Convertible Notes | Note 7. Convertible notes. The following table summarized the convertible notes as of February 28, 2017: Note # Loan date Maturity Date Convertible Date Interest Loan Principal Original Issue Discount Derivative discount Discount Amortization Net Balance end Feb 2017 1 7/7/2016 7/7/2017 1/7/2017 10 % 29,482 (3,500 ) (30,000 ) 11,176 7,158 2 8/15/2016 8/15/2017 2/15/2017 10 % 33,500 (3,500 ) (30,000 ) 4,044 4,044 3 9/28/2016 9/28/2017 3/28/2017 10 % 73,500 (8,500 ) 3,563 68,563 4 10/20/2016 10/20/2019 4/20/2017 0 % 60,000 (10,000 ) 1,196 51,196 5 10/28/2016 7/28/2017 4/28/2017 10 % 78,780 (8,780 ) 3,956 73,956 6 2/22/2017 11/30/2017 11/1/2017 10 % 58,000 (3,000 ) 64 55,064 333,262 (37,280 ) (60,000 ) 23,999 259,981 These notes become convertible six months after the dates of agreement at variable conversion prices. The Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion features. On July 7, 2016, the Company issued a Convertible Promissory Note. The principal amount of the loan is $33,500 with an original issue discount of $3,500. The note bears interest at a rate of 10% per annum, is unsecured and becomes due and payable with accrued interest on July 7, 2017. Note provider has the option to convert the note plus accrued interest into shares of the Company’s common stock after six months, at a price of 58% (42% discount) of the average of the lowest three trading prices for the previous 20 days prior to the conversion date. On January 7, 2017, the company bifurcated the conversion feature and accounted for it as a derivative liability. The Company recorded the derivative liability at its fair value of $41,473 based on the Black Scholes Merton pricing model, a corresponding debt discount of $30,000 to be amortized utilizing the interest method of accretion over the remaining term of the note and a loss on the issuance of convertible debt of $11,473. On January 20, 2017, the Company converted $4,018 of principal into 93,000 shares of common stock. The fair value of the derivative liability associated with the converted principal is determined to be $4,733, and is re-classed from liability to equity. As of February 28, 2017, the Company fair valued the derivative at $48,943 resulting in a loss on the change in the fair value of $12,203. In addition, total of $11,176 of the debt discount has been amortized to interest expense. As of February 28, 2017 there is $29,482 of principal due on this note. On August 15, 2016, the Company issued a Convertible Promissory Note. The principal amount of the loan is $33,500 with an original issue discount of $3,500. The note bears interest at a rate of 10% per annum, is unsecured and becomes due and payable with accrued interest on August 15, 2017. Note provider has the option to convert the note plus accrued interest into shares of the Company’s common stock after six months, at a price of 58% (42% discount) of the average of the lowest three trading prices for the previous 20 days prior to the conversion date. On February 15, 2017, the company bifurcated the conversion feature and accounted for it as a derivative liability. The Company recorded the derivative liability at its fair value of $45,032 based on the Black Scholes Merton pricing model, a corresponding debt discount of $30,000 to be amortized utilizing the interest method of accretion over the remaining term of the note and a loss on the issuance of convertible debt of $15,032. As of February 28, 2017, the Company fair valued the derivative at $63,518 resulting in a loss on the change in the fair value of $18,486. In addition, total of $4,044 of the debt discount has been amortized to interest expense. As of February 28, 2017 there is $33,500 of principal due on this note. A summary of the activity of the derivative liability for the year ended February 28, 2017 is as follows: Balance at February 29, 2016 $ - Addition of derivative as a debt discount 60,000 Decrease to derivative due to conversions (4,733 ) Derivative loss due to mark to market adjustment 57,194 Balance at February 28, 2017 $ 112,461 A summary of quantitative information about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liabilities that are categorized within Level 3 of the fair value hierarchy for the year ended February 28, 2017 is as follows: Date of valuation February 28, 2017 Inception Volatility (annual) 308% - 315% 247% - 255% Risk-free rate .61% - .69% .61% - .67% Years to maturity .35 - .46 .5 Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 3: Pricing inputs that are generally observable inputs and not corroborated by market data. The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments. The Company’s notes payable approximates the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at February 28, 2017. Fair value measured at February 28, 2017 Fair value at February 28, 2017 Quoted prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Derivative liabilities $ 112,461 $ - $ - $ 112,461 |