| NOTE 9 - CONVERTIBLE DEBENTURE/NOTES PAYABLE | NOTE 9 -
CONVERTIBLE DEBENTURE/NOTES PAYABLE
June 30, December 31,
Convertible note issued on February 20, 2014, unsecured, zero interest if paid on or before 90 days otherwise one time interest charge of 12%, due on February 20, 2016. Unamortized debt discount of $1,328 and $2,352, respectively. $ 2,792 $ 1,768
Convertible note issued on October 2013, unsecured, interest at 6%, due on October 13, 2014 (in default). Unamortized debt discount of $-0- and $-0-, respectively. 9,912 9,912
Convertible note issued in January 2014, unsecured, interest at 8%, due on January 30, 2015. Unamortized debt discount of $-0- and $-0-, respectively. 112,150 115,000
Convertible note issued on January 2, 2014, unsecured, interest at 10%, due on June 2, 2014 (in default), convertible into common stock at 60% of the bid price on the date of conversion. Unamortized debt discount of $-0- and $-0-, respectively. 11,209 11,209
Convertible note issued on March 10, 2014, unsecured, interest at 10%, due on April 10, 2014 (in default). Unamortized debt discount of $-0- and $-0-, respectively. 6,669 6,669
Convertible note issued on April 9, 2014, unsecured, interest at 10%, due on May 4, 2014 (in default). Unamortized debt discount of $-0- and $-0-, respectively. 2,679 2,679
Convertible note issued on March 31, 2014, unsecured, interest at 8%, due on January 2, 2015. Unamortized debt discount of $-0- and $580, respectively. 73,310 72,730
Convertible note issued on April 1, 2014, unsecured, interest at 10%, due on September 1, 2014 (in default). Unamortized debt discount of $-0- and $-0-, respectively. 93,000 93,000
Convertible note issued on June 4, 2014, unsecured, interest at 16%, due on April 1, 2000 (in default). Unamortized debt discount of $-0- and $-0-, respectively. 25,000 25,000
Convertible note issued on June 1, 2014, unsecured, interest at 10%, due on December 1, 2014. Unamortized debt discount of $-0- and $-0-, respectively. 25,000 25,000
Convertible note issued on April 1, 2014, unsecured, interest at 10%, due on December 1, 2014. Unamortized debt discount of $-0- and $-0-, respectively. 25,000 25,000
Convertible note issued on May 16, 2014, unsecured, interest at 8%, due on November 16, 2014 (in default). Unamortized debt discount of $-0- and $-0-, respectively. 1,975 1,975
Convertible note issued on June 30, 2014, unsecured, interest at 8%, due on December 30, 2014. Unamortized debt discount of $-0- and $-0-, respectively. 1,929 1,929
Convertible note issued on July 9, 2014, unsecured, interest at 10%, due on February 9, 2015. Unamortized debt discount of $-0- and $827, respectively. 4,556 3,730
Convertible note issued on August 29, 2014, unsecured, interest at 12%, due on November 1, 2014 (in default). Unamortized debt discount of $-0- and $-0-, respectively. 1,890 1,890
Convertible note issued on October 1, 2014, unsecured, interest at 12%, due on January 1, 2015 (in default). Unamortized debt discount of $-0- and $978, respectively. 90,000 89,022
Convertible note issued on October 1, 2014, unsecured, interest at 12%, due on January 1, 2015 (in default). Unamortized debt discount of $-0- and $978, respectively. 90,000 89,022
Convertible note issued on October 1, 2014, unsecured, interest at 12%, due on January 1, 2015 (in default). Unamortized debt discount of $-0- and $155, respectively. 14,250 14,095
Convertible note issued on October 1, 2014, unsecured, interest at 12%, due on January 1, 2015 (in default). Unamortized debt discount of $-0- and $489, respectively. 45,000 44,511
Convertible note issued on January 6, 2015, unsecured, interest at 8%, due on October 10, 2015. Unamortized debt discount of $2,188 and $-0-, respectively. 3,812
Convertible note issued on May 20, 2015, unsecured, interest at 10%, due on demand. Unamortized debt discount of $-0- and $-0-, respectively. 15,000
Convertible note issued on June 16, 2015, unsecured, interest at 8%, due on June 16, 2016. Unamortized debt discount of $30,295 and $-0-, respectively. 1,205
Total notes payable 656,338 634,141
Less: current portion (656,338 ) (634,141 )
Long-term convertible debenture/notes payable $ $ Convertible debenture February 20, 2014
On February 20, 2014, the Company issued
a $25,000 Convertible Promissory Note which bears interest at a rate of 12%, due on February 20, 2016 and is convertible into the
Companys common stock at the holders option, at the conversion rate of 60% of the lowest three day trading price
for ten trading days immediately preceding the date of conversion. Any amount of principal or interest on this Note which is not
paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is
paid (Default Interest) and the note also has prepayment penalty clause. The Company identified embedded
derivatives related to the Convertible Promissory Note entered into in February 2014. These embedded derivatives included
certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record
the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as
