Florida
(State
of or Other Jurisdiction of Incorporation or Organization)
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20-1167761
(IRS
Employer I.D. No.)
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Page
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PART
I.
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FINANCIAL
INFORMATION
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Item
1.
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3
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3
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4
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5
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6
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Item
2.
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19
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Item
3.
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25
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PART
II.
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OTHER
INFORMATION
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Item
1.
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25
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Item
2.
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25
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Item
3.
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26
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Item
4.
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26
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Item
5.
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26
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Item
6.
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26
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27
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Innovative Food Holdings, Inc. and subsidiary
|
||||
Condensed
Consolidated Balance Sheet
|
||||
(unaudited)
|
||||
June
30,
|
||||
2007
|
||||
ASSETS
|
||||
Current
assets
|
||||
Cash
and cash equivalents
|
$ | 37,074 | ||
Accounts
receivable net
|
190,509 | |||
Interest
receivable
|
7,147 | |||
Loan
receivable, net
|
285,000 | |||
Other
current assets
|
18,236 | |||
Total
current assets
|
537,966 | |||
Property
and equipment, net
|
75,799 | |||
$ | 613,765 | |||
LIABILITIES
AND STOCKHOLDERS' DEFICIENCY
|
||||
Current
liabilities
|
||||
Accounts
payable and accrued liabilities
|
$ | 581,702 | ||
Accrued
interest, net
|
245,845 | |||
Accrued
interest - related parties, net
|
124,205 | |||
Notes
payable, current portion
|
927,640 | |||
Notes
payable - related parties, current portion
|
411,000 | |||
Penalty
for late registration of shares
|
275,808 | |||
Warrant
liability
|
493,853 | |||
Conversion
option liability
|
529,951 | |||
Total
current liabilities
|
3,590,004 | |||
Notes
payable
|
18,577 | |||
Stockholders’
deficiency
|
||||
Common
stock, $0.0001 par value; 500,000,000 shares authorized;
|
||||
149,787,638
shares issued and 139,787,638 shares outstanding
|
||||
(post
reverse-splits)
|
14,979 | |||
Additional
paid-in capital
|
519,292 | |||
Accumulated
deficit
|
(3,529,087 | ) | ||
Total
stockholders’ deficiency
|
(2,994,816 | ) | ||
$ | 613,765 |
Innovative Food Holdings, Inc. and
subsidiary
|
||||||||
Condensed
Consolidated Statements of Operations
|
||||||||
(unaudited)
|
||||||||
Three
months ended June 30,
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Six
months ended June 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(Restated)
|
(Restated)
|
|||||||||||||||
Sales
|
$ | 1,704,209 | $ | 1,840,270 | $ | 3,304,408 | $ | 3,479,445 | ||||||||
Cost
of goods sold
|
1,260,890 | 1,398,322 | 2,406,112 | 2,670,228 | ||||||||||||
Gross
Margin
|
443,319 | 441,948 | 898,296 | 809,217 | ||||||||||||
Selling,
General and administrative expenses
|
427,873 | 586,954 | 827,764 | 1,036,639 | ||||||||||||
Total
operating expenses
|
427,873 | 586,954 | 827,764 | 1,036,639 | ||||||||||||
Operating
income (loss)
|
15,446 | (145,006 | ) | 70,532 | (227,422 | ) | ||||||||||
Other
(income) expense:
|
||||||||||||||||
Interest
(income) expense-net
|
81,859 | 86,880 | 158,133 | 158,647 | ||||||||||||
Penalty
for late registration of shares
|
14,280 | 556,320 | 51,712 | 1,221,952 | ||||||||||||
Change
in fair value of warrant liability
|
2,076 | (638,829 | ) | (27,753 | ) | 532,835 | ||||||||||
Change
in fair value of conversion option liability
|
(20,259 | ) | (1,270,054 | ) | 92,744 | 367,581 | ||||||||||
(Gain)
loss from marking to market
|
(11,280 | ) | (141,080 | ) | (38,464 | ) | 6,208 | |||||||||
