Note 5 - Convertible Debentures | NOTE 5 CONVERTIBLE DEBENTURES Through June 30, 2016, we have financed our operations primarily through the issuance of various convertible debentures. For the six months ended June 30, 2016, we received cash proceeds of $375,000 from the issuance of new convertible debentures. Convertible debentures, net of discount, included in current liabilities totaled $2,760,088 and $2,387,981 as of June 30, 2016 and December 31, 2015, respectively. The following is a schedule of short-term convertible debentures outstanding as of June 30, 2016: Description Date Conversion Price Original Principal Amount Unpaid Principal Balance Term Interest Rate Debenture 1 10/10/11 $30.00 $ 25,000 $ 25,000 12 months 14% Debenture 3 2/17/12 $30.00 10,000 10,000 12 months 14% Debenture 4 3/9/12 $30.00 5,000 5,000 12 months 14% Debenture 5 3/19/12 $30.00 5,000 5,000 12 months 14% Debenture 6 4/29/12 $30.00 5,000 5,000 12 months 14% Debenture 7 4/25/12 $30.00 10,000 10,000 12 months 14% Debenture 8 10/9/12 $30.00 5,000 5,000 12 months 14% Debenture 10 11/15/12 $30.00 5,000 5,000 12 months 14% Debenture 11 11/20/12 $30.00 2,000 2,000 12 months 14% Debenture 12 12/11/12 $30.00 2,500 2,500 12 months 14% Debenture 14 1/5/13 $30.00 2,500 2,500 12 months 14% Debenture 15 2/5/13 $30.00 2,500 2,500 12 months 14% Debenture 17 7/23/13 Variable 62,000 62,000 9 months 8% Debenture 19 7/29/13 $30.00 10,000 10,000 12 months 14% Debenture 22 9/4/13 Variable 50,000 50,000 12 months 8% Debenture 31 10/3/13 Variable 3,750 3,750 12 months 8% Debenture 33 10/25/13 Variable 52,000 52,000 9 months 8% Debenture 34 10/25/13 Variable 30,000 47,455 9 months 8% Debenture 36 11/29/13 Variable 30,000 22,800 6 months 15% Debenture 37 11/29/13 Variable 25,000 25,000 6 months 15% Debenture 39 12/2/13 Variable 25,000 15,000 6 months 15% Debenture 47 6/23/13 Variable 35,000 17,500 7 months 10% Debenture 48 6/23/13 Variable 12,500 12,500 7 months 10% Debenture 49 1/12/14 Variable 26,000 26,000 12 months 22% Debenture 50 1/12/14 Variable 60,000 60,000 12 months 12% Debenture 51 2/3/14 $0.06 50,000 46,600 2 months 14% Debenture 52 2/18/14 $0.06 5,000 5,000 12 months 14% Debenture 53 3/17/14 Variable 25,000 23,500 12 months 18% Debenture 54 3/20/14 Variable 10,000 10,000 12 months 18% Debenture 55 3/25/14 Variable 10,000 10,000 12 months 18% Debenture 56 3/28/14 Variable 55,000 55,000 12 months 18% Debenture 57 4/1/14 $0.0025 50,000 800 6 months 14% Debenture 58 4/9/14 Variable 75,000 75,000 11 months 18% Debenture 59 4/10/14 Variable 60,000 60,000 11 months 18% Debenture 60 4/11/14 Variable 2,272 2,272 11 months 18% Debenture 61 4/11/14 Variable 40,000 19,475 12 months 15% Debenture 62 4/16/14 Variable 30,000 8,503 24 months 12% Debenture 63 4/23/14 $0.04 10,500 10,500 12 months 14% Debenture 64 5/8/14 $0.06 4,000 4,000 12 months 14% Debenture 65 5/21/14 Variable 50,000 50,000 12 months 15% Debenture 68 7/11/14 $0.01 25,000 7,500 12 months 14% Debenture 70 7/24/14 $0.06 48,360 48,360 12 months 14% Debenture 73 8/29/14 Variable 67,595 19,966 6 months 5% Debenture 74 9/3/14 Variable 37,520 37,520 24 months 12% Debenture 75 9/8/14 $0.01 25,000 25,000 12 months 14% Debenture 76 9/9/14 $0.01 36,359 36,359 12 months 14% Debenture 77 9/9/14 $0.0025 8,641 811 12 months 14% Debenture 78 9/9/14 $0.0025 10,000 10,000 12 months 