Annual report pursuant to section 13 and 15(d)

NOTES PAYABLE

v2.4.0.8
NOTES PAYABLE
12 Months Ended
Jun. 30, 2013
NOTES PAYABLE [Abstract]  
NOTES PAYABLE
NOTE 8 – NOTES PAYABLE
 
 
 
 
 
Maturity
   
Interest
Rate
   
Conversion Price
   
June 30, 2013
   
June 30, 2012
 
Related Party
 
   
   
   
   
 
Senior Convertible Note
 
2013
     
8
%
 
$
0.60
   
$
1,053,000
   
$
1,053,000
 
Accrued Interest
                           
274,078
     
189,834
 
Total
                           
1,327,078
     
1,242,834
 
Less current portion
                           
1,327,078
     
-
 
Total long-term
                           
-
     
1,242,834
 
 
                                       
Others
                                       
Senior Convertible Note
 
2014
     
8
%
 
$
0.50
     
150,000
     
150,000
 
Senior Convertible Note
   
2014
     
8
%
 
$
0.50
     
100,000
     
100,000
 
Acrued interest
                           
4,891
     
4,986
 
Total
                           
254,891
     
254,986
 
Less current portion
                           
254,891
     
-
 
Total long-term
                           
-
     
254,986
 
 
                                       
Related Party
                                       
Note Payable
   
2013
     
8
%
           
59,155
     
89,155
 
Accrued interest
                           
18,776
     
12,870
 
Total
                           
77,931
     
102,025
 
Less current portion
                           
77,931
     
30,000
 
Total long-term
                           
-
     
72,025
 
 
                                       
Related Party
                                       
Senior Convertible Note
   
2013
     
6-8
%
 
$
.18-.74
     
3,547,580
     
3,547,580
 
Senior Convertible Note 2
           
8
%
 
$
.42-.63
     
375,000
     
375,000
 
Senior Convertible Note 3
           
8
%
 
$
0.60
     
600,000
     
600,000
 
Accrued interest
                           
1,727,236
     
1,391,157
 
Total
                           
6,249,816
     
5,913,737
 
Less current portion
                           
6,249,816
     
-
 
Total long-term
                           
-
     
5,913,737
 
 
On March 31, 2013, the Company combined several of its outstanding and previously issued notes payable to the largest shareholder into a single senior convertible promissory note in the amount of $3,547,580. The original notes were issued on September 30, 2003, June 14, 2007, October 30, 2007, February 11, 2008, May 17, 2008, September 12, 2008, February 26, 2009, May 12, 2009 and March 15, 2010 in the principal amounts of $1,268,625, $208,955, $300,000, $370,000, $485,000, $150,000, $175,000, $375,000 and $215,000, respectively. This senior convertible note is secured by the Company's revenues and assets and is subordinate to the additional senior convertible notes issued to the various parties listed below. Interest rates for these convertible notes range from 6% to 8% and conversion rates range from $0.18 to $0.74.

On March 31, 2010, the Company issued a senior convertible promissory note to a major shareholder for the principal amount of $1,053,000, which consisted of $600,164 in cash, $375,000 principal balance of a prior senior convertible note together with unpaid accrued interest thereon of $77,836.  This senior convertible note is secured by the Company's revenues and assets with the same priority as the Notes 2 and 3 to the Shareholder and the senior convertible notes totaling $250,000.  This note has an annual interest rate of 8%, a maturity date of December 31, 2013.  This note has the conversion price of $0.60 per share of common stock.  The Company has recorded approximately $859,950 as an interest expense as a result of the beneficial conversion feature.

On March 31, 2010, the Company issued two senior convertible promissory notes totaling $250,000 to third parties.  These senior convertible notes are secured by the Company's revenues and assets with  priority below Notes 2 and 3 to the Shareholder and the March 31, 2010 senior convertible note to a major shareholder. These notes have an annual interest rate of 8% with a maturity date of June 30, 2014.  These notes have the convertible price of $1.00 per share of common stock.  The Company has recorded approximately $22,500 as an interest expense as a result of the beneficial conversion feature.  During the year ended June 30, 2011, the conversion price of the $150,000 senior convertible promissory note was reduced to $0.50 per share of common stock as part of the arrangement of the additional investment in the Company's restricted common stock by the note holder. In addition, the conversion price on the $100,000 senior convertible promissory note was also reduced to $0.50 per share of common stock as a result of the additional investment in the Company's restricted common stock.

On December 16, 2010, the Company issued a promissory note to an officer for the principal amount of $113,155, which consisted of a total 100,000 principal balance of four prior convertible notes together with unpaid accrued interest thereon of $13,155.  This note has an annual interest rate of 8%, a maturity date of December 31, 2013.  The outstanding principal amount will be paid at a rate of $1,000, $2,000 and $3,000 each month for the first 12 months, the second 12 months and the third 12 months, respectively. As of June 30 2013, and June 30, 2012, the Company paid an aggregate principal amount of approximately $30,000 and $18,000 respectively, to the officer. The remaining outstanding principal balance and accrued interest will be paid on the maturity date.

In November 2009, the Company finalized and issued a $600,000 2009 senior convertible note payable ("Note 3") to the Shareholder.  The Company received the borrowings (the "Advances") in a series of $45,000 on September 8, 2009, $25,000 on September 11, 2009, $125,000 on September 23, 2009, $100,000 on October 14, 2009, $50,000 on October 28, 2009, $175,000 on November 12, 2009,   $50,000 on December 14, 2009, and $30,000 on February 26, 2010 totaling $600,000.   This senior convertible note is secured by the Company's revenues and assets with the same priority as the March 31, 2010 senior convertible notes, it has a 8% annual interest rate and has a maturity date of December 31, 2013.  This note has the conversion price of $0.60 per share of common stock.  The Company has recorded approximately $215,500 as an interest expense to date for the Advances received as a result of the beneficial conversion feature.  As part of the terms of this note, the maturity dates of all other outstanding senior convertible notes owed to the Shareholder were extended to December 31, 2013.  During the year ended June 30, 2011, the conversion price on a $135,000 portion of the Note 3 was also reduced to $0.50 per share of common stock as a result of the additional investment in the Company's restricted common stock.

Effective May 12, 2009, the Company issued a 2009 senior convertible note payable ("Note 2") to the Shareholder to combine the borrowings (the "Advances") in a series of $35,000 each from May 12, 2009 through August 12, 2009, $50,000 and $45,000 on August 14 and 27, 2009, respectively totaling $375,000. This senior convertible note is secured by the Company's revenues and assets with the same priority as the March 31, 2010 senior convertible notes and has a maturity date of December 31, 2013.  This note has the conversion prices determined by the closing trading prices of the Company's common stock on the dates the Advances were received.

At June 30, 2013, the Company accrued interest of $1,727,236, $274,078, $4,891, and  $18,776 on the convertible notes and the note payable with the Shareholder, the convertible notes with related parties, the convertible note with a third party, and the note payable to a related party, respectively.