SKFT: Actually there were 39M shares issued as of the last 10Q; but only 28M as of 12/06.
Also, there aren't any preferred shares; but there are several convertible notes:
NOTE 5 - CONVERTIBLE NOTES PAYABLE
In June 2005, the Company executed a non-interest bearing convertible note in the amount of $33,000 with a public relations firm for services rendered. The holder is entitled, at its option, to convert, the debenture into shares of the Company’s common stock at $0.90 per share. If not converted, the entire principal amount shall be due to the holder on the first year anniversary of the note. In January 2007, the Company and the public relations firm reached an informal agreement whereby the Company has agreed to make periodic payments in order to repay the note in full by June 30, 2008.
In March 2006, the Company extended the maturity date of a convertible debenture, executed with an investor in the amount of $125,000, to January 26, 2007. In January 2007, the Company extended the maturity date of the convertible debenture to January 26, 2008. In connection with the extensions, the Company issued the investor 45,000 warrants with an exercise price of $0.20 per share and an expiration date of January 26, 2009, relating to the first extension, and 100,000 restricted shares of the Company’s common stock at $0.05 per share, relating to the second extension. The fair value of the warrants issued using the Black-Scholes Option Pricing Model was $4,878. For the three months ended March 31, 2007, the Company recorded $488 in financing expense related to the issuance of these warrants.
In February 2007, in relation to the January 2007 term sheet executed with an investment firm (see Note 14), the Company sold a total of six units to six individuals, each unit consisting of an 18% convertible note payable in the amount of $16,667 and 66,667 bonus shares of the Company’s common stock, valued at $0.03988, for a total of $100,000 and 400,000 shares of common stock, with principal due August 31, 2007. The holder is entitled, at its option, to convert, the debenture, plus accrued interest, into shares of the Company’s common stock at the price of $0.05 per share. Six months of prorated prepaid interest, for a total of $8,729, was due at closing and was paid directly to the note holders by the Company. The Company paid a placement agent fee of $10,000 and issued 80,000 shares of the Company’s common stock, valued at $0.03988, in March 2007, relating to the convertible notes. The Company also paid an escrow agent fee of $500 and a legal fee of $1,000 relating to the convertible notes. All of the Company’s shares of common stock issued in connection with the convertible notes have Rule 144 piggyback registration rights. For the three months ended March 31, 2007, the Company expensed $19,142 of financing expenses related to the issuance of the shares.
In March 2007, the Company executed an 18% convertible promissory note in the amount of $75,000 with an individual. The holder is entitled, to convert the debenture, plus accrued interest, into shares of the Company’s common stock at the market value of the Company’s common stock at the date of note maturity, June 30, 2007. If not converted, the entire principal amount and all accrued interest shall be due to the holder on June 30, 2007. In connection with the convertible promissory note payable, the Company issued to the individual an aggregate of 150,000 shares of the Company’s common stock, valued at $0.039 per share. The Company’s shares of common stock issued in connection with the convertible note have Rule 144 piggyback registration rights. For the three months ended March 31, 2007, the Company expensed $5,850 in financing expenses related to the issuance of the shares.
Financing expense for the convertible notes payable for the three months ended March 31, 2007 and 2006 was $21,625 and $10,410, respectively.
NOTE 6 - CONVERTIBLE NOTES PAYABLE - RELATED PARTIES
Convertible notes payable - related parties at March 31, 2007, consisted of convertible promissory notes that the Company executed with the Chief Executive Officer (“CEO”), the Vice President of Technical Services (“VPTS”), relatives of a former officer of the Company, a relative of the Chief Financial Officer, the President, a Software Developer who is also a relative of the Chief Technology Officer and the Office Manager.
The terms of the convertible promissory notes state that principal is payable in full in immediately available funds of $1,000,000 or more through any sales or investment. With the exception of the notes issued to the CEO, all of the notes bear interest at a rate of prime, which was posted as 8.25% on March 31, 2007 by the Wall Street Journal print edition, plus 2%, prime plus 4%, a straight 8% per year or a straight 21.90% per year. The notes issued to the CEO bear interest equal to the CEO’s private banking account monthly lending rate ranging between 8.625% and 11.00%. In September 2006, the variable interest rate for the notes issued to the CEO was revised to a fixed rate of 8%, effective August 1, 2006. In April 2007, the convertible promissory notes were amended to change the interest calculation from simple to compound effective April 1, 2007.
