Convertible Notes Payable | NOTE 7 – CONVERTIBLE NOTES PAYABLE The following table summarizes the convertible notes as of August 31, 2017: Note # Date Maturity Date Convertible Date Interest Balance May 31, 2017 Additions Conversions Balance August 31, 2017 1 7/7/2016 7/7/2017 1/7/2017 10 % $ 29,482 $ (29,482 ) $ - 2 8/15/2016 8/15/2017 2/15/2017 10 % 33,500 (33,500 ) - 3 9/28/2016 9/28/2017 3/28/2017 10 % 73,500 6,000 (1) (38,060 ) 41,440 4 10/20/2016 10/20/2017 4/18/2017 0 % 60,000 (60,000 ) - 5 10/28/2016 7/28/2017 4/26/2017 10 % 78,750 (39,624 ) 39,126 6 2/22/2017 11/30/2017 6/21/2017 10 % 58,000 (5,200 ) 52,800 7 3/15/2017 3/15/2018 9/11/2017 10 % 37,000 - 37,000 8 3/28/2017 3/28/2018 9/24/17 8 % 45,850 - 45,850 9 4/10/2017 1/15/2018 10/7/2017 10 % 38,000 - 38,000 10 5/16/2017 2/25/2018 11/12/2017 10 % 53,000 - 53,000 11 7/11/2017 demand 1/12/2018 10 % 11,000 - 11,000 12 8/3/2017 8/3/2018 1/30/2017 10 % 28,500 28,500 $ 333,232 219,350 $ (205,866 ) $ 346,716 Less Debt Discount: (73,251 ) (62,772 ) $ 259,981 $ 283,944 (1) $6,000 added to principle for fees related to conversions. These notes become convertible six months after the dates of agreement at a variable conversion price. 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. Convertible note holders have the option to convert the note plus accrued interest into shares of the Company’s common stock after six months, at a certain discount of the average of the lowest trading prices for the previous 20 days prior to the conversion date. The Company determined the embedded conversion feature as a derivative liability, and recorded at fair value as of August 31, 2017. For certain notes a $500 to $1,000 fee for costs associated with converting and clearing stock is added to the amount being converted with an adjustment to the conversion price. A summary of the activity of the derivative liability for the period ended August 31, 2017 is as follows: Balance at February 28, 2017 $ 112,461 Derivative discount 240,000 Increase to derivative due to new issuance 328,601 Decrease in derivative due to conversion of debt (682,422 ) Derivative loss due to mark to market adjustment 261,183 Balance at August 31, 2017 $ 259,823 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 quarter ended August 31, 2017 is as follows: Date of valuation August 31, 2017 Inception Volatility 365% - 417 % 247% - 351 % Risk-free rate .92% - 1.38 % .61% - 1.01 % Years to maturity .25 –.33 .25 - .5 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 August 31, 2017. Fair value measured at August 31, 2017 Fair value at August 31, 2017 Quoted prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Derivative liabilities $ 259,823 $ - $ - $ 259,823 |