6. EQUITY TRANSACTION

9 Months Ended

Sep. 30, 2012

Common Stock

During the nine months ending September 30, 2012 the following equity transactions occurred:

On January 17, 2012, the Company entered into a Convertible Promissory Note (Note #9) with Asher Enterprises, Inc. with a principal amount of $47,500. The note matures in 9 months and carries an 8% interest rate per annum, compounded annually. If the note remains unpaid after 9 months from the Issue date, the holder has the option to convert the principal and accrued interest into shares of our Company stock at a conversion price equal to 60% of the “trading price” as described in the Note. These proceeds from this loan were used for both the purchase of inventory as well as Company operations.

On February 28, 2012, the Company entered into a Secured Promissory Note with Next View Capital, LP with a principal amount of $200,000. The note matures in one year and carries an interest rate of 12% for the first 6 months and 15% for the last six months. As additional consideration for entering into the note the Company issued 800,000 shares if its restricted securities valued at $48,000 ($.06 per share) and issued 800,000 5-year warrants exercisable at $.10 per share. Due to recent issuances of common stock at prices less than the exercise price of the warrants, the new exercise price of these warrants is $.095 per share. These notes have a liquidated damages clause and the warrants have a “ratchet-down” provision which creates additional derivative liabilities. The proceeds of this note are to be used specifically for the purchase of inventory. This note was personally guaranteed by Mr. Jeff Schultz, the Company’s Chairman and CEO. The Company recorded a debt discount of $48,516 attributed to the shares and warrants issued.

On February 28, 2012, the Company entered into two Secured Promissory Notes with private investors each with a principal amount of $25,000 ($50,000 total). The notes mature in one year and carry an interest rate of 12% for the first 6 months and 15% for the last six months. As additional consideration for entering into the notes the Company issued 200,000 shares if its restricted securities valued at $12,000 ($.06 per share) and issued 200,000 5-year warrants exercisable at $.10 per share. Due to recent issuances of common stock at prices less than the exercise price of the warrants, the new exercise price of these warrants is $.095 per share. These notes have a liquidated damages clause and the warrants have a “ratchet-down” provision which creates additional derivative liabilities. The proceeds of these notes are to be used specifically for the purchase of inventory. These notes were personally guaranteed by Mr. Jeff Schultz, the Company’s Chairman and CEO. The $50,000 total funds from these notes are to be kept in a separate “loan account” and are not to be used until the $200,000 note entered into on February 28, 2012 is fully paid. The Company recorded a debt discount of $12,129 attributed to the shares and warrants issued.

On March 22, 2012, the Company issued to Asher Enterprises, Inc. 416,667 shares of the Company’s common stock upon the conversion of $15,000 principal amount on a $63,000 convertible note (Note #6) that the Company had with Asher Enterprises, Inc. dated September 15, 2011 at a price of $.036 per share.

On March 28, 2012, the Company issued to Asher Enterprises, Inc. 486,111 shares of the Company’s common stock upon the conversion of $17,500 principal amount on a $63,000 convertible note (Note #6) that the Company had with Asher Enterprises, Inc. dated September 15, 2011 at a price of $.036 per share.

On April 2, 2012, the Company issued to Asher Enterprises, Inc. 611,111 shares of the Company’s common stock upon the conversion of $22,000 principal amount on a $63,000 convertible note (Note #6) that the Company had with Asher Enterprises, Inc. dated September 15, 2011 at a price of $.036 per share.

On April 10, 2012, the Company issued to Asher Enterprises, Inc. 402,190 shares of the Company’s common stock upon the conversion of $8,500 principal amount and $2,520 in accrued interest on a $63,000 convertible note (Note #6) that the Company had with Asher Enterprises, Inc. dated September 15, 2011 at a price of $.027 per share.

On May 7, 2012, the Company issued to Asher Enterprises, Inc. 392,157 shares of the Company’s common stock upon the conversion of $12,000 principal amount on a $42,500 convertible note (Note #7) that the Company had with Asher Enterprises, Inc. dated October 31, 2011 at a price of $.031 per share.

On May 9, 2012, the Company entered into a Convertible Promissory Note (Note #10) with Asher Enterprises, Inc. with a principal amount of $53,000. The note matures in 9 months and carries an 8% interest rate per annum, compounded annually. If the note remains unpaid after 9 months from the Issue date, the holder has the option to convert the principal and accrued interest into shares of our Company stock at a conversion price equal to 60% of the “trading price” as described in the Note. These proceeds from this loan were used for both the purchase of inventory as well as Company operations.

On May 17, 2012, the Company issued to Asher Enterprises, Inc. 600,000 shares of the Company’s common stock upon the conversion of $15,000 principal amount on a $42,500 convertible note (Note #7) that the Company had with Asher Enterprises, Inc. dated October 31, 2011 at a price of $.025 per share.

On May 30, 2012, the Company issued to Asher Enterprises, Inc. 822,967 shares of the Company’s common stock upon the conversion of $15,500 principal amount and $1,700 in accrued interest on a $42,500 convertible note (Note #7) that the Company had with Asher Enterprises, Inc. dated October 31, 2011 at a price of $.021 per share.

On June 25, 2012, the Company issued to David Rappa, 171,429 shares of the Company’s common stock relating to his 2012 employment agreement with the Company. These shares were valued at the sum of $6,000.

On July 19, 2012, the Company entered into a Convertible Promissory Note (Note #11) with Asher Enterprises, Inc. with a principal amount of $27,500. The note matures in 9 months and carries an 8% interest rate per annum, compounded annually. If the note remains unpaid after 9 months from the Issue date, the holder has the option to convert the principal and accrued interest into shares of our Company stock at a conversion price equal to 60% of the “trading price” as described in the Note. These proceeds from this loan were used for both the purchase of inventory as well as Company operations.

On September 24, 2012, the Company issued to Michael E. Fasci, 500,000 shares of the Company’s common stock relating to his 2012 employment agreement with the Company. These shares were valued at the sum of $4,000.

On September 24, 2012, the Company issued to Jeffrey Schultz, 500,000 shares of the Company’s common stock relating to his 2012 employment agreement with the Company. These shares were valued at the sum of $4,000.

On September 26, 2012, the Company issued to David Rappa, 500,000 shares of the Company’s common stock relating to his 2012 employment agreement with the Company. These shares were valued at the sum of $6,000.

A summary of the activity of warrants issued as of September 30, 2012 as follows:

					Weighted Average
	Warrants				Exercise Price
	Outstanding		Exercisable		Outstanding		Exercisable
Balance – December 31, 2011		5,500,000		5,500,000	$	.13	$	.13
Granted		1,000,000		1,000,000		.10		.10
Exercised		-		-		-		-
Canceled		-		-		-		-
Balance – September 30, 2012		6,500,000		6,500,000	$	.13	$	.13

The following table summarizes information about stock warrants outstanding and exercisable at September 30, 2012:

		Number Outstanding		Weighted- Average Remaining Life in Years		Weighted Average Exercise Price		Number Exercisable
Range of exercise prices:
$	.05 to $.09		1,000,000		1.58	$	.06		1,000,000
$	.10 to $.49		5,500,000		2.03	$	.14		5,500,000

- Definition

The entire disclosure for shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Including, but not limited to: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms, and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables, effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure.

+ References

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+ Details

REDFIN NETWORK, INC. 10-Q