Florida
(State
of or Other Jurisdiction of Incorporation or Organization)
|
20-1167761
(IRS
Employer I.D. No.)
|
Page
|
||
PART
I.
|
FINANCIAL
INFORMATION
|
|
Item
1.
|
3
|
|
3
|
||
4
|
||
5
|
||
7
|
||
Item
2.
|
28
|
|
Item
3.
|
34
|
|
PART
II.
|
OTHER
INFORMATION
|
|
Item
1.
|
34
|
|
Item
2.
|
35
|
|
Item
3.
|
35
|
|
Item
4.
|
35
|
|
Item
5.
|
35
|
|
Item
6.
|
35
|
|
36
|
September
30,
|
||||||||||||
2006
|
2005
|
2004
|
||||||||||
ASSETS
|
||||||||||||
Current
assets
|
||||||||||||
Cash and cash
equivalents
|
$
|
12,695
|
$
|
17,663
|
$
|
24,423
|
||||||
Accounts receivable, net of
allowance
|
249,015
|
302,476
|
148,140
|
|||||||||
Interest
receivable
|
7,147
|
1,184
|
-
|
|||||||||
Loan receivable, net of
allowance
|
285,000
|
75,000
|
-
|
|||||||||
Prepaid
expenses
|
-
|
45,278
|
-
|
|||||||||
Other current
assets
|
31,351
|
-
|
-
|
|||||||||
Total
current assets
|
585,208
|
441,601
|
172,563
|
|||||||||
Property and equipment, net
of accumulated depreciation
|
107,091
|
71,489
|
163,510
|
|||||||||
Total
assets
|
$
|
692,299
|
$
|
513,090
|
$
|
336,073
|
||||||
LIABILITIES AND
STOCKHOLDERS' DEFICIENCY
|
||||||||||||
Current
liabilities
|
||||||||||||
Accounts payable and
accrued liabilities
|
$
|
708,840
|
$
|
443,222
|
$
|
594,798
|
||||||
Amount due under bank
credit line
|
24,255
|
15,154
|
24,400
|
|||||||||
Accrued interest, net of
discount
|
137,503
|
15,260
|
28,195
|
|||||||||
Accrued interest - related
parties, net of discount
|
94,975
|
29,352
|
4,520
|
|||||||||
Notes payable - current
portion
|
934,443
|
585,000
|
-
|
|||||||||
Notes payable - related
parties, current portion
|
375,000
|
275,000
|
-
|
|||||||||
Warrant
liability
|
1,374,197
|
10,374,536
|
-
|
|||||||||
Conversion option
liability
|
1,461,180
|
12,453,662
|
-
|
|||||||||
Penalty for late
registration of shares
|
583,040
|
880,000
|
-
|
|||||||||
Total
current liabilities
|
5,693,433
|
25,071,186
|
651,913
|
|||||||||
Notes
payable
|
17,763
|
219,000
|
365,000
|
|||||||||
Notes payable - related
parties
|
-
|
175,000
|
98,000
|
|||||||||
Total
liabilities
|
5,711,196
|
25,465,186
|
1,114,913
|
|||||||||
Stockholder's
deficiency
|
||||||||||||
Common stock, $0.0001 par
value; 500,000,000 shares authorized;
|
||||||||||||
151,310,796,
103,742,037 and 65,052,037 at September 30, 2006,
|
||||||||||||
2005, and
2004, respectively
|
15,130
|
10,374
|
6,506
|
|||||||||
Additional
paid-in capital
|
391,437
|
-
|
4,385,318
|
|||||||||
Accumulated
deficit
|
(5,425,464
|
)
|
(24,962,470
|
)
|
(5,170,664
|
)
|
||||||
Total
stockholder's deficiency
|
(5,018,897
|
)
|
(24,952,096
|
)
|
(778,840
|
)
|
||||||
Total liabilities and
stockholders' deficiency
|
$
|
692,299
|
$
|
513,090
|
$
|
336,073
|
For the Three Months Ended
September 30,
|
For the Nine months Ended
September 30,
|
|||||||||||||||||||||||
2006
|
2005
|
2004
|
2006
|
2005
|
2004
|
|||||||||||||||||||
Revenue
|
$
|
1,564,653
|
$
|
1,303,593
|
$
|
1,171,484
|
$
|
5,044,098
|
$
|
3,799,332
|
$
|
3,237,454
|
||||||||||||
Cost of goods
sold
|
1,167,832
|
1,002,958
|
918,392
|
3,838,060
|
2,964,413