66,676 | (1,406,763 | ) | 236,372 | 2,287,223 | ||||||||||||
(Loss)
income before income taxes expense
|
(51,230 | ) | 1,261,757 | (165,840 | ) | (2,514,645 | ) | |||||||||
Income
tax expense
|
- | - | - | - | ||||||||||||
Net
(loss) income
|
$ | (51,230 | ) | $ | 1,261,757 | $ | (165,840 | ) | $ | (2,514,645 | ) | |||||
Net
(loss) income per share - basic (post reverse-splits)
|
$ | (0.00 | ) | $ | 0.01 | $ | (0.00 | ) | $ | (0.02 | ) | |||||
Net
(loss) income per share – diluted (post reverse-split)
|
$ | (0.00 | ) | $ | 0.00 | $ | (0.00 | ) | $ | (0.02 | ) | |||||
Weighted
average shares outstanding - basic (post reverse-splits)
|
148,666,209 | 116,952,912 | 148,595,605 | 111,913,251 | ||||||||||||
Weighted
average shares outstanding- diluted (Post reverse-split)
|
148,666,209 | 501,964,901 | 148,595,605 | 111,913,251 | ||||||||||||
Innovative Food Holdings, Inc. and Subsidiary
|
||||||||
Condensed
Consolidated Statements of Cash Flows
|
||||||||
(unaudited)
|
||||||||
Six months ended June
30,
|
||||||||
2007
|
2006
|
|||||||
(Restated)
|
||||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (165,840 | ) | $ | (2,514,645 | ) | ||
Adjustments to reconcile net loss to net
|
||||||||
cash (used in) provided by operating activities:
|
||||||||
Depreciation
and amortization
|
29,967 | 25,372 | ||||||
Value
of warrants issued
|
- | 17,394 | ||||||
Stock
issued as bonuses to employees and board members
|
8,125 | 49,901 | ||||||
Amortization
of discount on note payable issued to officer for salary
|
27,000 | - |
Cost
of penalty due to late registration of shares
|
51,712 | 1,221,952 | ||||||
Change
in operating fair value of warrant liability
|
(27,753 | ) | 543,586 | |||||
Change
in fair value of conversion option liability
|
92,744 | 367,581 | ||||||
(gain)
loss from marking to market-penalty
|
(38,464 | ) | 6,208 | |||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable, net
|
125,190 | 108,072 | ||||||
Prepaid
and other current assets
|
(2,730 | ) | (17,152 | ) | ||||
Accounts
payable and accrued expenses
|
(164,909 | ) | 252,142 | |||||
Net
cash (used in) provided by operating activities
|
(64,958 | ) | 60,411 | |||||
Cash
flows from investing activities:
|
||||||||
Loan
receivable
|
- | (190,000 | ) | |||||
Acquisition
of property and equipment
|
(13,138 | ) | (25,787 | ) | ||||
Net
cash used in investing activities
|
(13,138 | ) | (215,787 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Principal
payments on notes payable
|
(3,348 | ) | (10,000 | ) | ||||
Proceeds
from issuance of debt
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- | 160,000 | ||||||
Net
cash (used in) provided by financing activities
|
(3,348 | ) | 150,000 | |||||
Decrease
in cash and cash equivalents
|
(81,444 | ) | (5,376 | ) | ||||
Cash
and cash equivalents at beginning of period
|
118,518 | 10,203 | ||||||
Cash
and cash equivalents at end of period
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$ | 37,074 | $ | 4,827 | ||||
Supplemental
disclosure of cash flows information:
|
||||||||
Cash
paid during the period for:
|
||||||||
Interest
|
$ | - | $ | 265 | ||||
Taxes
|
$ | - | $ | - | ||||
Common
stock issued for services
|
$ | - | $ | 85,901 | ||||
Cost
of shares issued as penalty for late registration
|
$ | 51,712 | $ | 1,221,952 | ||||
Notes
payable issued for acquisition of computer equipment
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$ | - | $ | 25,787 | ||||
Value
of warrants and options issued as compensation
|
$ | - | $ | 17,394 | ||||
Revaluation
of conversion option liability
|
$ | 92,744 | $ | 367,581 | ||||
Revaluation
of liability for options and warrants
|
$ | (27,753 | ) | $ | 543,586 | |||
Revaluation
of penalty for late registration of shares
|
$ | (38,464 | ) | $ | 6,208 | |||
Cancellation
of shares of common stock
|
$ | 557 | $ | - | ||||
Common
stock issued to employees as bonus
|
$ | 8,125 | $ | - | ||||
Common
stock issued for conversion of accrued interest
|
$ | 4,000 | $ | - |
Weighted
|
||||||||
Average
|
||||||||
Number
of
|
Exercise
|
|||||||
Shares
|
Price
|
|||||||
Options
outstanding at December 31, 2006
|
15,500,000 | $ | 0.021 | |||||
Exercisable
|
15,200,000 | 0.012 | ||||||
Not
exercisable
|
300,000 | 0.50 | ||||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Cancelled
/ Expired
|
- | - | ||||||
Options
outstanding at March 31, 2007
|
15,500,000 | $ | 0.021 | |||||
Exercisable
|
15,300,000 | $ | 0.010 | |||||
Not
exercisable
|
200,000 | $ | 0.50 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Cancelled/Expired
|
- | - | ||||||
