NOTE 4 - NOTES PAYABLE TO THE CELLULAR CONNECTION LTD. AND LARRY BURKE

9 Months Ended

Apr. 30, 2013

NOTE 4 - NOTES PAYABLE TO THE CELLULAR CONNECTION LTD. AND LARRY BURKE

NOTE 4 - NOTES PAYABLE TO THE CELLULAR CONNECTION LTD. AND LARRY BURKE

	Original Date of Issuance	Maturity Date		April 30, 2013		July 31, 2012
Promissory Note 7	May 27, 2010	May 26, 2013	$	53,280	$	53,280
Promissory Note 9	November 29, 2010	November 28, 2013		70,560		58,800
Promissory Note 12	April 7, 2011	April 6, 2013		46,080		38,400
Promissory Note 13	February 24, 2012	February 23, 2013		81,723		27,241
Interest				24,612		23,773
Accretion				27,360		42,909
			$	303,615	$	244,403

As of April 30, 2013 and July 31, 2012 notes payable are recorded net of unamortized debt discount of $66,324 and $78,088, respectively.

Each of the notes bears interest at 20% per annum and allow for the lender to secure a portion of the Company assets up to 200% of the face value of the note and mature one year from the day of their respective issuance. Unless otherwise indicated, the holder has the right to convert the Notes plus accrued interest into shares of the Company's common stock at any time prior to the maturity date. The number of common stock to be issued will be determined using a conversion price based on 75% of the average of the lowest closing bid price during the fifteen trading days immediately prior to conversion.

On November 29, 2012, Promissory Note 9 renewed for an additional year under the terms outlined in the original Note. The modification of the Note upon renewal has been accounted for as debt extinguishment and the issuance of a new debt instrument. Accordingly, in connection with extinguishment of the original debt, the Company recognized a $23,520 gain.

On April 7, 2013, Promissory Note 12 renewed for an additional year under the terms outlined in the original Note. The modification of the Note upon renewal has been accounted for as debt extinguishment and the issuance of a new debt instrument. Accordingly, in connection with extinguishment of the original debt, the Company recognized a $15,360 gain.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References+ Details

Vital Products, Inc. 10-Q