Notes Payable, Net of Discounts

6 Months Ended

Jun. 30, 2014

13. NOTES PAYABLE, NET OF DISCOUNTS

As a result of our inability to file our Form 10-Q for the period ended June 30, 2014 within the time period required under the Securities Exchange Act of 1934, as amended, we have defaulted on certain covenants under various loan documents with Typenex, LG Capital, and JMJ Financial. We have informed each, as well as other lenders, of the default and requested a waiver from the default, which was conditionally granted. With this filing, we have cured our outstanding defaults related to the late filing.


Notes Payable	June 30, 2014		December 31, 2013

Blue Citi - Convertible Note Payable, 0% interest, convertible at 40% discount to market price, unsecured	$	278,500	$	-
R Knight £38,500 Note Payable, Nil Interest, when funds permit, unsecured		-		63,487
P Beitl £109,576 Note Payable, Nil Interest, when funds permit, unsecured		186,586		180,691
David Voss Note Payable, 15% Interest, unsecured, convertible at fixed 00.5 cents per share		15,000		-
Black Mountain - Convertible Note Payable, 10% interest, convertible at 35% discount to market price, unsecured		110,000		-
Union Capital Note Payable, 8% Interest, unsecured, convertible at 42% discount to market price after 180 days		50,000		-
N Jones £10,053 Note Payable, Nil Interest, unsecured		17,118		16,577
I Hobday – Note payable, Nil interest, unsecured		24,419		5,813
P Lilley £700 Note Payable, Nil Interest, unsecured		1,191		1,154
L G Capital Note payable, 8% Interest, unsecured, convertible at 50% discount to market price after 180 days		27,000		76,500
Auctus Note Payable, 8% Interest, unsecured, convertible at 42% discount to market price after 180 days		-		37,750
JMJ Financial Note Payable, interest 12% after 90 days, unsecured, convertible at 40% discount to market price		166,668		82,000
Louis Klein Note Payable, 15% Interest, unsecured, convertible at fixed 10.5 cents per share		50,000		50,000
Linda Singer Note Payable, 15% Interest, unsecured, convertible at fixed 10.5 cents per share		100,000		100,000
David Hopkins Note Payable, 15% Interest, unsecured , a conversion price of 50% of close price on date of notification		20,000		20,000
Gel Properties Note Payable, 6% Interest, unsecured, convertible at 40% discount to market price		25,000		25,000
Redwood Fund II Note Payable ,10% Interest, unsecured, convertible at 50% discount to market price		100,000		100,000
Redwood Management LLC Note Payable, Nil Interest, unsecured, convertible at 50% discount to market price		-		336,376
Bizloan Note payable, 36% Interest, secured		83,647		219,691
Typenex Note Payable, 8% Interest, unsecured, convertible at 60% discount to market price after 180 days		142,500		-
WEAM/WFC		200,000		-
Accrued interest		-		8,080
		1,597,629		1,323,119
Debt Discount		(272,766)		(273,777)
	$	1,324,863	$	1,049,342

Current Portion	$	1,031,506	$	845,396
Long Term		293,357		203,946
	$	1,324,863	$	1,049,342

In connection with the Black Mountain convertible notes issued on February 13, 2014, the Company issued a five year warrant to the note holder to purchase an additional 1,200,000 common shares at an exercise price of $0.15. The warrant has anti-dilution provisions, including adjustable provisions for the exercise price and the number of shares. As of June 30, 2014, the adjusted number of issuable shares equaled 26,865,672 shares and the strike price was $0.0067, Using the Black-Scholes model and the following inputs: $0.0523 market price, 1 year estimated term, 0.11% risk free rate and expected volatility of 176%, the warrant’s value was $ 1,266,388.

In connection with the Blue Citi convertible notes issued on March 21, 2014, the Company issued a three year warrant to the note holder to purchase an additional 15,218,579 common shares at an exercise price of $0.0183. The warrant has anti-dilution provisions, including adjustable provisions for the exercise price and the number of shares. As of June 30, 2014, the adjusted number of issuable shares equaled 41,567,164 shares and the strike price was $0.00670. Using the Black-Scholes model and the following inputs: $0.0158 market price, 1 year estimated term, 0.11% risk free rate and expected volatility of 176%, the warrant’s value was $ 504,027.

In connection with a funding transaction between the Company and Typenex Co-Investment, LLC, in June 2014 the Company issued a $665,000 secured convertible promissory note to Typenex payable 17 months after the issuance date and bearing interest at the rate of 10% per annum. The loan will be funded in six installments of which the first installment was for $142,500 and the remainder are for $110,000 each, except the last which is for $82,500. The Typenex transaction had an original issue discount of $60,000 and transaction expenses of $5,000. As the lender, Typenex is secured by a first priority security interest on the assets of the Company. The Typenex Note is convertible into shares of the Company’s common stock beginning on the date which is six months after each respective installment of the loan is received by the Company. The conversion formula is the amount of the loan being converted divided by the conversion price, which is 60% of the average of the three lowest Closing Bid Prices in the proceeding twenty trading days. In connection with the Typenex transaction, the Company issued a five year warrant to Typenex to purchase common stock that includes anti-dilution provisions. The number of shares issuable under the warrant equal $332,500 divided by the greater of the market price per share at the issue date of the warrant ($0.0205) or the average trading price per share calculated on the two days prior to the date of notice of conversion. The purchase price per share is determined by using the lower of the conversion price and the market price. As of June 30, 2014, the adjusted number of issuable shares equaled 49,626,866 and the strike price was $0.00670. Using the Black-Scholes model and the following inputs: $0.0205 market price, 1 year estimated term, 0.11% risk free rate and expected volatility of 176%, the warrant’s value was $817,799.

- 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.

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Green Automotive Co 10-Q