Interest is payable at such time as the principal on the note is due. Each individual shall have the right to convert the then outstanding principal amount, and all accrued interest thereon, into shares of the common stock of the Company, determined by dividing the amount of principal and interest then outstanding by a conversion price of either $0.75 or $1.00, depending on the note.
At March 31, 2007, accrued interest due for the convertible notes - related parties was $55,406 and is included in accrued expenses in the accompanying balance sheet. Financing expense for convertible notes payable - related parties for the three months ended March 31, 2007 and 2006 was $9,659 and $11,619, respectively.
NOTE 7 - NOTES PAYABLE
In July 2006, the Company sold a total of six units to six individuals, with each unit consisting of a 12% promissory note payable in the amount of $25,000 and 250,000 shares of the Company’s common stock for a total of $150,000 and 1,500,000 shares of common stock. The principal shall be payable in full by January 10, 2007. Per the terms of the notes, if any of the notes are deemed unenforceable, then the remaining outstanding principal and accrued interest shall be convertible into shares of common stock of the Company at the sole option of the note holder, at a conversion price equal to $0.085 per share, in addition to any other remedies or enforcement actions that the note holder may take to enforce collection of the note. Six months of prepaid interest, for a total of $9,000, was due at closing, of which $6,750 was withheld by the escrow agent and $2,250 was paid directly to the note holder by the Company. The Company paid a placement agent fee of $15,000 and issued 150,000 shares of the Company’s common stock, in August 2006, relating to the promissory notes. In addition, the Company paid an escrow agent fee of $3,000 and a due diligence fee of $7,500 plus 50,000 shares of the Company’s common stock issued to the placement agent in July 2006 in connection with the promissory notes. All of the Company’s shares of common stock issued in relation to the promissory notes have Rule 144 piggyback registration rights. In January 2007, the Company extended the maturity date of five of the promissory notes, totaling $100,000, to March 10, 2007, inclusive of a ten day grace period. In connection with the extensions, the Company has agreed to increase the interest rate of the promissory notes to 20% per annum and the Company has issued to the note holders 100,000 shares of the Company’s common stock at $0.0435 per share for the month of February 2007. Additionally, the Company issued 10,000 shares of the Company’s common stock at $0.0435 per share to the placement agent for the month of February 2007. The note holders and the placement agent are entitled to the aforementioned issuances on a pro-rated basis for every month that the notes are extended. The Company paid $500 to the placement agent’s attorney for document review related to the extensions. The remaining promissory note in the amount of $50,000 was paid in full in February 2007. The Company has issued to the note holders 100,000 shares of the Company’s common stock at $0.025 per share for the month of March 2007. Additionally, the Company issued 10,000 shares of the Company’s common stock at $0.025 per share to the placement agent for the month of March 2007. In March 2007, the Company partially repaid the five remaining notes in the amount of $50,000. The Company has issued to the note holders 50,000 shares of the Company’s common stock at $0.035 per share for the month of April 2007. Additionally, the Company issued 5,000 shares of the Company’s common stock at $0.035 per share to the placement agent for the month of April 2007. All of the Company’s shares of common stock issued in relation to the extensions have Rule 144 piggyback registration rights. For the three months ended March 31, 2007, the Company expensed $7,535 of financing expenses related to the issuance of the shares relating to the note extensions. In April 2007, the Company and the remaining note holders reached an informal agreement whereby the note holders have agreed to extend the notes on a month-to month basis.
In January 2007, the Company executed a promissory note with an individual in the amount of $50,000. The note is non-interest bearing with principal due February 15, 2007. Upon repayment, the Company shall make an additional lender’s fee payment of $3,000 to the individual. In connection with the promissory note, the Company issued 30,000 restricted shares of common stock to the individual at a price of $0.045 per share. In March 2007, the note was repaid in full along with the lender’s fee payment. For the three months ended March 31, 2007, the Company expensed $1,350 of financing expenses related to the issuance of the shares.
In February 2007, the Company executed a promissory note with an unrelated individual in the amount of $50,000. The note bears interest at 18% per annum with principal due June 5, 2007. Upon repayment, the Company shall make an additional lender’s fee payment of $4,000 to the individual. In connection with the promissory note, the Company issued 150,000 restricted shares of common stock to two individuals at $0.04 per share and paid a legal fee of $500 to the lender’s attorney. In addition, the Company’s CEO executed a Personal Guaranty Agreement guarantying $25,000 of the promissory note in the event the Company defaults on the note. For the three months ended March 31, 2007, the Company expensed $6,525 of financing expenses related to the issuance of the shares.
Interest and financing expense for notes payable for the three months ended March 31, 2007 was $5,030.
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