| Note 5 - Convertible Notes Payable | Note 5 Convertible Notes Payable On July 24, 2017 and September 7, 2017, the Company entered into two $28,000 convertible promissory notes with a third party for which the proceeds were used for operations. The Company received net proceeds of $50,000 and thus a $6,000 original issuance discount was recorded. The convertible promissory notes incur interest at 12% per annum for which $28,000 plus accrued interest are due on April 30, 2018 and June 15, 2018. The convertible promissory notes are convertible to shares of the Company's common stock 180 days after issuance. The conversion price per share is equal to 55% of the average of the three (3) lowest trading price of the Company's common stock during the fifteen (15) trading days immediately preceding the applicable conversion date. The Company has the option to prepay the convertible notes in the first 180 days from closing subject to prepayment penalties ranging from 120 of 145% of principal balance plus interest, depending upon the date of prepayment. The convertible promissory notes include various default provisions for which the default interest rate increases to 22% per annum with the outstanding principal and accrued interest increasing by 150%. The Company was required to reserve a total of 133,898,887 common shares in connection with the promissory notes. These convertible promissory notes are convertible into a variable number of shares of common stock for which there is not a floor to the number of common stock we might be required to issue. Based on the requirements of ASC 815 Derivatives and Hedging, the conversion feature represented an embedded derivative that is required to be bifurcated and accounted for as a separate derivative liability. The derivative liability is originally recorded at its estimated fair value and is required to be revalued at each conversion event and reporting period. Changes in the derivative liability fair value are reported in operating results each reporting period. On July 24, 2017 and September 7, 2017, the convertible note issuance dates, the Company valued the conversion feature resulting in initial liability of $133,968. Since the fair value of the derivatives were in excess of the proceeds received of $50,000, a full discount to convertible notes payable and a day one loss on derivative liabilities of $83,968 was recorded. The Company valued the conversion feature using the Black-Scholes option pricing model with the following assumptions: conversion prices ranging from of $0.003 to $0.004, the closing stock price of the Company's common stock on the date of valuation ranging from $0.008 to $0.009, an expected dividend yield of 0%, expected volatility ranging from 299% to 319%, risk-free interest rates ranging from 1.21% to 1.23%, and an expected term of 0.77 years. On September 30, 2017, the derivative liabilities were revalued at $98,683 resulting in a gain of $35,285 related to the change in fair value of the derivative liabilities. The derivative liabilities were revalued using the Black-Scholes option pricing model with the following assumptions: conversion price of $0.004, the closing stock price of the Company's common stock on the date of valuation of $0.008, an expected dividend yield of 0%, expected volatility ranging from 330% to 341%, risk-free interest rate of 1.31%, and an expected term ranging from 0.58 to 0.71 years. The Company amortizes the discounts over the term of the convertible promissory notes using the interest method. During the three and nine months ended September 30, 2017, the Company amortized $9,092 to interest expense. As of September 30, 2017, discounts of $46,908 remained for which will be amortized through June 30, 2018. |