of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair
value of $39,722 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial
Lattice Model based on the following assumptions:
Dividend yield: -0- %
Volatility 270.02 %
Risk free rate: 0.34 % The
initial fair value of the embedded debt derivative of $39,722 was allocated as a debt discount up to the proceeds of the note
($25,000) with the remainder ($14,722) charged to current period operations as interest expense for the year ended December 31,
2014. The outstanding balance as of June 30, 2015 is $4,120. Convertible debenture October 13, 2013: On October 13, 2013, the Company issued a
$30,000 Convertible Promissory Note which bears interest at a rate of 6%, due on October 13, 2014 and is convertible into the Companys
common stock at the holders option, at the conversion rate of 60% of the lowest five prior trading days immediately preceding
the date of conversion. Default rate of interest is 24% per annum. The Company received a net of $26,100 from
the convertible note holder; $1,500 was paid towards the legal expenses and $2,400 toward third party fees. The Company identified embedded derivatives
related to the Convertible Promissory Note entered into in October 2013. These embedded derivatives included certain conversion
features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives
as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date.
At the inception of the Convertible Promissory Note, the Company determined a fair value of $57,750 of the embedded derivative.
The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions:
Dividend yield: -0- %
Volatility 277 %
Risk free rate: 0.02 % The initial fair value of the embedded debt
derivative of $57,750 was allocated as a debt discount up to the proceeds of the note($30,000) with the remainder ($27,750) charged
to current period operations as non-cash interest expense for the year ended December 31, 2013. During the year 2014 the Company issued 15,261,282
shares for of common stock to convert note amount of $20,087. The outstanding balance as of June 30, 2015 is $9,912. Convertible debenture December 2013 and
January 2014 During the year ended December 31, 2014,
the Company issued two notes for a total of $228,500 Convertible Promissory Note which bears interest at a rate of 8%, due on July
20, 2014 and January 30, 2015 and is convertible into the Companys common stock at the holders option, at the conversion
rate of 60% of the lowest three day trading price for ten trading days immediately preceding the date of conversion. Any amount
of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per
annum from the due date thereof until the same is paid (Default Interest) and the note also has prepayment penalty
clause. The Company identified embedded
derivatives related to the Convertible Promissory Note entered into in January 2014. These embedded derivatives included
certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record
the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as
of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair
value of $383,457 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial
Lattice Model based on the following assumptions:
Dividend yield: -0- %
Volatility 267.19%-268.98 %
Risk free rate: 0.07%-0.10 % The
initial fair value of the embedded debt derivative of $383,457 was allocated as a debt discount up to the proceeds of the note
($228,500) with the remainder ($154,957) charged to current period operations as interest expense for the year ended December
31, 2014. The outstanding balance as of June 30, 2015 is $112,150. Convertible
debenture January 2, 2014 On January 2, 2014 the Company issued a $11,209
Convertible Promissory Note which bears interest at a rate of 8%, due on June 2, 2014 and is convertible into the Companys
common stock at the makers option, at the conversion rate of 40% of the lowest three day trading price for ten trading days
immediately preceding the date of conversion. Any amount of principal or interest on this Note which is not paid when due shall
bear interest at the lesser of i) 10 percent (10%) per annum or ii) the maximum rate allowed under the applicable law until paid
in full or until the Note is reinstated. The Company analyzed the convertible debts
for derivative accounting consideration under ASC 815 Derivatives and Hedging and determined that derivative accounting
is not applicable. The Company further analyzed the convertible debts for a beneficial conversion feature under ASC 470-20 on the
date of the notes and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion
feature was determined to be $7,473 and was recorded as debt discount. The outstanding balance as of June 30, 2015 is $11,209. Convertible debentures March 10, 2014
and April 9, 2014: During the year ended December 31, 2014,
the Company issued Convertible notes of$6,669 and $2,679 for expenses incurred. The Convertible Promissory Notes which bears interest