|
2,742,653
|
||||||||||||||||||
396,821
|
300,635
|
253,092
|
1,206,038
|
834,919
|
494,801
|
|||||||||||||||||||
Selling, general and
administrative expenses
|
484,171
|
516,051
|
503,191
|
1,520,810
|
1,304,466
|
4,032,703
|
||||||||||||||||||
Total
operating expenses
|
484,171
|
516,051
|
503,191
|
1,520,810
|
1,304,466
|
4,032,703
|
||||||||||||||||||
Operating
loss
|
(87,350
|
)
|
(215,416
|
)
|
(250,099
|
)
|
(314,772
|
)
|
(469,547
|
)
|
(3,537,902
|
)
|
||||||||||||
Other (income)
expense:
|
||||||||||||||||||||||||
Interest
(income) expense
|
107,360
|
253,168
|
91,113
|
266,007
|
694,353
|
398,375
|
||||||||||||||||||
Cost of
penalty for late registration of shares
|
362,960
|
1,040,000
|
-
|
1,584,912
|
1,507,200
|
-
|
||||||||||||||||||
Change in
fair value of warrant liability
|
(5,203,035
|
)
|
-
|
-
|
(4,670,200
|
)
|
-
|
-
|
||||||||||||||||
Change in
fair value of conversion option liability
|
(6,009,676
|
)
|
-
|
-
|
(5,642,095
|
)
|
-
|
-
|
||||||||||||||||
Change in
value of penalty for late registration of shares
|
(1,934,800
|
)
|
(697,600
|
)
|
-
|
(1,928,592
|
)
|
(627,200
|
)
|
-
|
||||||||||||||
Total
other (income) expense
|
(12,677,191
|
)
|
595,568
|
91,113
|
(10,389,968
|
)
|
1,574,353
|
398,375
|
||||||||||||||||
Income (Loss)
before income taxes
|
12,589,841
|
(810,984
|
)
|
(341,212
|
)
|
10,075,196
|
(2,043,900
|
)
|
(3,936,277
|
)
|
||||||||||||||
Income tax
expense
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||
Net Income
(loss)
|
$
|
12,589,841
|
$
|
(810,984
|
)
|
$
|
(341,212
|
)
|
$
|
10,075,196
|
$
|
(2,043,900
|
)
|
$
|
(3,936,277
|
)
|
||||||||
Earnings (loss) per share -
basic
|
$
|
0.09
|
$
|
(0.01
|
)
|
$
|
(0.02
|
)
|
$
|
0.08
|
$
|
(0.03
|
)
|
$
|
(0.14
|
)
|
||||||||
Earnings (loss) per share -
diluted
|
$
|
0.03
|
$
|
(0.01
|
)
|
$
|
(0.02
|
)
|
$
|
0.02
|
$
|
(0.03
|
)
|
$
|
(0.14
|
)
|
||||||||
Weighted average shares
outstanding - basic
|
136,912,804
|
87,659,428
|
17,994,416
|
120,338,009
|
81,506,689
|
28,825,062
|
||||||||||||||||||
Weighted average shares
outstanding - diluted
|
495,501,354
|
87,659,428
|
17,994,416
|
478,926,559
|
81,506,689
|
28,825,062
|
For
the Nine Months Ended September 30,
|
||||||||||||
2006
|
2005
|
2004
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
income (loss)
|
$
|
10,075,196
|
$
|
(2,043,900
|
)
|
$
|
(3,936,277
|
)
|
||||
Adjustments
to reconcile net income (loss) to net
|
||||||||||||
cash
provided by (used in) operating activities:
|
||||||||||||
Depreciation
|
39,835
|
44,372
|
48,487
|
|||||||||
Value
of warrants issued
|
10,750
|
-
|
-
|
|||||||||
Vale
of options issued to officer
|
-
|
-
|
135,673
|
|||||||||
Stock
issued for services
|
-
|
45,400
|
2,420,000
|
|||||||||
Stock
issued for employee bonus
|
-
|
-
|
-
|
|||||||||
Stock
issued as bonuses to employees and board members
|
49,901
|
-
|
-
|
|||||||||
Reserve
for bad debt
|
-
|
75,000
|
-
|
|||||||||
Amortization
of discount and interest expense on notes payable
|
-
|
595,000
|
388,000
|
|||||||||
Amortization
of discount on convertible interest
|
-
|
-
|
-