14% Debenture 79 9/9/14 $0.0025 10,000 10,000 12 months 14% Debenture 80 9/9/14 $0.0025 10,000 10,000 12 months 14% Debenture 81 9/9/14 $0.0025 77,595 73,845 12 months 14% Debenture 82 9/10/14 $0.01 8,000 8,000 12 months 14% Debenture 83 9/10/14 $0.01 15,000 15,000 12 months 14% Debenture 85 9/17/14 Variable 5,000 5,000 6 months 5% Debenture 87 9/24/14 Variable 140,995 140,995 6 months 5% Debenture 88 10/1/14 $0.00025 16,378 13,878 12 months 14% Debenture 90 10/27/14 $0.01 50,000 50,000 12 months 14% Debenture 92 10/31/14 $0.0025 63,097 63,097 12 months 16% Debenture 96 3/27/15 Variable 128,460 111,670 12 months 8% Debenture 97 1/18/15 Variable 7,500 7,500 12 months 14% Debenture 98 2/12/15 $0.0145 12,500 12,500 12 months 14% Debenture 99 3/31/15 $0.01 112,972 112,972 12 months 14% Debenture 100 2/2/15 Variable 79,115 79,115 12 months 12% Debenture 101 2/2/15 Variable 45,000 45,000 12 months 12% Debenture 102 2/24/15 $0.0025 10,000 9,000 12 months 14% Debenture 104 3/12/15 Variable 25,000 25,000 12 months 14% Debenture 105 3/21/15 $0.0025 30,000 30,000 12 months 14% Debenture 106 1/5/15 Variable 15,000 15,000 6 months 15% Debenture 107 1/5/15 Variable 15,000 5,300 6 months 15% Debenture 109 2/11/15 Variable 25,000 25,000 12 months 8% Debenture 110 2/26/15 Variable 16,000 16,000 12 months 8% Debenture 111 3/4/15 Variable 27,500 27,500 12 months 8% Debenture 112 3/1/15 $0.0015 10,000 10,000 12 months 14% Debenture 114 4/2/15 Variable 26,947 24,447 12 months 8% Debenture 115 4/2/15 $0.001 23,660 23,660 12 months 14% Debenture 116 3/31/15 Variable 14,000 14,000 6 months 15% Debenture 117 4/14/15 Variable 20,000 20,000 6 months 15% Debenture 118 4/27/15 Variable 25,000 25,000 12 months 14% Debenture 119 3/31/15 Variable 14,000 14,000 6 months 15% Debenture 120 5/27/15 $0.0025 7,500 7,500 12 months 14% Debenture 121 7/2/15 $0.0025 175,000 175,000 12 months 14% Debenture 122 7/3/15 Variable 238,894 221,894 12 months 8% Debenture 126 9/8/15 $0.0025 112,663 112,663 12 months 14% Debenture 128 9/15/15 $0.0025 10,000 10,000 12 months 14% Debenture 129 9/8/15 $0.0050 2,000 2,000 12 months 14% Debenture 130 10/12/15 $0.0050 15,000 15,000 12 months 14% Debenture 131 10/12/15 $0.0050 20,000 20,000 12 months 14% Debenture 132 10/15/15 $0.0025 10,750 10,750 12 months 14% Debenture 134 10/20/15 $0.0050 10,000 10,000 12 months 14% Debenture 135 12/5/15 $0.0050 10,000 10,000 12 months 14% Debenture 137 12/18/15 $0.0050 20,000 20,000 12 months 14% Debenture 138 1/7/16 Variable 50,000 50,000 12 months 14% Debenture 139 1/11/16 Variable 25,000 25,000 12 months 14% Debenture 140 1/25/16 Variable 10,000 10,000 12 months 14% Debenture 141 1/29/16 Variable 125,000 125,000 12 months 16% Debenture 146 5/10/16 Variable 50,000 50,000 12 months 14% Total $ 3,206,523 2,966,957 Less discount (218,841) Net $ 2,748,116 The following is a schedule of long-term convertible debentures outstanding as of June 30, 2016: Description Date Conversion Price Original Principal Amount Unpaid Principal Balance Term Interest Rate Debenture 123 8/24/15 Variable $ 34,650 $ 24,650 24 months 8% Debenture 125 9/4/15 Variable 105,000 105,000 24 months 8% Debenture 127 9/25/15 Variable 50,000 50,000 24 months 8% Debenture 133 10/20/15 Variable 100,000 100,000 24 months 8% Debenture 136 12/4/15 Variable 160,000 160,000 24 months 8% Debenture 