at a rate of 10%, due on April 10, 2014 and May 9, 2014 respectively, are convertible into the Companys common stock at
the holders option, at the conversion rate of 60% of the average of the lowest three day trading price for ten trading
days immediately preceding the date of conversion. The Company identified Debt discounts of
$6,629 and $1,182 related to the Convertible Promissory Note issued on March 10, 2014 and April 9, 2014 respectively. The accounting
treatment of debt discount financial instruments requires that the Company record the Debt discount on notes as of the inception
date of the Convertible Promissory note and amortized it over the period of note. The Company has fully amortized $6,629 and $1,182
and charged to current period operations as interest expense for the year ended December 31, 2014. The outstanding balance as of June 30, 2015
is $6,669 and $2,679. Convertible debentures March 31, 2014: On March 31, 2014, the Company issued a
$83,500 Convertible Promissory Note which bears interest at a rate of 8%, due on January 2, 2015 and is convertible into the
Companys common stock at the holders option, at the conversion rate of 60% of the average of the lowest three
day trading price for ten trading days immediately preceding the date of conversion. The Company identified embedded
derivatives related to the Convertible Promissory Note issued on March 31, 2014. These embedded derivatives included certain
conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair
value of these derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of
each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value
of $157,749 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice
Model based on the following assumptions:
Dividend yield: -0- %
Volatility 266.94 %
Risk free rate: 0.10 % The
initial fair value of the embedded debt derivative of $157,749 was allocated as a debt discount up to the proceeds of the note
($83,500) with the remainder ($74,249) charged to current period operations as interest expense for the year ended December 31,
2014. The
outstanding balance as of June 30, 2015 is $73,310. Convertible debentures April 1, 2014: On April 1, 2014, the Company issued a $93,000
Convertible Promissory Note for expenses incurred. The note bears interest at a rate of 10%, due on September 9, 2014 and is convertible
into the Companys common stock at the holders option, at the conversion rate of 75% of the average of the lowest
three day trading price for ten trading days immediately preceding the date of conversion. The Company identified embedded
derivatives related to the Convertible Promissory Note issued on April 1, 2014. These embedded derivatives included certain
conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair
value of these derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of
each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value
of $111,104 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice
Model based on the following assumptions:
Dividend yield: -0- %
Volatility 266.94 %
Risk free rate: 0.05 % The initial fair value of the embedded debt
derivative of $111,104 was allocated as a debt discount up to the proceeds of the note ($93,000) with the remainder ($18,104) charged
to current period operations as interest expense for the year ended December 31, 2014. The outstanding balance as of June 30, 2015
is $93,000. Convertible debentures April 1, 2014 June
1, 2014 and June 4, 2014: During the year ended December 31, 2014,
the Company issued three convertible notes of $25,000 each, $50,000 for expenses incurred and $25,000 transfer of loan. One Convertible
promissory note bears interest at 16% and the other two notes bears interest rate at 10%. The notes of $25,000 each which are due
September 9, 2014 and December 1, 2014 are convertible into the Companys common stock at the holders option at conversion
price of $0.05, and the note of $25,000 which is due on demand is convertible at the conversion rate of 75% of the average of the
lowest trading price for five trading days immediately preceding the date of conversion. The Company identified Debt discount of
$25,000 each related to the Convertible Promissory Note issued on April 1, 2014 and June 6, 2014. The accounting treatment of
debt discount financial instruments requires that the Company record the Debt discount on note as of the inception date of
the Convertible Promissory Note and amortized it over the period of note. The Company has fully amortized $50,000 and charged
to current period operations as interest expense for the year ended December 31, 2014. The outstanding balance for these three convertible
notes payable as of June 30, 2015 is $25,000 each. Convertible debentures May 16, 2014: On May 16, 2014, the Company issued a Convertible
note of $1,975 for expenses incurred. The Convertible Promissory Note which bears interest at a rate of 8%, due on November 16,