|
|||||||||
Cost
of penalty for late registration
|
1,584,912
|
1,507,200
|
-
|
|||||||||
Change
in fair value of warrant liability
|
(4,652,805
|
)
|
-
|
-
|
||||||||
Change
in fair value of conversion option liability
|
(5,642,095
|
)
|
-
|
-
|
||||||||
(gain)
loss from marking to market-penalty
|
(1,928,592
|
)
|
(627,200
|
)
|
-
|
|||||||
Changes
in assets and liabilities:
|
||||||||||||
Accounts
receivable, net
|
190,095
|
23,022
|
116,876
|
|||||||||
Interest
receivable
|
-
|
(1,184
|
)
|
-
|
||||||||
Prepaid
expenses
|
(29,844
|
)
|
(45,278
|
)
|
-
|
|||||||
Other
current liability
|
-
|
-
|
-
|
|||||||||
Accounts
payable and accrued expenses
|
371,584
|
(73,374
|
)
|
158,817
|
||||||||
Net
cash provided by (used in) operating activities
|
68,937
|
(500,942
|
)
|
(668,424
|
)
|
|||||||
Cash
flows from investing activities:
|
||||||||||||
Loan
to Pasta Italiana
|
(190,000
|
)
|
(150,000
|
)
|
-
|
|||||||
Acquisition
of property and equipment
|
(26,445
|
)
|
(12,040
|
)
|
(134,772
|
)
|
||||||
Net
cash used in investing activities
|
(216,445
|
)
|
(162,040
|
)
|
(134,772
|
)
|
||||||
Cash
flows from financing activities:
|
||||||||||||
Proceeds
from issuance of long-term-debt
|
160,000
|
595,000
|
463,000
|
|||||||||
Payments
on bank credit line
|
-
|
(9,366
|
)
|
-
|
||||||||
Cash
from bank credit line
|
-
|
-
|
262
|
|||||||||
Principal
payments on notes payable
|
(10,000
|
)
|
-
|
-
|
||||||||
Proceeds
from sale of common stock
|
-
|
67,000
|
320,225
|
|||||||||
Net
cash provided by financing activities
|
150,000
|
652,634
|
783,487
|
|||||||||
Increase
in cash and cash equivalents
|
2,492
|
(10,348
|
)
|
(19,709
|
)
|
|||||||
Cash
and cash equivalents at beginning of period
|
10,203
|
28,011
|
44,132
|
|||||||||
Cash
and cash equivalents at end of period
|
$
|
12,695
|
$
|
17,663
|
$
|
24,423
|
||||||
Supplemental
disclosure of cash flow information:
|
||||||||||||
Cash
paid during the period for:
|
||||||||||||
Interest
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Taxes
|
$
|
-
|
$
|
-
|
$
|
-
|
For
the Nine
MonthsEnded
September
30, 2006
|
For
the Nine
MonthsEnded
September
30, 2005
|
For
the Nine
Months
Ended
September
30, 2004
|
||||||||||
Stock
issued for services
|
$
|
85,901
|
$
|
45,400
|
$
|
2,420,000
|
||||||
Notes
payable issued for acquisition of computer equipment
|
$
|
25,385
|
$
|
-
|
$
|
-
|
||||||
Common
stock issued for conversion of notes payable
|
$
|
-
|
$
|
44,000
|
$
|
788,176
|
||||||
Common
stock issued for conversion of liability
|
$
|
-
|
$
|
-
|
$
|
339,750
|
||||||
Value
of warrants issued
|
$
|
10,750
|
$
|
-
|
$
|
-
|
||||||
Common
stock issued during recapitalization
|
$
|
-
|
$
|
-
|
$
|
2,500
|
||||||
Common
stock issued as penalty for late registration
|
$
|
-
|
$
|
537,600
|
$
|
-
|
||||||
Common
stock issued in share exchange to acquire subsidiary
|
$
|
-
|
$
|
-
|
$
|
125,000
|
||||||
Charge
to equity for change to liability method for value
|
||||||||||||
of
beneficial conversion feature of notes payable
|
$
|
-
|
$
|
12,453,662
|
$
|
-
|
||||||
Charge