142 1/29/16 Variable 20,000 20,000 20 months 8% Debenture 143 3/3/16 Variable 30,000 30,000 18 months 8% Debenture 144 4/15/16 Variable 15,000 15,000 17 months 8% Debenture 145 4/18/16 Variable 50,000 50,000 17 months 8% Total $ 564,650 554,650 Less discount (338,100) Net $ 216,550 The convertible debentures are generally unsecured and bear interest ranging from 5% to 22% per annum, with maturities ranging from six months to two years. The outstanding principal and accrued interest of the debentures are convertible into shares of the Company's common stock at a fixed conversion price ranging from $0.00025 to $30.00 per share or variable discounted pricing based on the market price of the Company's common stock as defined in the debt agreement. We evaluated the convertible debentures in accordance with ASC Topic 815, "Derivatives and Hedging," and determined that the conversion feature of the convertible promissory notes with variable conversion prices were not afforded the exemption for conventional convertible instruments due to their variable conversion rates. The notes have no explicit limit on the number of shares issuable so they did not meet the conditions set forth in current accounting standards for equity classification. We elected to recognize the notes under paragraph 815-15-25-4, whereby there would be a separation into a host contract and derivative instrument. We elected to initially and subsequently measure the notes in their entirety at fair value, with changes in fair value recognized in earnings. We recorded a derivative liability and debt discount representing the imputed interest associated with the embedded derivative. For those convertible debentures with fixed conversion prices, we recorded a beneficial conversion feature at the inception of the debt to additional paid-in capital and to debt discount where the conversion price was less that the market price of the stock. At June 30, 2016, the convertible debentures and related accrued interest payable were convertible into approximately 6,698,670,000 shares of our common stock. Based on the assumptions used to estimate the fair value of the derivative liability at June 30, 2016 and assuming all lenders convert the notes payable at the June 30, 2016 conversion prices, the Company would have insufficient authorized shares of common stock to complete the debt conversions. As of June 30, 2016, $2,062,129 of the convertible debentures were delinquent. We believe we have good relationships with the holders of the delinquent debentures, and we continue to have discussions with them regarding the extension of maturity dates or settlement of amounts due. Several of the convertible debentures have default interest rates that apply when the debentures are delinquent, and we have accrued default interest where applicable. In addition, we have been unable to complete certain conversions of convertible debentures during the year ended December 31, 2015, pending an increase in the number of authorized shares of our common stock, and have accrued applicable penalties as of June 30, 2016 and December 31, 2015. Accrued interest payable for the convertible debentures, including accrued default interest and penalties, where applicable, totaled $1,982,955 and $1,141,478 as of June 30, 2016 and December 31, 2015, respectively. |