Promissory Notes

3 Months Ended

Dec. 31, 2013

Convertible Promissory Notes ("CPN")

As of December 31, 2013, the Company had the following CPNs:

Date of:		Conversion					Accrued		Total
Issuance	Maturity	Price		Status	Principle		Interest		Outstanding
01/28/11	07/28/11	$	0.10	In default	$	5,000	$	1,169	$	6,169
06/21/11	01/21/12	$	0.10	In default		2,500		506		3,006
06/24/11	01/24/12	$	0.10	In default		10,000		2,019		12,019
07/14/11	02/14/12	$	0.10	In default		10,000		1,975		11,975
07/28/11	02/28/12	$	0.10	In default		10,000		1,944		11,944
08/10/11	02/10/12	$	0.10	In default		15,263		2,924		18,187
08/19/11	02/19/12	$	0.10	In default		10,000		1,898		11,898
09/21/11	03/21/12	$	0.10	In default		21,500		3,925		25,425
10/12/11	04/12/12	$	0.10	In default		2,900		508		3,408
10/19/11	04/19/12	$	0.10	In default		7,500		1,290		8,790
11/09/11	05/09/12	$	0.10	In default		11,950		1,970		13,920
01/03/12	07/03/12	$	0.10	In default		11,817		1,886		13,703
02/27/12	08/27/12	$	0.10	In default		15,392		2,270		17,662
01/09/13	06/09/13	$	0.20	In default		75,021		5,854		80,875
02/08/13	08/08/13	$	0.20	In default		41,928		2,996		44,924
03/18/13	09/15/13	$	0.20	In default		35,185		2,221		37,406
05/22/13	11/22/13	$	0.20	In default		33,853		1,655		35,508
06/04/13	12/04/13	$	0.20	In default		25,000		1,151		26,151
					$	344,809	$	38,160	$	382,969
Number of shares issuable upon exercise of the above debt upon default										2,705,376

From time to time the Company has issued CPNs all with identical terms, including a maturity date six to seven months from the date of issuance, eight percent (8%) per annum interest rate, no requirement for any payments prior to maturity, and the right to convert the outstanding principle and interest in to into fully paid and non-assessable shares of the Company's common stock at a fixed conversion price of $0.10 or $0.20 per share upon default. The conversion privilege provides for net share settlement only. Pursuant to ASC 470-20-25-5, the Company determined that due to the market price of the Company's common stock being greater than the conversion price contained in each CPN on the commitment date, each CPN contained a beneficial conversion feature (“BCF”) with an intrinsic value in excess of the face amount of each CPN. The resulting discount to the Loan is recorded to interest expense upon default. The Company has not received notice from the holder of the defaulted notes to enforce collection. The Company communicates regularly with the holder who has not expressed a desire to force collection at this time.

During the three months ended December 31, 2013 and 2012, the Company recognized $58,852 and $0 of expense related to the debt discount arising from the beneficial conversion feature of CPN's entering default status. During the three months ended December 31, 2013 and 2012, the Company recognized $6,953 and $2,698, respectively, of interest expense related to the stated interest rate contained in the Company's CPNs.

Non-Convertible Promissory Notes

On March 19, 2012, the Company entered into a Securities Purchase Agreement, Guaranty and Note (the "Note") with Gemini Master Fund, Ltd. under which the Company issued a promissory note with a face amount of $280,000 and received net proceeds of $245,000. The net proceeds include a $30,000 original issue discount ("OID") and $5,000 in documentary fees associated with the note and with held by the lender. The Note matured six months from the date of issue, bears interest of twelve percent (12%) per annum on the face amount and is payable in full upon maturity. In the event of default, the Note is subject to a penalty of 130% of the then outstanding principle and increase in the interest rate to twenty four percent (24%) per annum. In connection with the Note the Company issued 200,000 shares of restricted common stock. Pursuant to ASC 470-20-25, the Company recorded a debt discount of $105,933 including $70,933 attributable to the 200,000 shares of common stock and $35,000 to the OID and documentary fees. The debt discount was accreted over the term of the Note, or six months on a straight line basis during our second through the fourth quarter of 2012.

During the three months ended December 31, 2012, on October 3, 2012, the Company paid an additional $100,000 against the principle balance of the Note and issued 20,000 shares of restricted common stock to Gemini Master Fund, Ltd. in exchange for their not exercising the default terms of the Note. The shares were valued on the date of the Agreement or $0.93 per share. On December 31, 2012, Gemini sold and Amalfi Coast Capital purchased the remaining $100,000 balance remaining under the Note.

During the three months ended December 31, 2013 and 2012, the Company recognized $3,025 and $2,142, respectively of interest expense related to this note.

- Definition

The entire disclosure for short-term debt.

+ References+ Details

Blink Technologies, Inc. 10-Q