to equity for change to liability method of warrant
valuation
|
$
|
-
|
$
|
10,374,536
|
$
|
-
|
||||||
Value
of warrants and options issued as compensation
|
$
|
10,750
|
$
|
-
|
$
|
-
|
||||||
Value
of shares issued as penalty for late registration
|
$
|
1,584,912
|
$
|
-
|
$
|
-
|
||||||
Revaluation
of conversion option liability
|
$
|
(5,642,095
|
)
|
$
|
-
|
$
|
-
|
|||||
Revaluation
of liability for warrants
|
$
|
(4,652,805
|
)
|
$
|
-
|
$
|
-
|
|||||
Revaluation
of penalty for late registration of shares
|
$
|
(1,928,592
|
)
|
$
|
-
|
$
|
-
|
Weighted
|
|||||||
Average
|
|||||||
Number
of
|
Exercise
|
||||||
Shares
|
Price
|
||||||
Options
exercisable at December 31, 2003
|
-
|
-
|
|||||
Granted
|
500,000
|
$
|
0.50
|
||||
Exercised
|
-
|
||||||
Cancelled
/ Expired
|
-
|
-
|
|||||
Options
outstanding at 12.31.04
|
500,000
|
$
|
0.50
|
||||
Exercisable
|
-
|
$
|
-
|
||||
Not
exercisable
|
500,000
|
$
|
0.50
|
||||
Granted
|
-
|
-
|
|||||
Exercised
|
-
|
-
|
|||||
Cancelled
/ Expired
|
-
|
-
|
|||||
Options
outstanding at 03.31.05
|
500,000
|
$
|
0.50
|
||||
Exercisable
|
-
|
$
|
-
|
||||
Not
exercisable
|
500,000
|
$
|
0.50
|
||||
Granted
|
-
|
-
|
|||||
Exercised
|
-
|
-
|
|||||
Cancelled
/ Expired
|
-
|
-
|
Weighted
|
|||||||
Average
|
|||||||
Number
of
|
Exercise
|
||||||
Shares
|
Price
|
||||||
Options
outstanding at 06.30.05
|
500,000 | $ | 0.50 | ||||
Exercisable
|
100,000 | $ | 0.50 | ||||
Not
exercisable
|
400,000 | $ | 0.50 | ||||
Granted
|
- | - | |||||
Exercised
|
- | - | |||||
Cancelled
/ Expired
|
- | - | |||||
Options
outstanding at 09.30.05
|
500,000 | $ | 0.50 | ||||
Exercisable
|
100,000 | $ | 0.50 | ||||
Not
exercisable
|
400,000 | $ | 0.50 | ||||
Granted
|
- | - | |||||
Exercised
|
- | - | |||||
Cancelled
/ Expired
|
- | - | |||||
Options
outstanding at 12.31.05
|
500,000 | $ | 0.50 | ||||
Exercisable
|
100,000 | $ | 0.50 | ||||
Not
exercisable
|
400,000 | $ | 0.50 | ||||
Granted
|
- | 0.005 | |||||
Exercised
|
- | - | |||||
Cancelled
/ Expired
|
- | - | |||||
Options
outstanding at 03.31.06
|
500,000
|
$
|
0.500
|
||||
Exercisable
|
100,000
|
$
|
0.500
|
||||
Not
exercisable
|
400,000
|
$
|
0.500
|
||||
Granted
|
-
|
-
|
|||||
Exercised
|
-
|
-
|
|||||
Cancelled
/ Expired
|
-
|
-
|
|||||
Options
outstanding at 06.30.06
|
500,000
|
$
|
0.500
|
||||
Exercisable
|
200,000
|
$
|
0.500
|
||||
Not
exercisable
|
300,000
|
$
|
0.500
|
||||
Granted
|
-
|
-
|
|||||
Exercised
|
-
|
-
|
|||||
Cancelled
/ Expired
|
-
|
-
|
|||||
Options
outstanding at 09.30.06
|
500,000
|
$
|
0.500
|
||||
Exercisable
|
200,000
|
$
|
0.500
|
||||
Not
exercisable
|
300,000
|
$
|
0.500
|
2006
|
2005
|
2004
|
||||||||||
Accounts
receivable from customers
|
$
|
249,015
|
$
|
367,476
|
$
|
148,140
|
||||||
Allowance
for doubtful accounts
|
(0
|
)
|
(65,000
|
)
|
(0
|
)
|
||||||
Accounts
receivable, net
|
$
|
249,015
|
$
|
302,476
|
$
|
148,140
|
2006
|
2005
|
2004
|
||||||||||
Computer
equipment
|
$
|
214,507
|
$
|
150,574
|
$
|
197,635
|
||||||
Furniture
and fixtures
|
82,213
|
63,315
|
61,275
|
|||||||||
296,720
|
213,889
|
258,910
|
||||||||||
Less