Options
outstanding at June 30, 2007
|
15,500,000 | $ | 0.021 | |||||
Exercisable
|
15,300,000 | $ | 0.010 | |||||
Not
exercisable
|
200,000 | $ | 0.500 |
Accounts
receivable from customers
|
$
|
200,509
|
||
Allowance
for doubtful accounts
|
(10,000
|
)
|
||
Accounts
receivable, net
|
$
|
190,509
|
Computer
equipment
|
$
|
261,588
|
||
Furniture
and fixtures
|
62,733
|
|||
324,321
|
||||
Less
accumulated depreciation and amortization
|
(248,522
|
)
|
||
Total
|
$
|
75,799
|
Accounts
payable and accrued expenses
|
$
|
579,754
|
|
Accrued commissions |
1,948
|
||
Total | $ |
581,702
|
Gross
|
Discount
|
Net
|
|||||||||
Non-related
parties
|
$
|
252,683
|
$ |
6,838
|
$
|
245,845
|
|||||
Related
parties
|
124,205
|
-
|
124,205
|
||||||||
Total
|
$
|
376,888
|
$
|
6,838
|
$ |
370,050
|
June
30, 2007
|
|||
Convertible
note payable in the original amount of $350,000 to Alpha Capital
Aktiengesselschaft (“Alpha Capital”), dated February 25, 2005. This note
consists of $100,000 outstanding under a previous note payable which was
cancelled on February 25, 2005, and $250,000 of new borrowings. We did not
meet certain of our obligations under the loan documents relating to this
issuance. These lapses include not reserving the requisite
number of treasury shares, selling subsequent securities without offering
a right of first refusal, not complying with reporting obligations, not
having our common shares quoted on the OTC:BB and not timely registering
certain securities. This note is entered technical default
status on May 16, 2005. The note originally
carried interest at the rate of 8% per annum, and is due in
full on February 24, 2007. Upon default, the note’s interest
rate increased to 15% per annum, and the note became immediately due. The
note is convertible into common stock of the Company at a conversion price
of $0.005 per share (post-reverse split). A beneficial conversion feature
in the amount of $250,000 was recorded as a discount to the note, and was
amortized to interest expense during the twelve months ended December 31,
2005. Accrued interest is convertible into common stock of the
Company at a conversion price of $0.005 per share (post-reverse
split). During the twelve months ended December 31, 2006 the note holder
converted $5,000 into shares of common stock. During the twelve months
ended December 31, 2006 the holder of the note converted $27,865 of
accrued interest into common stock. This note is in
default at June 30, 2007. Interest in the amount of $12,901 was accrued on
this note during the three months ended June 30, 2007, and
2006.
|
$
|
345,000
|
Convertible
note payable in the amount of $160,000 to Michael Ferrone, a board member
and related party, dated March 11, 2004. The note bears interest at the
rate of 8% per annum, and was originally due in full on March 11, 2006. On
February 25, 2005, an amendment to the convertible notes was signed which
extended the term, which resulted in a new maturity date of October 12,
2006. The note is convertible by the holder into common stock of the
Company at a conversion of $0.005 per share (post-reverse split). A
beneficial conversion feature in the amount of $160,000 was recorded as a
discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2004. Accrued interest is
convertible by the holder into common stock of the Company at maturity of
the note at a price of $0.005 per share (post-reverse
split) Interest in the amount of $3,191 was accrued on this
note during the each of the three months ended June
30, 2007, and 2006. This note is in default at June 30,
2007.
|
160,000
|
||
Convertible
note payable in the original amount of $100,000 to Joel Gold, a board
member and related party, dated October 12, 2004. The note bears interest
at the rate of 8% per annum, and was due in full on October 12, 2006. The
note is convertible by the holder into common stock of the Company at a
conversion price of $0.005 per share (post-reverse split). A
beneficial conversion feature in the amount of $100,000 was recorded as a
discount to the note, and was amortized to interest expense during the
twelve months ended December 31, 2004. Accrued interest is convertible by
the holder into common stock of the Company at maturity of the note at a
price of $0.005 per share (post-reverse split) . During
the twelve months ended December 31, 2006, $75,000 of the principal amount
was converted into common stock. Interest in the amount of $498, and
$1,732 was accrued on this note during the three months ended June 30,
2007, and 2006, respectively. This note is in default at June 30,
2007.
