shares were issued in July 2013.
On July 5, 2013, the Company issued 35,000 shares of common stock as compensation to a consultant in regards to services rendered. The shares were recorded at a cost of $9,451.
On July 12, 2013, as a condition of financing, the Company issued JMJ 24,390 shares of common stock. The stock, based on the prior day’s closing price of $0.31, was valued at $7,561 and was recorded as a cost of financing. On October 30, 2013, as a condition of the settlement with JMJ, these shares were committed to be returned to the Company (see Note 4 and 8). The shares were returned on January 6, 2014.
On July 9, 2013, W. Ray Harrison, Jr., a former employee of the Company, exercised his 500,000 warrants for common stock on a cashless basis using the prior day’s closing price of $0.3378 thereby a forfeiture of 14,801 shares with an issuance of 485,199 shares of common stock (see Note 6).
On July 12, 2013, W. Ray Harrison, Jr., a former employee of the Company, exercised his 250,000 options for common stock on a cashless basis based on the prior day’s closing price of $0.305 thereby a forfeiture of 8,196 shares with an issuance of 241,804 shares of common stock (see Note 6).
On July 25, 2013, we issued 3,600,000 shares of our common stock to Ironridge. The issuance is exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, as the issuance of securities was in exchange for bona fide outstanding claims, where the terms and conditions of such issuance were approved by a court after a hearing upon the fairness of such terms and conditions. See Notes 5 and 7.
On July 29, 2013, the Company issued 35,000 shares of common stock as compensation to a consultant in regards to services rendered. The shares were recorded at a cost of $9,450.
On July 29, 2013, as part of an engagement agreement with RedChip Companies, Inc., a public and investor relations firm, the Company issued 300,000 shares of common stock. The shares were recorded at a cost of $81,300.
On August 16, 2013, the Company issued 12,500 shares of common stock to Hilton Kahn, a member of the Advisory Board, as his quarterly compensation. The shares were valued at $0.278 per share, the previous day’s price based on July 15, 2013, the date of the contractual obligation, or $3,500. See Note 6.
On August 16, 2013, the Company issued RJR Manufacturers’ Agent 300,000 shares of common stock, as compensation for services. The shares were valued at $0.278 per share, or $83,370.
On August 16, 2013, the Company issued Bruce Harmon, the Company’s CFO, 300,000 shares of common stock, as compensation for services. The shares were valued at $0.278 per share, or $83,370 (see Note 6).
On September 5, 2013, the Company issued DBA 300,000 shares of common stock, as compensation for services. The shares were valued at $0.50 per share, or $60,000. The shares have a three vesting therefore will be amortized accordingly. As of March 31, 2014, $2,500 has been expensed. See Note 6.
On September 5, 2013, the Company issued Jeff Thurgood, the Company’s Vice President of Sales, 250,000 shares of common stock, as compensation for services. The shares were valued at $0.50 per share, or $50,000. The shares have a three vesting therefore will be amortized accordingly. As of March 31, 2014, $1,805 has been expensed. See Note 6.
On September 6, 2013, the Company issued 35,161 shares of common stock to BCJ for August legal fees. The shares were valued at $10,267, or $0.29 per share, and due to an averaging method of calculation, a $10,267 loss on issuance was recorded.
On September 6, 2013, the Company issued 41,254 shares of common stock to BCJ for September legal fees. The shares were valued at $9,488.42, or $0.23 per share, and due to an averaging method of calculation, a $5,488 loss on issuance was recorded.
On September 12, 2013, RJR Manufacturers’ Agent exercised these warrants on a cashless basis based on the prior day’s closing price of $0.3378 thereby a forfeiture of 72,992 shares with an issuance of 927,008 shares of common stock.
On September 13, 2013, the Company sold 26,087 shares of restricted common stock to an individual for $3,000. The shares sold were discounted by 25% due to the restriction and a loss of $1,043 was recorded.
On September 18, 2013, the Company issued 200,000 shares of common stock to Kalpesh Vyas as payment for the finalization of the transfer of ownership of the United Kingdom Clearly Herbal trademark (see Note 2 and 5).
On September 18, 2013, the Company issued Tauriga 625,000 shares of common stock as obligated under the licensing agreement between Tauriga and GHI (see Note 2).
On September 18, 2013, the Company issued a shareholder 264 shares of common stock as part of the February 2013 dividend. The shareholder was omitted from the original issuance due to the timing of his ownership. The Company believes that the lack of issuance at the time of dividend was correct but, in order to avoid any potential problems, issued the immaterial amount of shares. The issuance was recorded as a loss of $73 based on the prior day’s closing price of $0.275.
