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EXCEL - IDEA: XBRL DOCUMENT - Panache Beverage, Inc.Financial_Report.xls
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v2.4.0.6
NOTE 4 - FACTORING AGREEMENT
3 Months Ended
Mar. 31, 2012
Notes to Financial Statements  
NOTE 4 - FACTORING AGREEMENT

 

NOTE 4 - FACTORING AGREEMENT

 

On June 10, 2011, the Company entered into a purchase and sale factoring agreement with a commercial factor whereby the Company sells certain accounts receivable to the factor. Under the terms of the agreement, the factor may, in its sole discretion, make advances to the Company of amounts representing up to 70% of the net amount of eligible accounts receivable up to a maximum of $1,000,000. On September 22, 2011, the factor increased the advance to 75% of eligible accounts receivable. On March 19, 2012, the factor reduced the advance to 70% of eligible accounts receivable. The factor's purchase of the eligible accounts receivable will be at a discounted fee which is deducted from the face value of each collection. The Discount Fee, is based on the number of days outstanding from the date of purchase. The Discount Fee will be; 2.50% if paid within 40 days, 3.34% if paid within 50 days, 4.18% if paid within 60 days, 5.00% if paid within 60 days, 5.84% if paid within 70 days, 6.68% if paid within 80 days, 7.50% if

 

paid within 90 days and 2.0% for each 15 day period until the account is paid. Based on this arrangement, the Company is liable to the factor if the accounts receivable is not collected, and therefore the Company has accounted for cash received on factored receivables as a liability.

 

On December 22, 2011, the Company entered into a separate purchase and sale factoring agreement with a different commercial factor whereby the Company sells certain accounts receivable to the factor. Under the terms of this agreement, the factor makes advances to the Company of amounts representing up to 90% of certain accounts receivable. The factor purchases the accounts receivable at a $500 discount plus monthly compounded interest of 2% of the factored amount for the period the factored accounts receivable remain outstanding. Based on this arrangement, the Company is liable to the factor if the accounts receivable is not collected, and therefore the Company has accounted for cash received on factored receivables as a liability.

 

The combined balance due to the factors as of March 31, 2012 and December 31, 2011 was $87,203 and $317,293, respectively. Factor expense charged to operations for the three months ended March 31, 2012 and 2011 amounted to $26,380 and $0, respectively.