|
25,000
|
||
Convertible
note payable in the amount of $85,000 to Briolette Investments, Ltd, dated
March 11, 2004. The note bears interest at the rate of 8% per annum, and
is due in Full on March 11, 2006. The note is convertible into common
stock of the Company at a conversion of $0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of
$85,000 was recorded as a discount to the note, and was amortized to
interest expense during the twelve months ended December 31, 2004 Accrued
interest is convertible by the holder into common stock of the Company at
a price of $0.005 per share (post-reverse split). During the twelve months
ended December 31, 2005, the note holder converted $44,000 of the note
payable into common stock. During the twelve months ended December 31,
2006, the Company made a $3,000 cash payment on the principal amount of
the note. Interest in the amount of $758, and $819 was accrued on this
note during the three months ended June 30, 2007, and 2006, respectively.
This note is in default at June 30, 2007.
|
38,000
|
||
Convertible note payable in the
amount of $80,000 to Brown Door, Inc., dated March 11, 2004. The note
bears interest at the rate of 8% per annum, and was due in full on March
11, 2006. The note is convertible into common stock of the
Company at a conversion of $0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of $80,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2004. Accrued interest is
convertible by the holder into common stock of the Company at maturity of
the note at a price of $0.005 per share (post-reverse
split) Interest in the amount of $1,576 was accrued on
this note during each of the three months ended June 30,
2007, and 2006. This note is in default at June 30,
2007.
|
80,000
|
Convertible
note payable in the amount of $50,000 to Whalehaven Capital Fund, Ltd.
(“Whalehaven Capital”) dated February 25, 2005. We did not meet certain of
our obligations under the loan documents relating to this
issuance. These lapses include not reserving the requisites
numbers of treasury shares, selling subsequent securities without offering
a right of first refusal, not complying with reporting obligations, not
having our common shares quoted on the OTC:BB and not timely registering
certain securities. This note is in technical default as of May
16, 2005. The note originally carried interest at
the rate of 8% per annum, and was due in Full on February 24, 2007. Upon
default, the note’s interest rate increased to 15% per annum, and the note
became due immediately. The note is convertible into common stock of the
Company at a conversion of $0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of
$50,000 was recorded as a discount to the note, and was amortized to
interest expense during the three months ended March 31, 2005. Accrued
interest is convertible into common stock of the Company at a price of
$0.005 per share (post-reverse split). During the twelve months ended
December 31, 2006, $5,000 of principal was converted into common
stock. During the twelve months ended December 31, 2006 the
holder of the note converted $5,000 of principal and $589 of accrued
interest into shares of common stock. Interest in the amount of
$1,496, and $1,792 was accrued on this note during the three months ended
June 30, 2007 and 2006, respectively. This note is in default
at June 30, 2007.
|
40,000
|
||
Convertible
note payable in the amount of $50,000 to Oppenheimer & Co., /
Custodian for Joel Gold IRA, a related party, dated March 14, 2004. The
note bears interest at the rate of 8% per annum, and was due in full on
October 12, 2006. The note is convertible into common stock of the
Company at a conversion of $0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of $50,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2005. Accrued
interest is convertible into common stock of the Company at a price of
$0.005 per share (post-reverse split). Interest in the amount of $998
was accrued on this note during each of the three months ended
June 30, 2007, and 2006. This note is in default at June 30,
2007.
|
50,000
|
||
Convertible
note payable in the original amount of $30,000 to Huo Hua dated May 9,
2005. The note bears interest at the rate of 8% per annum, and was due in
full on October 12, 2006. The note is convertible into common
stock of the Company at a conversion of $0.005 per share
(post-reverse split). A beneficial conversion feature in the amount of
$30,000 was recorded as a discount to the note, and was amortized to
interest expense during the twelve months ended December 31, 2005. Accrued
interest is convertible into common stock of the Company at a price of
$0.005 per share(post-reverse split) During the twelve months
ended December 31, 2006, the note holder converted $10,000 of principal
into common stock. Interest in the amount of $400 was accrued
on this note during the three months ended June 30, 2007, and 2006. This
note is in default at June 30, 2007.