2014 is convertible into the Companys common stock at the holders option, at the conversion rate of 60% of the average
of the lowest three day trading price for ten trading days immediately preceding the date of conversion. The Company identified Debt discount of
$1,391 related to the Convertible Promissory Note issued on May 16, 2014. The accounting treatment of debt discount financial
instruments requires that the Company record the Debt discount on notes as of the inception date of the Convertible
Promissory note and amortized it over the period of note. The Company has fully amortized $1,391 and charged to current
period operations as interest expense for the year ended December 31, 2014. The outstanding balance as of June 30, 2015
is $1,975. Convertible debentures June 30, 2014: On June 30, 2014, the Company issued a Convertible
note of $1,929 for expenses incurred. The Convertible Promissory Note which bears interest at a rate of 8%, due on December 30,
2014 is convertible into the Companys common stock at the holders option, at the conversion rate of 60% of the average
of the lowest three day trading price for ten trading days immediately preceding the date of conversion. The Company identified Debt discount of $1,417
related to the Convertible Promissory Note issued on June 30, 2014. The accounting treatment of debt discount financial instruments
requires that the Company record the Debt discount on notes as of the inception date of the Convertible Promissory note and amortized
it over the period of note. The Company has fully amortized $1,417 and charged to current period operations as interest expense
for the year ended December 31, 2014. The outstanding balance as of June 30, 2015
is $1,929. Convertible debentures July 9, 2014: On July 9, 2014, the Company issued a
Convertible note of $16,056 through transfer of convertible note, accrued interest and miscellaneous loans payable. The
Convertible Promissory Note which bears interest at a rate of 10%, due on February 9, 2015 and is convertible into the
Companys common stock at the holders option, at the conversion rate of 60% of the average of the lowest three
day trading price for ten trading days immediately preceding the date of conversion. The Company identified embedded
derivatives related to the Convertible Promissory Note issued on July 9, 2014. These embedded derivatives included certain
conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair
value of these derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of
each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value
of $20,585 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice
Model based on the following assumptions:
Dividend yield: -0- %
Volatility 294.57 %
Risk free rate: 0.07 % The initial fair value of the embedded debt
derivative of $20,585 was allocated as a debt discount up to the proceeds of the note ($16,056) with the remainder ($4,529) charged
to current period operations as interest expense for the year ended December 31, 2014. The outstanding balance as of June 30, 2015
is $4,556 after $11,500 converted to shares of common stock during the year ended December 31, 2014. Convertible debentures August 29, 2014: On August 29, 2014, the Company issued
a Convertible note of$1,890 for expenses incurred. The Convertible Promissory Note which bears interest at a rate of 8%, due
on December 30, 2014 and is convertible into the Companys common stock at the holders option, at the conversion
rate of 60% of the average of the lowest three day trading price for ten trading days immediately preceding the date of
conversion. The Company identified embedded
derivatives related to the Convertible Promissory Note issued on August 29, 2014. These embedded derivatives included certain
conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair
value of these derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of
each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value
of $3,150 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice
Model based on the following assumptions:
Dividend yield: -0- %
Volatility 305.21 %
Risk free rate: 0.03 % The initial fair value of the embedded debt
derivative of $3,150 was allocated as a debt discount up to the proceeds of the note ($1,890) with the remainder ($1,260) charged
to current period operations as interest expense for the year ended December 31, 2014. The outstanding balance as of June 30, 2015
is $1,890. Convertible debentures October 1, 2014: On October 1, 2014, the Company issued a
$90,000 Convertible Promissory Note which bears interest at a rate of 12%, due on January 1, 2015 and is convertible into the Companys
common stock at the holders option, at the conversion rate of 60% of the lowest trading price for ten trading days immediately
preceding the date of conversion. The Company identified embedded
derivatives related to the Convertible Promissory Note issued on October 1, 2014. These embedded derivatives included certain
conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair
value of these derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of
each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value
of $150,000 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice
Model based on the following assumptions:
Dividend yield: -0- %
Volatility 309.19 %
Risk free rate: 0.02 % The initial fair value of the embedded debt
derivative of $150,000 was allocated as a debt discount up to the proceeds of the note ($90,000) with the remainder ($60,000) charged
to current period operations as interest expense for the year ended December 31, 2014. The outstanding balance as of June 30, 2015
is $90,000. Convertible debentures October 1, 2014: On October 1, 2014, the Company issued a
$90,000 Convertible Promissory Note which bears interest at a rate of 12%, due on January 1, 2015 and is convertible into the Companys
common stock at the holders option, at the conversion rate of 60% of the lowest trading price for ten trading days immediately
preceding the date of conversion. The
Company identified embedded derivatives related to the Convertible Promissory Note issued on October 1, 2014. These embedded
derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that
the Company record the fair value of these derivatives as of the inception date of the Convertible Promissory Note and to
adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the
Company determined a fair value of $150,000 of the embedded derivative. The fair value of the embedded derivative was
determined using the Binomial Lattice Model based on the following assumptions:
Dividend yield: -0- %
Volatility 309.19 %
Risk free rate: 0.02 % The initial fair value of the embedded debt
derivative of $150,000 was allocated as a debt discount up to the proceeds of the note ($90,000) with the remainder ($60,000) charged
to current period operations as interest expense for the year ended December 31, 2014. The outstanding balance as of June 30, 2015
is $90,000. Convertible debentures October 1, 2014: On October 1, 2014, the Company issued a
$14,250 Convertible Promissory Note which bears interest at a rate of 12%, due on January 1, 2015 and is convertible into the
Companys common stock at the holders option, at the conversion rate of 60% of the lowest trading price for ten trading
days immediately preceding the date of conversion. The Company identified
embedded derivatives related to the Convertible Promissory Note issued on October 1, 2014. These embedded derivatives
included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company
record the fair value of these derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair
value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a
fair value of $23,750 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial
Lattice Model based on the following assumptions:
Dividend yield: -0- %
Volatility 309.19 %
Risk free rate: 0.02 % The initial fair value of the embedded
debt derivative of $23,750 was allocated as a debt discount up to the proceeds of the note ($14,250) with the remainder
($9,500) charged to current period operations as interest expense for the year ended December 31, 2014. The outstanding balance as of June 30, 2015
is $14,250. Convertible debentures October 1, 2014: On October 1, 2014, the Company issued a
$45,000 Convertible Promissory Note which bears interest at a rate of 12%, due on January 1, 2015 and is convertible into the Companys
common stock at the holders option, at the conversion rate of 60% of the lowest trading price for ten trading days immediately
preceding the date of conversion. The Company identified embedded
derivatives related to the Convertible Promissory Note issued on October 1, 2014. These embedded derivatives included certain
conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair
value of these derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of
each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value
of $75,000of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice
Model based on the following assumptions:
Dividend yield: -0- %
Volatility 309.19 %
Risk free rate: 0.02 % The
initial fair value of the embedded debt derivative of $75,000 was allocated as a debt discount up to the proceeds of the note
($45,000) with the remainder ($30,000) charged to current period operations as interest expense for the year ended December 31,
2014. The
outstanding balance as of June 30, 2015 is $45,000. Convertible debentures January 6, 2015: On January 6, 2015, the Company issued a
$6,000 Convertible Promissory Note which bears interest at a rate of 8%, due on October 10, 2015 and is convertible into the Companys
common stock at the holders option, at the conversion rate of 50% of the average of the lowest three day trading price
for twenty trading days immediately preceding the date of conversion. The Company identified embedded derivatives
related to the Convertible Promissory Note issued on January 6, 2015. These embedded derivatives included certain conversion features.