On September 25, 2013, we issued 3,000,000 shares of our common stock to Ironridge. The issuance is exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, as the issuance of securities was in exchange for bona fide outstanding claims, where the terms and conditions of such issuance were approved by a court after a hearing upon the fairness of such terms and conditions. See Notes 5 and 7.
On October 7, 2013, the Company issued 62,500 shares or 12,500 each, to its Advisory Board, Perfetti, Y. Parmar, K. Parmar, Sandberg, and DeFilippo. The shares were valued collectively at $14,375. See Note 6.
On October 8, 2013, the Company issued 44,307 shares of common stock to BCJ for legal services. The shares were valued at $13,723, or $0.31 per share, and due to an averaging method of calculation, a $4,861 loss on issuance was recorded.
On October 8, 2013, the Company issued Clearly Herbal International, a British Virgin Island corporation, an additional 1,700,000 shares of common stock in regards to the Clearly Herbal U.S. trademark and to Clearly Herbal International, a UK corporation, an additional 1,333,333 shares of common stock in regards to the Clearly Herbal UK trademark (see Note 2 and 5).
On October 15, 2013, the Company issued 12,500 shares to Hilton Kahn, a new member of the Company’s Advisory Board. The shares were valued at $2,250. See Note 6.
On October 23, 2013, the Company issued 2,316,595 shares to TCA in conjunction with the financing provided by TCA. The shares were valued at $250,000. See Note 4 and 5.
On October 23, 2013, we issued 4,200,000 shares of our common stock to Ironridge. The issuance is exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, as the issuance of securities was in exchange for bona fide outstanding claims, where the terms and conditions of such issuance were approved by a court after a hearing upon the fairness of such terms and conditions. See Notes 5 and 7.
On October 31, 2013, the Company issued 40,000 shares of common stock to BCJ for legal services. The shares were valued at $5,600, or $0.14 per share, and due to an averaging method of calculation, a $1,600 loss on issuance was recorded.
On November 1, 2013, the Company issued 15,000 shares of common stock to Charles Andrews, a member of the Board of Directors of the Company. The shares were valued at $2,100. See Note 6.
On November 1, 2013, the Company issued 65,488 shares of common stock to BCJ for legal services. The shares were valued at $14,337, or $0.22 per share, and due to an averaging method of calculation, a $5,168 loss on issuance was recorded.
On November 25, 2013, the Company issued 46,611 shares of common stock to Coventry Capital in regards to the February 2013 dividend.
On November 25, 2013, the Company issued 30,000 shares of common stock to Robert Brennan, a consultant to the Company. Mr. Brennan had previously been issued 30,000 warrants for common stock which was cancelled. The shares were valued at $3,900.
On November 25, 2013, the Company issued 30,000 shares of common stock to Jean-Michel Fitamant, a consultant to the Company. The shares were valued at $3,900.
On November 25, 2013, the Company issued 30,000 shares of common stock to Michele Harris, a leased employee to the Company (became employee in January 2014). The shares were valued at $3,900.
On December 1, 2013, the Company issued 176,219 shares of common stock to BCJ
for legal services. The shares were valued at $38,293, or $0.22 per share, and due to an averaging method of calculation, a $17,146 loss on issuance was recorded.
On December 16, 2013, we issued 4,400,000 shares of our common stock to Ironridge. The issuance is exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, as the issuance of securities was in exchange for bona fide outstanding claims, where the terms and conditions of such issuance were approved by a court after a hearing upon the fairness of such terms and conditions. See Notes 5 and 7.
On January 1, 2014, the Company issued 131,492 shares of common stock to BCJ for legal services. The shares were valued at $10,519, or $0.08 per share, and due to an averaging method of calculation, a $6,519 loss on issuance was recorded.
On January 2, 2014, the Company sold 190,476 shares of restricted common stock to an individual for $10,000. The shares sold were discounted by 25% due to the restriction and a loss of $4,876 was recognized.
On January 3, 2014, the Company issued 51,471 shares of common stock to Octane, Inc. (“Octane”) for services. The shares were valued at $4,118, or $0.08 per share, and due to a discount due to the restriction, a $1,493 loss on issuance was recorded.
On January 6, 2014, the Company cancelled 24,390 shares of common stock that were previously issued to JMJ (see Note 4). As a condition of the payment of the note to JMJ on October 30, 2013, these shares were agreed to be returned and cancelled.