|
20,000
|
||
Convertible
note payable in the amount of $25,000 to Joel Gold a board member and
related party, dated January 25, 2005. The note bears interest at the rate
of 8% per annum, and is due in full on January 25, 2007. The
note is convertible into common stock of the Company at a
conversion of $0.025 per share. A beneficial conversion feature in the
amount of $25,000 was recorded as a discount to the note, and was
amortized to interest expense during the twelve months ended December 31,
2005. Accrued interest is convertible into common stock of the Company at
a price of $0.025 per share. Interest in the amount of $498, was accrued
on this note during the three months ended June 30, 2007, and
2006. This note is in default at June 30, 2007.
|
25,000
|
||
Convertible
note payable in the amount of $25,000 to The Jay & Kathleen Morren
Trust dated January 25, 2005. The note bears interest at the
rate of 6% per annum, and is due in full on January 25,
2007. The note is convertible into common stock of the
Company at a conversion of $0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of $25,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2005. Accrued interest is
convertible into common stock of the Company at a price of $0.005 per
share (post-reverse split) Interest in the amount of $373 was accrued on
this note during the three months ended June 30, 2007, and 2006. This note
is in default at June 30, 2007.
|
25,000
|
Convertible
note payable in the amount of $10,000 to Lauren M. Ferrone, a relative of
a board member and related party, dated October 12, 2004. The note bears
interest at the rate of 8% per annum, and was originally due in full on
October 12, 2005. On February 25, 2005, an amendment to the convertible
notes was signed which extended the term, which resulted in a new maturity
date of October 12, 2006. The note is convertible into common stock of the
Company at a conversion of $0.01 per share (post-reverse
split). A beneficial conversion feature in the amount of $10,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2004. Accrued interest is
convertible into common stock of the Company at a price of $0.01 per share
(post-reverse split). Interest in the amount of 200, was accrued on this
note during the three months ended June 30, 2007, and
2006. This note is in default at June 30,
2007.
|
10,000
|
||
Convertible
note payable in the amount of $10,000 to Richard D. Ferrone, a relative of
a board member and related party, dated October 12, 2004. The note bears
interest at the rate of 8% per annum, and was originally due in full on
October 12, 2005. On February 25, 2005, an amendment to the convertible
notes was signed which extended the term, which resulted in a new maturity
date of October 12, 2006. The note is convertible into common stock of the
Company at a conversion of $0.01 per share (post-reverse
split). A beneficial conversion feature in the amount of $10,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2004. Accrued interest is
convertible into common stock of the Company at a price of $0.01 per share
(post-reverse split) . Interest in the amount of $200 was accrued on this
note during the three months ended June 30, 2007, and
2006. This note is in default at June 30, 2007.
|
10,000
|
||
Convertible
note payable in the amount of $10,000 to Christian D. Ferrone, a relative
of a board member and related party, dated October 12, 2004. The note
bears interest at the rate of 8% per annum, and was originally
due in full on October 12, 2005. On February 25, 2005, an amendment to the
convertible notes was signed which extended the term, which resulted in a
new maturity date of October 12, 2006. The note is convertible into common
stock of the Company at a conversion of $0.01 per share
(post-reverse split). A beneficial conversion feature in the amount of
$10,000 was recorded as a discount to the note, and was amortized to
interest expense during the twelve months ended December 31, 2004. Accrued
interest is convertible into common stock of the Company at a price of
$0.01 per share (post-reverse split). Interest in the amount of
$200 was accrued on this note during the three months ended June 30, 2007,
and 2006. This note is in default at June 30,
2007.
|
10,000
|
||
Convertible note payable in the
amount of $10,000 to Andrew I. Ferrone, a relative of a board member and
related party, dated October 12, 2004. The note bears interest at the rate
of 8% per annum, and was originally due in full on October 12, 2005. On
February 25, 2005, an amendment to the convertible notes was signed which
extended the term, which resulted in a new maturity date of October 12,
2006. The note is convertible into common stock of the
Company at a conversion of $0.01 per share (post-reverse
split). A beneficial conversion feature in the amount of $10,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2004. Accrued interest is
convertible into common stock of the Company at a price of $0.01 per
share (post-reverse split). Interest in the amount of $200 was
accrued on this note during the three months ended June 30, 2007, and
2006. This note is in default at June 30,
2007.
