CONVERTIBLE NOTES PAYABLE AND LOAN PAYABLE | NOTE 8 – CONVERTIBLE NOTES PAYABLE AND LOAN PAYABLE Convertible notes payable consisted of the following as of April 30, 2015 and July 31, 2014, respectively: Convertible Notes Payable April 30, July 31, 2015 2014 $250,000 face value, issued on September 27, 2013, interest rate of 10%, matures on September 27, 2015. $ 250,000 $ 250,000 $125,000 face value, issued on October 18, 2013, interest rate of 10%, matures on October 18, 2015. 125,000 125,000 $150,000 face value, issued on November 22, 2013, interest rate of 10%, matures on November 22, 2015. 150,000 150,000 $78,500 face value, of which, $78,500 was converted, issued on January 14, 2014, interest rate of 8% and a default rate of 22%, matured on October 14, 2014, net of unamortized discount of $29,759 and $78,500 as of April 30, 2015 and July 31, 2014. - 29,759 $53,000 face value, of which, $53,000 was converted, issued on March 19, 2014, interest rate of 8% and a default rate of 22%, matured on December 26, 2014, net of unamortized discount of $13,913 and $33,000 as of April 30, 2015 and July 31, 2014. - 13,913 $63,000 face value, issued on May 15, 2014, interest rate of 8%, and a default rate of 22%, matured on February 2, 2015, net of unamortized discount of $0 and $47,673 as of April 30, 2015 and July 31, 2014. 63,000 15,327 $73,500 face value, issued on December 2, 2014, interest rate of 8%, matures on December 2, 2015, net of unamortized discount of $43,496 and $0 as of April 30, 2015 and July 31, 2014. 30,004 - $59,000 face value, issued on December 2, 2014, interest rate of 8%, matures on September 2, 2016, net of unamortized discount of $45,264 and $0 as of April 30, 2015 and July 31, 2014. 13,736 - $65,000 face value, issued on December 16, 2014, interest rate of 0%, matures on December 16, 2016, net of unamortized discount of $52,996 and $0 as of April 30, 2015 and July 31, 2014. 12,004 - $33,000 face value, issued on March 17, 2015, interest rate of 8% maturing on December 19, 2015, net of unamortized discount of $27,758 and $0 as of April 30, 2015 and July 31, 2014. 5,242 Total convertible notes payable – non-related parties 648,986 583,999 Current Portion of Notes 637,074 174,500 Discount on Notes 169,514 115,501 Convertible notes payable-current portion net of discount 467,560 58,999 Convertible notes payable, long-term $ 181,426 $ 525,000 On September 27, 2013, the Company issued a convertible note to an unrelated party for $250,000 that matures in September 27, 2015. The note bears an interest rate of 10% per annum with a floor of $.005 per share, and principal is convertible at any time after September 27, 2013 in part or in whole into shares of the Company's common stock using the average closing prices for five trading days directly preceding the conversion date. Interest is not convertible and is due upon conversion or at maturity date. On October 18, 2013, the Company issued a convertible note to an unrelated party for $125,000 that matures in October 18, 2015. The note bears an interest rate of 10% per annum with a floor of $.005 per share, and principal is convertible at any time after October 18, 2013 in part or in whole into shares of the Company's common stock using the average closing prices for five trading days directly preceding the conversion date. Interest is not convertible and is due upon conversion or at the maturity date. On November 22, 2013, the Company issued a convertible note to an unrelated party for $150,000 that matures in November 22, 2015. The note bears an interest rate of 10% per annum with a floor of $.005 per share, and principal is convertible at any time after November 22, 2013 in part or in whole into shares of the Company's common stock using the average closing prices for five trading days directly preceding the conversion date. Interest is not convertible and is due upon conversion or at the maturity date. On January 14, 2014, the Company entered into a convertible promissory note with Asher Enterprises, Inc. ("Asher") a Delaware corporation for an 8% convertible promissory note with an aggregate principal amount of $78,500 which together with any unpaid accrued interest is due on October 17, 2014. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder's option 180 days from inception at a variable conversion price calculated as 58% of the Market Price, which means the average of the lowest three Trading Prices (defined as the closing bid prices) during the ten trading day period ending on the last complete trading day prior to the conversion date with a floor of $.00005 as stated in the conversion feature. In January 2014, the Company received cash in the amount of $58,600, with the remaining $19,900 being used for legal and accounting fees. The Company analyzed the note on the issuance date on January 14, 2014. The Company determined that the variable conversion price and the floor exceeding the authorized number of shares results in the need for bifurcation into a separate derivative liability valued at fair market value. On January 14, 2014, the Company estimated the fair market value of the derivative liability associated with the bifurcated conversion feature to be $87,968 and a discount on the note of $78,500. On September 24, 2014, Asher converted $15,000 of principal related to the January 14, 2014, convertible note into 583,658 shares of the Company's common stock at $0.0257 per share. On October 2, 2014, Asher converted an additional $15,000 of principal related to the January 14, 2014, convertible note into 810,811 shares of the Company's common stock at $0.0185 per share. On October 9, 2014, Asher converted an additional $12,000 of principal related to the January 14, 2014, convertible note, into 869,565 shares of the Company's common stock at $0.0138 per share. The remaining principal balance due after the conversions was $36,500. On March 19, 2014, the Company entered into a convertible promissory note with KBM Worldwide, Inc. ("KBM") a New York corporation for an 8% convertible promissory note with an aggregate principal amount of $53,000 which together with any unpaid accrued interest is due on December 26, 2014. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder's option 180 days from inception at a variable conversion price calculated as 58% of the Market Price, which means the average of the lowest three Trading Prices (defined as the closing bid prices) during the three trading day period ending on the last complete trading day prior to the conversion date with a floor of $.00005 as stated in the conversion feature. In March 2014, the Company received cash in the amount of $24,487, with the remaining $6,898 being used for legal and accounting fees. The Company analyzed the note on the issuance date on January 14, 2014. The Company determined that the variable conversion price and the floor exceeding the authorized number of shares results in the need for bifurcation into a separate derivative liability valued at fair market value. On March 19, 2014, the Company estimated the fair market value of the derivative liability associated with the bifurcated conversion feature to be $47,806 and a discount on the note of $49,010. On May 15, 2014, the Company entered into a convertible promissory note with KBM Worldwide, Inc. ("KBM") a New York corporation for an 8% convertible promissory note with an aggregate principal amount of $63,000 which together with any unpaid accrued interest is due on February 2, 2015. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder's option 180 days from inception at a variable conversion price calculated as 58% of the Market Price, which means the average of the lowest three Trading Prices (defined as the closing bid prices) during the three trading day period ending on the last complete trading day prior to the conversion date with a floor of $.00005 as stated in the conversion feature. In May 2014, the Company received cash in the amount of $42,500, with the remaining $17,500 being used for legal fees. The Company analyzed the note on the issuance date on January 14, 2014. The Company determined that the variable conversion price and the floor exceeding the authorized number of shares results in the need for bifurcation into a separate derivative liability valued at fair market value. On May 15, 2014, the Company estimated the fair market value of the derivative liability associated with the bifurcated conversion feature to be $56,591 and a discount on the note of $56,591. On November 14, 2014, Asher converted an additional $15,000 of principal related to the January 14, 2014, convertible note, into 931,677 shares of the Company's common stock at $0.0161 per share. The remaining principal balance due after the conversion was $21,500. On December 8, 2014, Asher converted an additional $12,500 of principal related to the January 14, 2014, convertible note, into 1,041,667 shares of the Company's common stock at $0.012 per share. The remaining principal balance due after the conversion was $9,000. On December 2, 2014, the Company entered into a collateralized secured convertible promissory note with LG Capital Funding, LLC ("LG"), a New York limited liability company, for an 8% convertible promissory note with an aggregate principal amount of $73,500, which together with any unpaid accrued interest is due on December 2, 2015. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder's option 180 days from inception at a variable conversion price calculated as 58% of the average of the lowest three closing bid prices during the ten trading day period ending on the conversion date. This note was funded on December 10, 2014, when the Company received cash in the amount of $70,000, with the remaining $3,500 being used for LG's legal and other origination expenses. On December 2, 2014, the Company also entered into a second $73,500 convertible promissory note with LG on the same terms as the first note and due on December 2, 2015, which has not yet been funded. This note is collateralized by a secured promissory note issued by LG to the Company for $73,500, due on August 2, 2015, and accruing interest at the rate of 8% per annum. This note was canceled along with the derivative liability on June 3, 2015 due to the fact that the Company had not maintained a stock price in excess of .002 at all times. On December 2, 2014, the Company entered into a collateralized secured convertible promissory note with Typenex Co-Investment, LLC ("Typenex"), a Utah limited liability company, for an 10% convertible promissory note with an aggregate principal amount of $224,000, of which the company is to assume $20,000 in original interest discount ("OID") and legal fees and other expenses of Typenex totaling $4,000, which together with any unpaid accrued interest is due on September 10, 2016. The note is to be issued in tranches with an initial tranche of $59,000, of which the company received $50,000 on December 10, 2014, with the remaining $4,000 being used for legal and other expenses of Typenex and the Company assuming $5,000 in OID. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at a variable conversion price calculated as 58% of the average of the lowest three closing bid prices during the ten trading day period ending on the last complete trading day prior to the conversion date. The remaining three tranches of $55,000 of funding to the Company under the note will consist of $50,000 in principal and the $5,000 in OID, which have not yet been funded, and shall correspond to three $50,000 promissory notes issued by Typenex in favor of the Company, accruing interest at 8% per annum and maturing on September 2, 2016. In conjunction with the Company's convertible note issued to Typenex and Typenex's three promissory notes issued to the Company for the three additional tranches of funding to the Company, the Company issued four warrants for a total number of shares equal to $112,000 ($29,500 for the first warrant corresponding to funding on December 10, 2014, and $27,500 for the other three warrants corresponding to the future tranches of funding by Typenex to the Company) divided by the conversion market price in the Typenex convertible note. The warrants have an exercise price of $0.06, subject to adjustment, and expire on December 2, 2019. Each of the warrants are only exerciseable after the corresponding tranche of funding by Typenex to the company has been paid. Therefore, the first warrant is currently exerciseable, but the other three warrants are not. On December 10, 2014, the Company estimated the fair market value of the derivative liability associated with the bifurcated conversion feature to be $84,512 and a discount on the note of $59,000. On December 2, 2014, the Company entered into a convertible promissory note with JMJ Financial, a Nevada sole proprietorship ("JMJ"), with a face amount of $350,000, of which the company is to assume $35,000 in original interest discount ("OID"), which together with any unpaid accrued interest is due on Dec 2, 2016. The note is to be funded by JMJ at its discretion, and the initial tranche was funded on December 16, 2014, when the Company received cash in the amount of $55,000. The note balance funded (plus a pro rata portion of the OID) together with any unpaid accrued interest is convertible into shares of common stock at a variable conversion price calculated as 65% of the average of the lowest trade price during a 25-day period ending on the last complete trading day prior to the conversion date. On December 16, 2014, the Company estimated the fair market value of the derivative liability associated with the bifurcated conversion feature to be $71,321 and a discount on the note of $65,000. On December 23, 2014, Asher converted an additional $12,500 of principal related to the January 14, 2014, convertible note, into 1,686,111 shares of the Company's common stock at $0.0072 per share. The remaining principal balance due after the conversion was $0. On , KBM converted $5,000 of principal related to the March 19, 2014, convertible note, into shares of the Company's common stock at $0.0056 per share. The remaining principal balance due after the conversion was $48,000. On January 26, 2015, KBM converted $15,000 of principal related to the March 19, 2014, convertible note, into shares of the Company's common stock at $0.0058 per share. The remaining principal balance due after the conversion was $33,000. On , KBM converted $11,455 of principal related to the March 19, 2014, convertible note, into shares of the Company's common stock at $0.0041 per share. The remaining principal balance due after the conversion was $21,545. On , KBM converted $9,055 of principal related to the March 19, 2014, convertible note, into shares of the Company's common stock at $0.0038 per share. The remaining principal balance due after the conversion was $12,490. On , KBM converted $12,490 of principal and $2,120 related to the March 19, 2014, convertible note, into shares of the Company's common stock at $0.0056 per share. The remaining principal balance due after the conversion was $0. On March 17, 2015, the Company entered into a convertible promissory note with for an 8% convertible promissory note with an aggregate principal amount of $33,000 which together with any unpaid accrued interest is due on December 19, 2015. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder's option 180 days from inception at a variable conversion price calculated as 58% of the Market Price, which means the average of the lowest three Trading Prices (defined as the closing bid prices) during the three trading day period ending on the last complete trading day prior to the conversion date with a floor of $.00005 as stated in the conversion feature. On April 1, 2015 the Company received cash in the amount of $20,000, with the remaining $13,000 being used for legal fees. The Company analyzed the note on the issuance date on March 17, 2015. The Company determined that the variable conversion price and the floor exceeding the authorized number of shares results in the need for bifurcation into a separate derivative liability valued at fair market value. On April 30, 2015 the Company estimated the fair market value of the derivative liability associated with the bifurcated conversion feature to be $35,444 and a discount on the note of $33,000. As of April 30, 2015 and July 31, 2014, the Company estimated the fair market value of the derivative liability to be $188,391 and $177,907, with a change in fair value of $49,878 respectively. For the nine months ended April 30, 2015 and 2014, the Company recorded $156,939 and $13,643 in amortization related to the discount on the note to interest expense and $9,602 and $0 in interest related to the nine conversions. See note 12. |