"Alleged cash advances." Oh my, is that a fish in the crystal goblet?
"In December 2011, the Company issued a second convertible note to Crystal Falls Investments, LLC, converting an outstanding open account due to Crystal Falls for direct payments made by Crystal Falls to DTC to obtain NOBO lists, totaling $1,680. The note is a two year note due December 31, 2013, bears interest at 10 percent and is in the principal amount of $1,680. The note is convertible into common stock at any time after 180 days at the election of the holder, at a price equal to 75 percent of the average closing price of the common stock for the 30 trading days prior to the date of election to convert, but not less than $0.001. There is a limitation on the total shares held by the holder of the note, to 4.99 percent of all common shares outstanding. Interest of $168 has been accrued on the note for 2012 and an additional $83 in interest for the six month period ended June 30, 2013.
Effective July 2, 2013, the Company entered into a settlement agreement with Crystal Falls Investments, LLC, resolving all amounts claimed to be due under the two promissory notes, as well as claims made by it against the Company for other alleged cash advances, by the issuance of 53,000,000 shares of common stock. See, Note 5, Stockholder Equity (Deficit). ] As part of the settlement agreement, both notes were paid in full as of July 2, 2013."
In June 2013, the Company entered into a settlement agreement with Crystal Falls Investments, LLC, and Lotus Capital Investments, LLC to resolve claimed cash advances to the Company allegedly made by Crystal Falls Investments, LLC between October, 2010 and April 2013, inclusive, a portion of which claims apparently had been previously assigned by Crystal Falls to Lotus. Crystal Falls had paid outstanding invoices of two vendors of SK3 in the amounts of $2,324 and $1,680 in December 2010 and 2011, respectively, but those amounts were then incorporated into two promissory notes in the principal amounts of $2,324 and $1,680, due December 31, 2013 and convertible by their terms into common stock based on a conversion price of 75 percent of the average closing price for the stock for the 30 days prior to the date of the conversion, but not less than $0.001 per share. Under the terms of the settlement, Crystal Falls and Lotus Capital agreed not to pursue threatened litigation against the Company, and to cancel the two promissory notes and accrued interest in the name of Crystal Falls, in exchange for 53,000,000 shares of common stock issued in July, 2013, and an additional 117,000,000 common shares to be issued commencing October 1, 2013 in quarterly installments of the lesser of (a) 9.9 percent of the then issued and outstanding common shares or (b) that number of shares equal to the difference between 117,000,000 and the number of shares issued already in any prior quarterly installments. A total of 53,000,000 shares were issued on July 3, 2013 to Crystal Falls and to Lotus Investments at the direction of Crystal Falls, under the settlement agreement, which has been accounted for as follows:
Item Shares Value
Conversion of two prior notes plus accrued interest, a total of $4,897.83, at the agreed conversion rate of $0.01504 (75% of 30 day average closing price) 325,654 $ 4,897.83
Settlement compensation, based on July 2, 2013 closing market price of $0.0188 52,674,346 $ 990,277.70 Totals 53,000,000 $ 995,175.53
The additional shares to be issued on a quarterly basis will be treated as additional settlement compensation to Crystal Falls Investments and Lotus Capital Investments as and when each quarterly installment is issued. Management has considered the application of FASB Statement No. 123 on accounting for stock based employee compensation, which requires fair value accounting treatment for either the fair value of the consideration received or the fair
value of the equity issued, whichever is more reliably measured, and has concluded that FASB 123 does not apply to this transaction. Crystal Falls and Lotus Investments are not employees or consultants of the Company, have not provided and will not provide any services to the Company, and have not provided anything of reliably measurable value for the issuance of the shares on a quarterly basis in the future, other than the settlement of threatened litigation over their alleged claims. However, FASB 123 does indicate that in the case of issuance of restricted stock as compensation to an employee, the value of that restricted stock is to be measured by the market price of a share of unrestricted stock on the grant date.
Since the future market price of each quarterly grant of shares to Crystal Falls and Lotus Capital is speculative, the issuance of the shares is dependent on a fairness determination by a court of competent jurisdiction, and the number of shares to be issued at each quarterly date is dependent on the then total outstanding shares of the Company’s common stock, which is also unknown, the restricted stock to be issued to them in the future will be valued at the closing market price of the common stock at the time of each quarterly installment due date and based on the total number of shares of the Company’s common stock then issued and outstanding."