|
10,000
|
||
Convertible
note payable in the amount of $8,000 to Adrian Neilan dated March 11,
2004. The note bears interest at the rate of 8% per annum, and is due in
full on October 12, 2006. The note is convertible into common stock of the
Company at a conversion of $0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of $8,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2004.. Accrued interest is
convertible into common stock of the Company at a price of $0.005 per
share (post-reverse split). Interest in the amount of $160 was accrued on
this note during the each of the three months ended June 30, 2007, and
2006. This note is in default at June 30, 2007.
|
8,000
|
Convertible note payable in the
amount of $5,000 to Matthias Mueller dated March 11, 2004. The note bears
interest at the rate of 8% per annum, and was due in full on October 12,
2006. The note is convertible into common stock of the
Company at a conversion of $0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of $5,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2005. Accrued interest is
convertible into common stock of the Company at a price of $0.005 per
share (post-reverse split). Interest in the amount of $100 was
accrued on this note during the each of the three months ended June 30,
2007, and 2006. This note is in default at June 30,
2007.
|
5,000
|
|||
Convertible
note payable in the amount of $120,000 to Alpha Capital dated August 25,
2005. We did not meet certain of our obligations under the loan documents
relating to this issuance. These lapses include not reserving
the requisite number of treasury shares, selling subsequent securities
without offering a right of first refusal, not complying with reporting
obligations, not having our common shares quoted on the OTC:BB and not
timely registering certain securities. This note is in
technical default as of November 13, 2005. The note originally
carried interest at the rate of 8% per annum, and was due in
full on August 25, 2007. Upon default, the note’s interest rate increased
to 15% per annum and the note became immediately due. The note is
convertible into common stock of the Company at a conversion of
$0.005 per share (post-reverse split). A beneficial conversion feature in
the amount of $120,000 was recorded as a discount to the note, and was
amortized to interest expense during the twelve months ended December 31,
2005. Accrued interest is convertible into common stock of the Company at
a price of $0.005 per share (post-reverse split). Interest in the amount
of $4,487 was accrued on this note during the three months ended June 30,
2007, and 2006. This note is in default at June 30,
2007.
|
120,000
|
|||
Convertible
note payable in the amount of $30,000 to Whalehaven Capital dated August
25, 2005. We did not meet certain of our obligations under the
loan documents relating to this issuance. These lapses include
not reserving the requisite number of treasury shares, selling subsequent
securities without offering a right of first refusal, not complying with
reporting obligations, not having our common shares quoted on the OTC:BB
and not timely registering certain securities. This note was in
technical default as of November 13, 2006. The note originally
carried interest at the rate of 8% per annum, and was due in
full on August 25, 2007. Upon default, the note’s interest rate increased
to 15% per annum and the note became immediately due. The note is
convertible into common stock of the Company at a conversion of
$0.005 per share (post-reverse split). A beneficial conversion feature in
the amount of $30,000 was recorded as a discount to the note, and was
amortized to interest expense during the twelve months ended December 31,
2005. Accrued interest is convertible into common stock of the Company at
a price of $0.005 per share (post-reverse split). Interest in the amount
of $1,122 and $1,340 was accrued on this note during the three months
ended June 30, 2007 and 2006, respectively. This note is in
default at June 30, 2007.
|
30,000
|
|||
Convertible note payable in the
original amount of $25,000 to Asher Brand, dated August 25, 2005. We did
not meet certain of our obligations under the loan documents relating to
this issuance. These lapses include not reserving the requisite
number of treasury shares, selling subsequent securities without offering
a right of first refusal, not complying with reporting obligations, not
having our common shares quoted on the OTC:BB and not timely registering
certain securities. This note was in technical default as of
November 13, 2006. The note originally
carried interest at the rate of 8% per annum, and was due in
full on August 25, 2007. Upon default, the note’s interest rate increased
to 15% per annum and the note became immediately due The note is
convertible into common stock of the Company at a conversion of
$0.005 per share (post-reverse split). A beneficial conversion feature in
the amount of $25,000 was recorded as a discount to the note, and was
amortized to interest expense during the twelve months ended December 31,
2005. Accrued interest is convertible into common stock of the Company at
a price of $0.005 per share (post-reverse split) Interest in the amount of
$861 and $934 was accrued on this note during the three months ended June
30, 2007 and 2006, respectively. During the three months ended September
30, 2006, the holder of the note converted $2,000 of principal and $3,667
of accrued interest into common stock. This note is in
default at June 30, 2007.