accumulated depreciation and amortization
|
(189,629
|
)
|
(142,400
|
)
|
(95,400
|
)
|
||||||
Total
|
$
|
107,091
|
$
|
71,489
|
$
|
163,510
|
2006
|
2005
|
2004
|
||||||||||
Accounts
payable and accrued expenses
|
$
|
681,838
|
$
|
420,928
|
$
|
440,972
|
||||||
Accrued
commissions
|
3,183
|
2,907
|
2,250
|
|||||||||
Total
|
$
|
685,651
|
$
|
423,835
|
$
|
443,222
|
Gross
|
Discount
|
Net
|
||||||||||
Non-related
parties
|
$
|
162,223
|
$
|
24,720
|
$
|
137,503
|
||||||
Related
parties
|
95,928
|
953
|
94,975
|
|||||||||
Total
|
$
|
258,151
|
$
|
25,673
|
$
|
232,478
|
Gross
|
Discount
|
Net
|
||||||||||
Non-related
parties
|
$
|
41,205
|
$
|
25,945
|
$
|
15,260
|
||||||
Related
parties
|
61,792
|
32,440
|
29,352
|
|||||||||
Total
|
$
|
102,997
|
$
|
58,385
|
$
|
44,612
|
Gross
|
Discount
|
Net
|
||||||||||
Non-related
parties
|
$
|
38,812
|
$
|
10,617
|
$
|
28,195
|
||||||
Related
parties
|
7,909
|
3,389
|
4,520
|
|||||||||
Total
|
$
|
46,721
|
$
|
14,006
|
$
|
32,715
|
2006
|
2005
|
2004
|
||||||||||
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). Interest in the amount of $13,233, $13,043 and $0 was accrued on
this note during the three months ended September 30,
2006, 2005, and 2004, respectively.. 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 September 30, 2006 and
2005.
|
$
|
345,000
|
$
|
350,000
|
$
|
-
|
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 $3,226 was accrued on this
note during the each of the three months ended
September 30, 2006, 2005, and
2004.
|
160,000
|
160,000
|
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) Interest in the
amount of $504, $2,016, and $0 was accrued on this note during the three
months ended September 30, 2006, 2005, and 2004,
respectively. During the twelve months ended December 31, 2006,
$75,000 of the principal amount was converted into common
stock.
|
25,000
|
100,000
|
-
|
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) Interest in the amount of
$828, $1,310, and $1,715 was accrued on this note during the three months
ended September 30, 2006, 2005, and 2004, respectively. 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.
|
41,000
|
41,000
|
85,000
|
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 $1,614 was accrued on
this note during each of the three months ended September 30, 2006,
2005, and 2004..
|
80,000
|
80,000
|
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). Interest in the amount of $1,596,
$1,890, and $0 was accrued on this note during the three months ended
September 30, 2006 and 2005, respectively. 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. This note is
in default at September 30, 2006 and 2005.
|
40,000
|
50,000
|
-
|
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 $1,009
was accrued on this note during each of the three months ended
December 31, 2006, 2005, and 2004.
|
50,000
|
50,000
|
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) Interest in the amount of
$404, $605, and $0 was accrued on this note during
the three months ended September 30, 2006, 2005, and 2004, respectively.