"In December 2011, the Company issued a second convertible note to Crystal Falls Investments, LLC, converting an outstanding open account due to Crystal Falls for direct payments made by Crystal Falls to DTC to obtain NOBO lists, totaling $1,680. The note is a two year note due December 31, 2013, bears interest at 10 percent and is in the principal amount of $1,680. The note is convertible into common stock at any time after 180 days at the election of the holder, at a price equal to 75 percent of the average closing price of the common stock for the 30 trading days prior to the date of election to convert, but not less than $0.001. There is a limitation on the total shares held by the holder of the note, to 4.99 percent of all common shares outstanding. Interest of $168 has been accrued on the note for 2012 and an additional $83 in interest for the six month period ended June 30, 2013.
Effective July 2, 2013, the Company entered into a settlement agreement with Crystal Falls Investments, LLC, resolving all amounts claimed to be due under the two promissory notes, as well as claims made by it against the Company for other alleged cash advances, by the issuance of 53,000,000 shares of common stock. See, Note 5, Stockholder Equity (Deficit). ] As part of the settlement agreement, both notes were paid in full as of July 2, 2013."
In June 2013, the Company entered into a settlement agreement with Crystal Falls Investments, LLC, and Lotus Capital Investments, LLC to resolve claimed cash advances to the Company allegedly made by Crystal Falls Investments, LLC between October, 2010 and April 2013, inclusive, a portion of which claims apparently had been previously assigned by Crystal Falls to Lotus. Crystal Falls had paid outstanding invoices of two vendors of SK3 in the amounts of $2,324 and $1,680 in December 2010 and 2011, respectively, but those amounts were then incorporated into two promissory notes in the principal amounts of $2,324 and $1,680, due December 31, 2013 and convertible by their terms into common stock based on a conversion price of 75 percent of the average closing price for the stock for the 30 days prior to the date of the conversion, but not less than $0.001 per share. Under the terms of the settlement, Crystal Falls and Lotus Capital agreed not to pursue threatened litigation against the Company, and to cancel the two promissory notes and accrued interest in the name of Crystal Falls, in exchange for 53,000,000 shares of common stock issued in July, 2013, and an additional 117,000,000 common shares to be issued commencing October 1, 2013 in quarterly installments of the lesser of (a) 9.9 percent of the then issued and outstanding common shares or (b) that number of shares equal to the difference between 117,000,000 and the number of shares issued already in any prior quarterly installments. A total of 53,000,000 shares were issued on July 3, 2013 to Crystal Falls and to Lotus Investments at the direction of Crystal Falls, under the settlement agreement, which has been accounted for as follows:
Item Shares Value
Conversion of two prior notes plus accrued interest, a total of $4,897.83, at the agreed conversion rate of $0.01504 (75% of 30 day average closing price) 325,654 $ 4,897.83
Settlement compensation, based on July 2, 2013 closing market price of $0.0188 52,674,346 $ 990,277.70 Totals 53,000,000 $ 995,175.53
The additional shares to be issued on a quarterly basis will be treated as additional settlement compensation to Crystal Falls Investments and Lotus Capital Investments as and when each quarterly installment is issued. Management has considered the application of FASB Statement No. 123 on accounting for stock based employee compensation, which requires fair value accounting treatment for either the fair value of the consideration received or the fair
value of the equity issued, whichever is more reliably measured, and has concluded that FASB 123 does not apply to this transaction. Crystal Falls and Lotus Investments are not employees or consultants of the Company, have not provided and will not provide any services to the Company, and have not provided anything of reliably measurable value for the issuance of the shares on a quarterly basis in the future, other than the settlement of threatened litigation over their alleged claims. However, FASB 123 does indicate that in the case of issuance of restricted stock as compensation to an employee, the value of that restricted stock is to be measured by the market price of a share of unrestricted stock on the grant date.
Since the future market price of each quarterly grant of shares to Crystal Falls and Lotus Capital is speculative, the issuance of the shares is dependent on a fairness determination by a court of competent jurisdiction, and the number of shares to be issued at each quarterly date is dependent on the then total outstanding shares of the Company’s common stock, which is also unknown, the restricted stock to be issued to them in the future will be valued at the closing market price of the common stock at the time of each quarterly installment due date and based on the total number of shares of the Company’s common stock then issued and outstanding."