|
23,000
|
Convertible
note payable in the original amount of $25,000 to Momona Capital, dated
August 25, 2005. We did not meet certain of our obligations under the loan
documents relating to this issuance. These lapses include not
reserving the requisite number of treasury shares, selling subsequent
securities without offering a right of first refusal, not complying with
reporting obligations, not having our common shares quoted on the OTC:BB
and not timely registering certain securities. This note was in
technical default at November 13, 2005. The note originally
carried interest at the rate of 8% per annum, and was due in
full on August 25, 2007. Upon default, the note’s interest rate increased
to 15% per annum and the note became immediately due The note is
convertible into common stock of the Company at a conversion of
$0.005 per share (post-reverse split). A beneficial conversion feature in
the amount of $25,000 was recorded as a discount to the note, and was
amortized to interest expense during the twelve months ended December 31,
2005. Accrued interest is convertible into common stock of the Company at
a price of $0.005 per share (post-reverse split. Interest in
the amount of $861 and $934 was accrued on this note during the three
months ended June 30, 2007 and 2006. During the twelve months ended
December 31, 2006, the holder of the note converted $2,000 of principal
and $3,667 of accrued interest into common stock. This note is in default
at June 30, 2007.
|
23,000
|
|||
Convertible
note payable in the amount of $10,000 to Lane Ventures dated August 25,
2005. We did not meet certain of our obligations under the loan documents
relating to this issuance. These lapses include not reserving
the requisite number of treasury shares, selling subsequent securities
without offering a right of first refusal, not complying with reporting
obligations, not having our common shares quoted on the OTC:BB and not
timely registering certain securities. This note was in
technical default at November 13, 2005. The note originally
carried interest at the rate of 8% per annum, and was due in
full on August 25, 2007. Upon default, the note’s interest rate increased
to 15% per annum and the note became immediately due. The note is
convertible into common stock of the Company at a conversion of
$0.005 per share (post-reverse split). A beneficial conversion feature in
the amount of $10,000 was recorded as a discount to the note, and was
amortized to interest expense during the twelve months ended December 31,
2005. Accrued interest is convertible into common stock of the Company at
a price of $0.005 per share (post-reverse split). Interest in the amount
of $224 and $373 was accrued on this note during the three
months ended June 30, 2007 and 2006, respectively. During
the twelve months ended December 31, 2006, the holder of the note
converted $4,000 of principal and $1,467 of accrued interest into common
stock. This note is in default at June 30,
2007.
|
6,000
|
|||
Note
payable in the amount of $120,000 to Alpha Capital, dated February 7,
2006. The originally carried interest at the rate of 15% per annum, and
was originally due in full on February 7, 2007. The Company is not in
compliance with various terms of this note, including making timely
payments of interest, and this note was in technical default at May 8,
2006. At this time, the interest rate increased to 20% and the note became
immediately due and payable. Interest in the amount of $5,984
and $5,359 was accrued on this note during the three months ended June 30,
2007 and 2006. This note is in default at June 30,
2007.
|
120,000
|
|||
Note
payable in the amount of $30,000 to Whalehaven Capital dated February 7,
2006. The note originally carried interest at the rate of 15%
per annum, and was due in full on February 7, 2007. The Company is not in
compliance with various terms of this note, including making timely
payments of interest, and this note was in technical default at May 8,
2006. At this time, the interest rate increased to 20% and the note became
immediately due and payable. Interest in the amount of $1,122
was accrued on this note during the three months ended
June 30, 2007 and 2006. This note is in default at June
30, 2007.
|
30,000
|
|||
Note
payable in the amount of $75,000 to Michael Ferrone, dated August 2, 2004.
The note bears interest at the rate of 8% per annum, and was due in full
on February 2, 2005. Interest in the amount of $1,496, was accrued on this
note during the three months ended June
30, 2007 and 2006, respectively. This note is
in default at June 30, 2007.
|
75,000
|
|||
Note
payable in the amount of $10,000 to Alpha Capital, dated May 19, 2006. The
note bears interest at the rate of 15% per annum, and was due in full on
November 19, 2006. Interest in the amount of $498 and $172 was accrued on
this note during the three months ended June 30, 2007 and 2006.
This note is in default at June 30, 2007.
|
10,000
|
|||
Eight
convertible notes payable in the amount of $4,500 each to Sam Klepfish,
the Company’s Interim President and a related party, dated November 1,
2006, December 1, 2006, January 1, 2007, February 1,
2007, March 1, 2007, April 1, 2007, May 1, 2007, and June 1,
2007. Pursuant to the Company’s employment agreement with Mr.
Klepfish, the amount of $4,500 in salary is accrued each month to a note
payable. These notes bear interest at a rate of 8% per
annum. These notes and accrued interest are convertible into
common stock as a rate of $0.005 per chare. Interest in the
aggregate amount of $611 and $0 was accrued on these notes during the
three months ended June 30, 2007 and 2006.