During the twelve months ended December 31, 2006, the note holder
converted $10,000 of principal into common stock.
|
20,000
|
30,000
|
-
|
Convertible
note payable in the original amount of $5,000 to Ke Du 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
$5,000 was recorded as a discount to the note, and was amortized to
interest expense during the twelve months ended December 31, 2005. This
note was converted to common stock during the year 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 $101 was accrued on this note
during the thee months ended September 30, 2005.
|
-
|
5,000
|
-
|
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 $504, $504, and $0
was accrued on this note during the three months ended September 30, 2006,
2005, and 2004, respectively.
|
25,000
|
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 $377, $377, and $0
was accrued on this note during the three months ended September 301,
2006, 2005, and 2004, respectively.
|
25,000
|
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 $202, $202, and $0 was
accrued on this note during the three months ended September 30, 2006,
2005, and 2004, respectively. This note is in default at
September 30, 2006 and 2005.
|
10,000
|
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 $202, $202, and $0 was
accrued on this note during the three months ended September 30, 2006,
2005, and 2004, respectively. This note is in default at
September 30, 2006 and 2005
|
10,000
|
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
$202, $202, and $0 was accrued on this note during the three months ended
September 30, 2006, 2005, and 2004, respectively. This
note is in default at September 30, 2006 and 2005
|
10,000
|
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 $202,
$202, and $0 was accrued on this note during the three months ended
September 30, 2006, 2005, and 2004,
respectively. This note is in default at
September 30, 2006 and 2005
|
10,000
|
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 $161was accrued on
this note during the each of the three months ended
September 30, 2006, 2005, and 2004,
respectively.
|
8,000
|
8,000
|
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 $101was
accrued on this note during the each of the three months ended September
30, 2006, 2005, and 2004, respectively.
|
5,000
|
5,000
|
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 $4,537, $947, and $0 was accrued on this note during the three months
ended September 30, 2006, 2005, and 2004,
respectively. This note is in default at September 30,
2006 and 2005.
|
120,000
|
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 $1,134 and $236 was accrued on this note during the three months ended
September 30, 2006 and 2005, respectively. This note is in
default at September 30, 2006 and 2005.
|
30,000
|
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
$938 and $197 was accrued on this note during the three months ended
September 30, 2006 and 2005, 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 September 30, 2006 and 2005.
|
23,000
|
25,000
|
-
|
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 $938 and $197 was accrued on this note during the three
months ended September 30, 2006 and 2005, respectively. 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 September 30, 2006 and 2005.
|
23,000
|
25,000
|
-
|
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 $364 and $79 was accrued on this note during the three
months ended September 30, 2006 and 2005,
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
September 30, 2006 and 2005.
|
6,000
|
10,000
|
-
|
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 $6,049
was accrued on this note during the three months ended September 30,
2006. This note is in default at September 30,
2006.
|
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 $1,512
was accrued on this note during the three months ended
September 30, 2006. This note is in default at September
30, 2006.
|
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 $1,512, $1,512, and $970
was accrued on this note during the twelve months ended
December 31, 2006, 2005, and 2004,
respectively. This note is in default at September 30,
2006, 2005, and 2004.
|
75,000
|
75,000
|
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 $461 was accrued on this
note during the three months ended September 30,
2006.
|
10,000
|
-
|
-
|
|||||||||
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 $419 was capitalized to this note during the
three months ended September 30, 2006.
|
26,206
|
-
|
$
|
-
|
Total
|
$
|
1,327,206
|
$
|
1,254,000
|
$
|
463,000
|
||||||
Less:
Current maturities
|
(1,309,443
|
)
|
(860,000
|
)
|
(75,000
|
)
|
||||||
Long-term
portion
|
$
|
17,763
|
$
|
394,000
|
$
|
388,000
|
||||||
Total
Non-related parties
|
$
|
952,206
|
$
|
804,000
|
$
|
178,000
|
||||||
Total
related parties
|
375,000
|
450,000
|
285,000
|
|||||||||
Total
|
$
|
1,327,206
|
$
|
1,254,000
|
$
|
463,000
|
Risk
Free
|
Expected
|
Expected
|
||||||||||||||
Interest
|
Dividend
|
Option
|
||||||||||||||
Rate
|
Yield
|
Life
|
Volatility
|
|||||||||||||
September
30, 2006
|
4.75
|
%
|
0
|
5
|
141.4
|
%
|
Weighted
|
Weighted
|
||||||||||||||||||||
Weighted
|
average
|
average
|
|||||||||||||||||||
average
|
exercise
|
exercise
|
|||||||||||||||||||
Range
of
|
Number
of
|
remaining
|
price
of
|
Number
of
|
price
of
|
||||||||||||||||
exercise
|
shares
|
contractual
|
outstanding
|
shares
|