The accounting treatment of derivative financial instruments requires that the Company record the fair value of these derivatives
as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date.
At the inception of the Convertible Promissory Note, the Company determined a fair value of $11,520 of the embedded derivative.
The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions:
Dividend yield: -0- %
Volatility 443.15 %
Risk free rate: 0.18 % The
initial fair value of the embedded debt derivative of $11,520 was allocated as a debt discount up to the proceeds of the note
($6,000) with the remainder ($5,520) charged to current period operations as interest expense for the three months ended March
31, 2015. The
outstanding balance as of June 30, 2015 is $6,000. Convertible
debenture May 20, 2015 On May 20, 2015 the Company issued a $15,000
Convertible Promissory Note which bears interest at a rate of 10%, due on November 20, 2015 and is convertible into the Companys
common stock at the makers option, at the conversion rate of 60% of the lowest trading price in the five days immediately
preceding the date of conversion. Any amount of principal or interest on this Note which is not paid when due shall bear interest
at the lesser of i) 10 percent (10%) per annum or ii) the maximum rate allowed under the applicable law until paid in full or until
the Note is reinstated. The Company analyzed the convertible debts
for derivative accounting consideration under ASC 815 Derivatives and Hedging and determined that derivative accounting
is not applicable. The Company further analyzed the convertible debts for a beneficial conversion feature under ASC 470-20 on the
date of the notes and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion
feature was determined to be $15,000 and was recorded as debt discount. The outstanding balance as of June 30, 2015 is $15,000. Convertible debentures June 16, 2015: On June 16, 2015, the Company issued a $31,500
Convertible Promissory Note which bears interest at a rate of 8%, due on June 16, 2016 and is convertible into the Companys
common stock at the holders option, at the conversion rate of 60% of the average of the lowest three day trading price for
ten trading days immediately preceding the date of conversion. The Company identified embedded derivatives
related to the Convertible Promissory Note issued on June 16, 2015. These embedded derivatives included certain conversion features.
The accounting treatment of derivative financial instruments requires that the Company record the fair value of these derivatives
as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date.
At the inception of the Convertible Promissory Note, the Company determined a fair value of $51,809 of the embedded derivative.
The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions:
Dividend yield: -0- %
Volatility 563.68 %
Risk free rate: 0.28 % The initial fair value of the embedded debt
derivative of $51,809 was allocated as a debt discount up to the proceeds of the note ($31,500) with the remainder ($20,309) charged
to current period operations as interest expense for the six months ended June 30, 2015. The outstanding balance as of June 30, 2015
is $31,500. At June 30, 2015, the Company adjusted the
recorded fair value of the derivative liability to market on the notes resulting in noncash, non-operating gain of $312,122 for
the six months ended June 30, 2015. During the six months ended June 30, 2015
and 2014 the Company amortized $25,048 and $924,585, respectively and $18,718 and $589,564, for the three months ended June 30,
2015 and 2014, respectively, of beneficial debt discount to the operations as interest expense. Accrued interest on convertible notes payable
for the six months ended June 30, 2015 was $79,433. Interest expense of $18,539 and $33,642 has been charged to expenses for the
three and six months ended June 30, 2015, respectively. |