On January 8, 2014, Black Mountain converted $10,000 of principal of the note dated June 12, 2013, into 263,505 shares of common stock, valued at $21,080. A loss on conversion of $11,080 was recorded. See Note 4.
On January 17, 2014, the Company issued 2,684,964 shares of common stock to TCA (see Notes 4 and 5) in conjunction with the financing provided by TCA. The shares were valued at $225,537. The shares have a guaranteed value of $112,500 and TCA cannot exceed that amount. As applicable, upon sale and recognition of the above stated compensation, any remaining shares will be returned to the Company for cancellation. The Company recorded a receivable of $113,037 in records to the over issuance value.
On January 22, 2014, the Company sold 152,000 shares of restricted common stock to an employee for $9,975. The shares sold were discounted by 25% due to the restriction and a loss of $3,705 was recorded.
On January 24, 2014, Black Mountain converted $55,000 of principal and $5,500 of accrued interest of the note dated June 12, 2013, into 1,231,708 shares of common stock, valued at $160,122. A loss on conversion of $99,622 was recorded. See Note 4.
On February 1, 2014, the Company issued 15,000 shares of common stock to Charles Andrews, a director of the Company (see Note 6), for services. The shares were valued at $1,800, or $0.12 per share.
On February 1, 2014, the Company issued 88,418 shares of common stock to BCJ for legal services. The shares were valued at $10,610, or $0.12 per share, and due to an averaging method of calculation, a $6,610 loss on issuance was recorded.
On February 4, 2014, the Company issued 4,000,000 shares of our common stock to Ironridge. The issuance is exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, as the issuance of securities was in exchange for bona fide outstanding claims, where the terms and conditions of such issuance were approved by a court after a hearing upon the fairness of such terms and conditions. See Notes 5 and 7.
On March 1, 2014, the Company issued 97,915 shares of common stock to BCJ for legal services. The shares were valued at $11,750, or $0.12 per share, and due to an averaging method of calculation, a $7,750 loss on issuance was recorded.
On March 19, 2014, the Company issued 50,000 shares of common stock to BCJ for additional legal services outside of the agreement between the parties. The shares were valued at $5,000, or $0.10 per share.
On March 19, 2014, 900,000 shares of common stock that were authorized for issuance in 2013 but never issued and recorded as issuable, were issued.
On March 20, 2014, we issued 4,500,000 shares of our common stock to Ironridge. The issuance is exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, as the issuance of securities was in exchange for bona fide outstanding claims, where the terms and conditions of such issuance were approved by a court after a hearing upon the fairness of such terms and conditions. See Notes 5 and 7.
On March 25, 2014, the Company issued 150,000 shares of common stock to American Capital Ventures (“ACV”) for investor relation services for three months. The shares were valued at $15,000, or $0.10 per share. These shares were not issued as of March 31, 2014 and recorded as issuable.
Stock Warrants
The Company has granted warrants to employees. Warrant activity for employees the three months ended March 31, 2014 is as follows:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
of Warrants
|
|
|
Price
|
|
|
Terms
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2013
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2014
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2014
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Grant Date Fair Value
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
On November 19, 2012, the Company issued 500,000 fully vested warrants with an exercise price of $0.01 per share for common stock to W. Ray Harrison, Jr. as compensation for the APA with SBI-TX (see Note 3). The warrants were valued at $0.58 per warrant or $290,000 using the average price for our common stock. On July 9, 2013, Mr. Harrison exercised these warrants on a cashless basis based on the prior day’s closing price of $0.3378 thereby a forfeiture of 14,801 shares with an issuance of 485,199 shares of common stock. See Note 2 and 6.
The Company has granted warrants to non-employees. Warrant activity for non-employees the three months ended March 31, 2014 is as follows:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
of Warrants
|
|
|
Price
|
|
|
Terms
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2013
|
|
|
2,111,111
|
|
|
$
|
0.076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2014
|
|
|
2,111,111
|
|
|
$
|
0.076
|
|
|
|
4.46
|
|
|
$
|
194,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2014
|
|
|
2,111,111
|
|
|
$
|
0.076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Grant Date Fair Value
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
On November 1, 2012, the Company issued 1,000,000 fully vested warrants with an exercise price of $0.01 per share for common stock to RJR Manufacturers’ Agent as compensation for services. The warrants were valued at $0.43 per warrant or $430,000 using the average price for our common stock. On September 12, 2013, RJR Manufacturers’ Agent exercised these warrants on a cashless basis based on the prior day’s closing price of $0.3378 thereby a forfeiture of 72,992 shares with an issuance of 927,008 shares of common stock.
