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7. Convertible Notes Payable
12 Months Ended
Jun. 30, 2012
Debt Disclosure [Abstract]  
7. Convertible Notes Payable

In January of 2011, the Company signed a Convertible Note agreement. Under the agreement, the Company can borrow up to $500,000, on as needed basis.  Interest on outstanding balance is due monthly, at a rate of 36% per year, with no schedule set for principal repayments.  The Holder of the Note has a right to convert part, or the entire outstanding balance into shares of Company’s common stock at 30% discount to market price.  Unpaid principal and interest outstanding under the Note, is due on January 1, 2012 (one year term), unless the agreement is extended, with consent of both parties.

 

On January 18, 2011, the Company received $60,000 as the first advance under the Note.  The Company recorded $25,714 related to the deemed beneficial conversion feature of this advance, of which $13,416 and $12,298 have been amortized to interest expense in the accompanying statements of operations for the fiscal years ended June 30, 2012 and 2011, respectively.

 

On April 12, 2011, the Company received $60,000 as the second advance under the Note.  The Company recorded $25,714 related to the deemed beneficial conversion feature of this advance, of which $18,150 and $7,564 have been amortized to interest expense in the accompanying statements of operations for the fiscal years ended June 30, 2012 and 2011.

 

On November 1, 2011, the Company received $100,000 as the third advance under the Note.  The Company recorded $42,857 related to the deemed beneficial conversion feature of this advance, of which $25,714 has been amortized to interest expense in the accompanying statements of operations for the fiscal year ended June 30, 2012.

 

On March 27, 2012, the Company received $20,000 as the fourth advance under the Note. The Company recorded $3,148 related to the deemed beneficial conversion feature of this advance, of which $1,049 has been amortized to interest expense in the accompanying statements of operations for the fiscal year ended June 30, 2012.

 

On May 4, 2012, the Company received $20,000 as the fourth advance under the Note. The Company recorded $1,584 related to the deemed beneficial conversion feature of this advance, of which $396 has been amortized to interest expense in the accompanying statements of operations for the fiscal year ended June 30, 2012.

 

During April and May of 2012, $60,000 outstanding under the Note was converted into 9,076,480 shares of common stock of the company, representing $30,348 of principal and $29,652 of interest.

 

As of June 30, 2012 and 2011, combined principal balances outstanding under the Note were $209,223 and $88,434, respectively; net of unamortized beneficial conversion features of $20,429 and $31,566, respectively.  Balances of interest accrued under the Note as of June 30, 2012 and 2011, were $14,501 and $1,560, respectively.

 

On April 8, 2012, the Company issued a convertible promissory note in the amount of $25,000, bearing interest at a rate of 20% per annum. The note is unsecured and matured on December 1, 2012. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 30% discount to the market price, at the point of conversion. The Company recorded $24,770 related to the deemed beneficial conversion feature of this note, of which $9,289 has been amortized to interest expense in the accompanying statements of operations for the fiscal year ended June 30, 2012.  As of June 30, 2012, the principal balance remained unchanged, and accrued interest balance was $1,109.

 

On May 25, 2012, the Company issued a convertible promissory note in the amount of $40,000, bearing interest at a rate of 8% per annum. The note is unsecured and matures on April 17, 2013. The entire principal and accrued interest on the note are convertible into common stock of the Company at a variable conversion price, with 45% discount to the market price, at the point of conversion. The Company determined that the conversion feature of the Note should be accounted for as a convertible note derivative liability, and recorded at its fair value. As of June 30, 2012, balance of derivative liability was $32,727. During the fiscal year ended June 30, 2012, $3,636 of debt discount was expensed on the accompanying statement of operations as interest expense, leaving the balance of $29,091 at the end of the year.