Convertible Notes Payable | NOTE 4 Convertible Notes Payable Note Date Maturity Date Face Amount Eligible for Conversion Conversion Date Amounts Converted / Cash Paid* Balance Outstanding 05/21/2013 09/20/2016 $900,448 06/15/2013 N/A 09/19/2013 11/20/2013 $31,000* $100,000 $70,000 $869,448 $769,448 $699,448 06/27/2013 - $100,000 due 12/12/2014 (in default) -$270,000 no due date 370,000 06/27/2013 $370,000 11/19/2013 08/21/2014 $78,500 $10,000 Default 05/19/2014 06/13/2014 07/01/2014 07/11/2014 07/21/2014 11/19/2014 12/01/2014 12/12/2014 12/16/2014 01/23/2015 $12,000 $12,000 $15,000 $19,500 $7,235 $5,635 $6,395 $5,780 $4,955 $66,500 $54,500 $39,500 $20,000 $30,000 $22,765 $17,130 $10,735 $4,955 $ -0 - 12/17/2013 09/21/2014 $32,500 $16,250 Default 06/15/2014 N/A 02/02/2015 02/05/2015 03/06/2015 03/09/2015 03/16/2015 03/23/2015 03/24/2015 03/31/2015 03/31/2015 $4,430 $6,030 $3,515 $3,515 $3,515 $3,760 $9,560 $2,675 $11,750 $32,500 $48,750 $44,320 $38,290 $34,775 $31,260 $27,445 $23,985 $14,425 $11,750 $-0 - 01/27/2014 10/29/2014 $32,500 $16,250 Default 07/26/2014 04/07/2015 04/08/2015 04/15/2015 04/22/2015 04/29/2015 05/01/2015 $7,495 $10,685 $10,500 $11,540 $8,000 $530 $32,500 $48,750 $41,225 $30,570 $20,070 $8,530 $530 $-0 - 07/08/2014 04/09/2015 $21,150 $10,575 Default 01/04/2015 05/07/2015 05/14/2015 05/19/2015 05/26/2015 $4,320 $3,165 $2,400 $1,820 $21,150 $31,725 $27,405 $24,240 $21,840 $20,020 09/03/2014 06/05/2015 $32,500 $16,250 Default 03/03/2015 $32,500 $48,750 09/10/2014 09/10/2016 $35,000 09/10/2014 03/27/2015 03/31/2015 04/07/2015 04/15/2015 04/22/2015 05/01/2015 05/07/2015 05/15/2015 $3,320 $3,802 $4,373 $5,013 $6,630 $4,608 $5,232 $2,023 $35,000 $31,680 $21,878 $23,506 $18,493 $11,863 $7,255 $2,023 $-0 - 01/12/2015 10/14/2015 $16,000 $8,000 Default 07/11/2015 $16,000 $24,000 Totals $1,595,923 $433,705 $1,162,218 Convertible notes payable third parties During 2011, 2012 and 2013, the Company obtained loans totaling $720,000. These loans were unsecured and bore interest at 10%. The loans (including accrued interest of $140,448) in the amount of $900,448 were converted to a Convertible Note Payable due to Southwest Financial bearing interest at 10% per annum. Following cash payments of $31,000 and conversions to common stock of $170,000 later in fiscal 2013, the Company owed $699,448. The notes were initially convertible at the option of the Holder at fixed rate of $0.075 per share and mature on September 20, 2015. In September 2014, the conversion rate was amended to a fixed rate of $0.003 per share. The Company paid no principal cash payments on these notes during the three months ended May 31, 2015. This note was deemed tainted on the date that another convertible note became convertible on May 18, 2014. A derivative liability of $252,313 was recorded as a debt discount and amortized over the term of the note. The principle balance of the note was $699,448 as of May 31, 2015. As of February 28, 2015, the Company owed convertible notes totaling $370,000 to third parties including accrued interest of another $4,041. Interest is 10% annually and is to be paid currently. The notes may be converted at the option of the Holder at a fixed rate of $0.075 per share. These notes were deemed tainted on the date that another note became convertible on May 18, 2014. A net derivative liability of $148,771 was recorded as a debt discount to be amortized over the terms of the notes. In February 2014, the notes were amended to modify the conversion rate to $0.003 per share. The principle balance of the notes as of May 31, 2015 was $370,000, which is due on demand. On December 17, 2013, the Company signed a convertible note agreement with a third party in which the party loaned $32,500 subject to annual interest of 8%. The note matured on September 21, 2014 and is convertible into the Companys common stock after 180 days from the date of issuance at 58% of the average of the lowest prices of the common stock during the ten days preceding the date of conversion. On June 25, 2014, the note became convertible and the embedded conversion option required derivative accounting for the variable conversion rate. On June 25, 2014, a derivative liability of $25,723 was recorded as a debt discount and amortized over the term of the note. The embedded conversion option of the note also tainted the outstanding convertible notes. On December 1, 2014, default interest in the amount of $16,250 was added to the principle balance of the note. During the three months ended May 31, 2015, the lender converted $38,290 in principle in exchange for 39,750,796 shares of common stock and the note was paid in full. On January 27, 2014, the Company signed a convertible note agreement with a third party in which the party loaned $32,500 subject to annual interest of 8%. The note matured on October 29, 2014 and is convertible into