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EXCEL - IDEA: XBRL DOCUMENT - VIPER POWERSPORTS INCFinancial_Report.xls
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EX-31.2 - EXHIBIT 31.2 - VIPER POWERSPORTS INCv325968_ex31-2.htm
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v2.4.0.6
Loans
9 Months Ended
Sep. 30, 2012
Debt Disclosure [Abstract]  
Debt Disclosure [Text Block]

F. Loans

 

The Company entered into two 180-day loan agreements for $100,000 each from January 1, 2012 through March 31, 2012. These loans are convertible and carry a 12.0% interest rate. Each agreement also required the Company to issue 650,000 warrants to purchase the applicable number of shares of common stock at $.15 per share. The Company valued the warrants issued using the Black-Scholes model. The relative fair value method was used to allocate the proceeds between the warrants and the loans, resulting in a debt discount, which is then accreted over the life of the loans. Any remaining unamortized debt discount at the time of conversion has been accreted as an expense. These loans were converted in April 2012.

 

On March 15, 2012, the Company repaid the Convertible Promissory Note to Asher Enterprises, Inc. with a principal amount of $65,000 with accrued interest and prepayment option fees. The discounted carrying value on the Balance Sheet was $33,622.

 

The Company entered into three (3) short-term loan agreements for a total of $214,000 with related parties from January 1, 2012 through March 31, 2012. The instruments are non-interest bearing.

 

On March 22, 2012, the Company received $25,000 from an accredited investor from a private placement. As of March 31, 2012, the shares were not issued and were classified as a payable. The loan was converted into share during the second quarter of 2012.

 

On April 24, 2012, Viper Motorcycle Company (“VMC”), as Borrower and being a wholly owned subsidiary of registrant Viper Powersports Inc., entered into a Loan and Security Agreement (the “Loan Agreement”) with Precious Capital LLC , of New York City, as Lender. The Loan Agreement provides funding through advances to VMC under a line of credit not to exceed $6,000,000, with interest on outstanding principal payable at an annual rate of 15% per annum. All outstanding principal of this loan and any accrued interest is due to Lender in full, thirty-six (36) months from the date of the Loan Agreement. The outstanding principal of this loan may be prepaid by VMC, in whole or in part, at any time.

  

· Upon closing this loan, VMC received an initial loan advance of $2,500,000. The Loan Agreement required the funds from this initial advance to be used by VMC as follows: payment of outstanding debt of $280,000 including $80,000 owed to a director of the Company; payment of $640,000 to acquire the assets of Precision Metal Fab Racing, a manufacturer and marketer of high performance motorcycle components based in suburban Minneapolis; prepaid payment of loan interest to the Lender of $375,000; payment of $330,000 to complete acquiring engine development IP technology from Ilmor; payment not to exceed $450,000 for manufacturing equipment and tooling; payment of $180,000 for loan brokerage commissions; payment not to exceed $128,000 for motorcycle components inventory and other immediate operational expenditures; and the balance for miscellaneous permitted expenditures including payment of professional and other expenses of VMC and the Lender related to this loan transaction and its closing.
· Under the terms of the Loan Agreement, any further advances to VMC beyond the initial $2,500,000 shall be in the Lender’s sole and absolute discretion, and no advance may be requested by VMC after April 24, 2014. The loan terms also require that at no time shall the outstanding balance of this loan exceed a “Balancing Formula” as defined in the Loan Agreement, which formula approximates 60% of the values of certain defined tangible and intangible assets of VMC and the Company.
· To provide the required collateral for this loan, both VMC and the Company entered into various security, pledge and guaranty agreements to guarantee payment to the Lender and secure the Lender with all tangible and intangible assets of VMC and the Company as set forth in the Loan Agreement and its supporting documents, including the Company’s 100% ownership of VMC. In addition, the future payment to the Lender of all outstanding principal and accrued interest of this loan was guaranteed unconditionally by the Chief Executive Officer and Chief Financial Officer of the Company.
· The Loan Agreement also contains numerous representations, warranties and covenants of VMC, detailed terms for the opening and operation of certain banking Special Deposit Accounts as required by the Lender, default provisions and other standard loan contract provisions.
· As an inducement to the Lender to make this loan to VMC, the Company issued a total of 9,694,128 unregistered shares of its common stock to the Lender, which common shares were offered and sold by the Company in reliance upon the exemption from registration set forth in Section 4(2) of the Securities Act of 1933, as amended. The cost of this issuance was capitalized to deferred financing costs and will be amortized on a straight-line basis over the life of the loan as additional interest.
· The Loan Agreement also provides that none of the common stock of the Company owned by the Lender or by the Chief Executive Officer and Chief Financial Officer of the Company can be sold or otherwise disposed of during the three-year term of this loan.

 

On July 10, 2012, per the April 24, 2012, Loan Agreement with Precious Capital LLC, VMC was advanced $345,000 under the same terms.

 

On August 22, 2012, per the April 24, 2012, Loan Agreement with Precious Capital LLC, VMC was advanced $195,000 under the same terms.

 

On September 10, 2012, per the April 24, 2012, Loan Agreement with Precious Capital LLC, VMC was advanced $160,000 under the same terms.