On March 17, 2013, the Company issued 1,000,000 fully vested warrants with an exercise price of $0.01 per share for common stock to Ecotrade Solutions Ltd. as compensation for services. The warrants were valued at $0.88 per warrant or $880,000 using the average price for our common stock.
On August 13, 2013, the Company issued 30,000 warrants with an exercise price of $0.28 per share for common stock to Robert Brennan, a consultant to the Company, as compensation for services. On November 25, 2013, the Company cancelled the warrants and issued Mr. Brennan 30,000 shares of common stock.
On November 1, 2013, the Company issued 1,111,111 fully vested warrants with an exercise price of $0.135 per share for common stock to RJR Manufacturers’ Agent as compensation for services. The warrants were valued at $0.135 per warrant or $150,000 using the current price for our common stock.
Stock Options
The Company approved the 2012 Stock Option Plan on November 14, 2012 under which 10,000,000 shares were reserved for issuance.
The Company has granted options to employees. Options activity for the three months ended March 31, 2014 is as follows:
|
|
|
|
|
Weighted
|
|
|
Weighted
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
of Options
|
|
|
Price
|
|
|
Terms
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2013
|
|
2,111,111
|
|
|
$
|
0.076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2014
|
|
|
2,111,111
|
|
|
$
|
0.076
|
|
|
|
9.13
|
|
|
$
|
194,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2014
|
|
|
2,111,111
|
|
|
$
|
0.076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Grant Date Fair Value
|
|
|
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
On November 14, 2012, the Company granted Bruce Harmon 1,000,000 options for common stock. The options are fully-vested at issuance, have a five-year life, and have an exercise price of $0.01. The options were valued at $0.53 per option or $530,000 using the average price of our common stock. See Note 6.
On November 14, 2012, the Company granted W. Ray Harrison, Jr. 250,000 options for common stock. The options are fully-vested at issuance, have a five-year life, and have an exercise price of $0.01. The options were valued at $0.53 per option or $132,500 using the average price of our common stock. On July 12, 2013, Mr. Harrison exercised these options on a cashless basis based on the prior day’s closing price of $0.305 thereby a forfeiture of 8,196 shares with an issuance of 241,804 shares of common stock (see Note 6).
On November 1, 2013, the Company granted Bruce Harmon 1,111,111 options for common stock. The options are fully-vested at issuance, have a five-year life, and have an exercise price of $0.135. The options were valued at $0.135 per option or $150,000. See Note 6.
NOTE 9 – CONCENTRATIONS
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to a concentration of credit risk, consist principally of temporary cash investments.
The Company places its temporary cash investments with financial institutions insured by the FDIC. No amounts exceeded federally insured limits as of March 31, 2014. There have been no losses in these accounts through March 31, 2014.
Concentration of Intellectual Property
The Company owns the trademark “SENSATIONAL” and “CLEARLY HERBAL” through the acquisitions from SBI-TX (see Note 2) and CHI (see Note 2), respectively, as filed with the United States Patent and Trademark Office (“USPTO”). Additionally, the Company has filed and been issued the trademark “FLORA” (the Company is not using “FLORA,” see Note 5) and has a patent pending on “SENSATIONALLY.” As of May 20, 2014, the USPTO will have recorded that the Company has abandoned the application for “SENSATIONALLY” and the patent “FLORA.”
NOTE 10 – SUBSEQUENT EVENTS
On April 1, 2014, the Company issued 1,111,111 options for common stock to Philip Rundle pursuant to the renewal of his employment agreement. The options were valued at $111,111. See Note 6.
On April 18, 2014, the Company entered into a Consulting Agreement with Mirador Consulting, LLC, to provide management consulting, business advisory, shareholder information and public relations. The contract is for six months with compensation of 2,500,000 shares of restricted common stock.
On April 18, 2014, the Company cancelled 87,500 shares of common stock that had been incorrectly issued to the Advisory Board in prior periods.
On April 30, 2014, Harmon exchanged 250,000 shares of Series A Preferred Stock for 250,000 shares of Series B Preferred Stock (see Notes 6 and 8).
On April 30, 2014, the Company issued 50,000 shares of common stock to Charles Andrews for his services for the quarter as a director. The shares will be recognized as an expense accordingly.