the Companys common stock after 180 days from the date of issuance at 58% of the average of the lowest prices of the common stock during the ten days preceding the date of conversion. On July 26, 2014, the note became convertible and the embedded conversion option required derivative accounting to the variable conversion rate. On July 26, 2014, a derivative liability of $23,228 was recorded as a debt discount and amortized over the term of the note. The embedded conversion option of the note also tainted the outstanding convertible notes. During the twelve months ended February 28, 2015, default interest of $16,250 was added to the principle balance of the note and an additional derivative liability of $11,014 was recorded. During the three months ended May 31, 2015, the lender converted $51,350 in principle in exchange for 54,275,893 shares of common stock and the note was paid in full. On July 8, 2014, the Company signed a convertible note agreement with a third party in which the party loaned $21,150 subject to annual interest of 8%. The note matures on April 9, 2015 and is convertible into the Companys common stock after 180 days from the date of issuance at 58% of the average of the lowest prices of the common stock during the ten days preceding the date of conversion. On January 4, 2015, the note became convertible and the embedded conversion option required derivative accounting to the variable conversion rate. On January 4, 2015, a derivative liability of $11,138 was recorded as a debt discount to be amortized over the term of the note. The embedded conversion option of the note also tainted the outstanding convertible notes. During the twelve months ended February 28, 2015, default interest of $10,575 was added to the principle balance of the note and an additional derivative liability of $7,136 was recorded. During the three months ended May 31, 2015, the lender converted $11,705 in principle in exchange for 38,369,856 shares of common stock and the principle balance of the note as of May 31, 2015 was $20,020. On September 3, 2014, the Company signed a convertible note agreement with a third party in which the party loaned $32,500 subject to annual interest of 8%. The note matures on June 5, 2015 and is convertible into the Companys common stock after 180 days from the date of issuance at 58% of the average of the lowest prices of the common stock during the ten days preceding the date of conversion. On March 2, 2015, the note became convertible and the embedded conversion option will require derivative accounting due to the variable conversion rate. During the twelve months ended February 28, 2015, default interest of $16,250 was added to the principle balance of the note and an additional derivative liability of $9,264 was recorded. The principle balance of the note as of May 31, 2015 was $48,750. On September 9, 2014, the Company executed a $200,000 Convertible Promissory Note bearing interest on the unpaid balance at the rate of 12% on the original principal amount. The principle amount due on the note shall be prorated based upon the consideration actually received by the Company, plus an approximate 10% original issue discount that is prorated based upon the consideration actually received as well as any other interest or fees. Under the terms of the note, the Company is not required to repay any unfunded portion of the note. The Maturity Date is two years from the Effective Date of each payment and is the date upon which the principal sum of this Note, as well as any unpaid interest and other fees, shall be due and payable. The conversion price is the lesser of $0.045 or 60% of the lowest trade price in the 25 trading days previous to the conversion. During the three months ended May 31, 2015, the lender converted $11,876 in principle in exchange for 17,265,000 shares of common stock and the note was paid in full. On January 12, 2015, the Company signed a convertible note agreement with a third party in which the party loaned $16,000 subject to annual interest of 8%. The note matures on October 14, 2015 and is convertible into the Companys common stock after 180 days from the date of issuance at 58% of the average of the lowest prices of the common stock during the ten days preceding the date of conversion. On July 11, 2015, the note became convertible and the embedded conversion option required derivative accounting to the variable conversion rate. During the twelve months ended February 28, 2015, default interest of $8,000 was added to the principle balance of the note and an additional derivative liability of $4,636 was recorded. The principle balance of the note as of May 31, 2015 was $24,000. Amortization expense on the debt discounts for the three months ended May 31, 2015 amounted to $432,705 and notes are carried at $1,162,218, net of unamortized discounts of $115,105. |