|
36,000
|
|||
Note
payable in the original amount of $25,787 to Microsoft Corporation dated
May 3, 2006. The note bears interest at the rate of 9.7% per annum, and is
payable in 60 monthly payments of $557 beginning October 1, 2006. Negative
interest in the amount of $581 was capitalized to this note during the
three months ended June 30, 2007.
|
23,217
|
$
|
1,357,217
|
Less:
Current maturities
|
(1,338,640
|
)
|
||
Long-term
portion
|
$
|
18,577
|
||
Total
Non-related parties
|
$
|
946,217
|
||
Total
related parties
|
411,000
|
|||
$
|
1,357,217
|
Risk
Free
|
Expected
|
Expected
|
||||||||||||||
Interest
|
Dividend
|
Option
|
||||||||||||||
Rate
|
Yield
|
Life
|
Volatility
|
|||||||||||||
March
31, 2007
|
4.75
|
%
|
-
|
10
|
183.67
|
%
|
Weighted
|
|||||||||||||||||
Weighted
|
average
|
||||||||||||||||
average
|
exercise
|
||||||||||||||||
Range
of
|
Number
of
|
remaining
|
price
of
|
Number
of
|
|||||||||||||
exercise
|
shares
|
contractual
|
outstanding
|
shares
|
|||||||||||||
prices
|
outstanding
|
life
(years)
|
warrants
|
exercisable
|
|||||||||||||
$ | 0.005 | 136,500,000 | 2.68 | $ | 0.005 | 136,500,000 | |||||||||||
$ | 0.110 | 10,500,000 | 3.15 | $ | 0.110 | 10,500,000 | |||||||||||
$ | 0.115 | 42,000,000 | 3.15 | $ | 0.115 | 42,000,000 | |||||||||||
189,000,000 | 2.81 | 189,000,000 |
Weighted
|
Weighted
|
||||||||||||||||||||
Weighted
|
average
|
average
|
|||||||||||||||||||
Average
|
exercise
|
exercise
|
|||||||||||||||||||
Range
of
|
Number
of
|
remaining
|
price
of
|
Number
of
|
price
of
|
||||||||||||||||
exercise
|
Options
|
contractual
|
Outstanding
|
Options
|
exercisable
|
||||||||||||||||
prices
|
outstanding
|
life
(years)
|
Options
|
exercisable
|
options
|
||||||||||||||||
$
|
0.005
|
15,000,000
|
4.39
|
$
|
0.005
|
15,000,000
|
$
|
0.005
|
|||||||||||||
0.500
|
500,000
|
1.88
|
0.500
|
300,000
|
0.500
|
||||||||||||||||
15,500,000
|
4.31
|
200,000
|
$
|
0.015
|
Weighted
|
|||||||
Average
|
|||||||
Number
of
|
Exercise
|
||||||
Shares
|
Price
|
||||||
Options
outstanding at June 30, 2007
|
15,500,000
|
$
|
0.0.21
|
||||
Exercisable
|
15,300,000
|
0.010
|
|||||
Not
exercisable
|
200,000
|
0.500
|
·
|
Our
ability to raise capital necessary to sustain our anticipated operations
and implement our proposed business
plan,
|
·
|
Our
ability to implement our proposed business
plan,
|
·
|
The
ability to successfully integrate the operations of businesses we have
acquired, or may acquire in the future, into our
operations,
|
·
|
Our
ability to generate sufficient cash to pay our lenders and other
creditors,
|
·
|
Our
ability to employ and retain qualified management and
employees,
|
·
|
Our
dependence on the efforts and abilities of our current employees and
executive officers,
|
·
|
Changes
in government regulations that are applicable to our
client or anticipated business,
|
·
|
Changes
in the demand for our services,
|
·
|
The
degree and nature of our
competition,
|
·
|
Our
lack of diversification of our business
plan,
|
·
|
The
general volatility of the capital markets and the establishment of a
market for our shares,
|
·
|
Our
ability to generate sufficient cash to pay our creditors,
and
|
·
|
Disruption
in the economic and financial conditions primarily from the impact of past
terrorist attacks in the United States, threats of future attacks, police
and military activities overseas and other disruptive worldwide political
and economic events and natural
disasters.
|
SIGNATURE
|
TITLE
|
DATE
|
||
/s/ Sam
Klepfish
Sam
Klepfish
|
Chief
Executive Officer
|
July
31, 2008
|
||
/s/ John
McDonald
John
McDonald
|
Principal
Financial Officer
|
July
31, 2008
|