5. CONVERTIBLE NOTES PAYABLE | During 2013, the Company received various unsecured convertible loans totaling $215,250 and converted loans payable in the amount of $310,000 to convertible notes payable of which $186,710 were converted to common stock in 2014. These notes have interest rates of 8% and 12% per year and mature on February 6, 2018 and March 1, 2018. During 2013, the Company repaid one convertible note payable in the amount of $42,500. During the first quarter of 2014, the Company received $133,000 of convertible notes payable, one for $75,000 with a discount of $25,000 for a term of three months, and one for $58,000 with an interest rate of 8% per year for a term of eight months. During the first quarter of 2014, the Company repaid loans of $42,500, $59,000 and $32,750 less $9,208 of discount. During the second quarter of 2014, the Company repaid a loan of $42,500. During the third quarter of 2014, the Company received $355,583 of convertible notes payable, one for $55,833 with an interest rate of 12% for a term of two years, one for $78,750 with an interest rate of 8% for a term of one year, one for $68,000 with an interest rate of 8% for a term of nine months, one for $53,000 with an interest rate of 8% for a term of nine months, and two $50,000 notes with interest rates of 12% for terms of six months. During the third quarter of 2014, the Company repaid loans of $58,000 and $75,000. During the fourth quarter of 2014, the Company received $107,000 of convertible notes payable, one for $25,000 with an interest rate of 8% for a term of one year, one for $57,000 with an interest rate of 10% for a term of one year, and one for $25,000 with an interest rate of 12% for a term of six months. During the first quarter of 2015, the Company issued 57,767 shares of common stock pursuant to the conversion of $110,308 of Convertible Notes and interest. During the second quarter of 2015, the Company received $3,350 of a convertible note payable with an interest rate of 10% due on demand and $54,500 of convertible preferred stock notes payable with an interest rate of 12%. During the third quarter of 2015, the Company received $18,500 of convertible notes payable with interest rates of 10% and due on demand. During the third quarter of 2015, the Company issued 145,020 shares of common stock pursuant to the conversion of $ 20,055 of Convertible Notes and interest. The Company is in default on two convertible notes payable dated July 17, 2014 due January 17, 2015 and dated August 25, 2014 due February 25, 2015 for which the note holder has commenced legal proceedings for $100,000 plus accrued interest and attorneys' fees. The convertible notes payable can be converted following a holding period provided in the respective promissory notes. The conversion into shares of Common Stock is based upon either i.) the lowest closing price of our stock during certain number of trading days prior to the conversion date, subject to conversion price discounts that vary from 50% to 60% discount, or ii.) conversion prices ranging from $.00001 to $0.14 per share. In addition, these notes include price protection terms, which would reset the per-share purchase price if the Company were obligated to convert other liabilities at a lower per share purchase price. The convertible Preferred Stock notes payable can be converted following a holding period into shares of Series B Preferred Stock at $2.50 per share. Each share of Series B Preferred Stock can be converted into shares of Common Stock at par value of $.00001 per share. The following is a summary of the unsecured convertible loans: Origination Date Maturity Date Interest Rate Principal September 30, 2015 Current Portion Long-term February 2013 February 2018 8 % $ 125,790 $ - $ 125,790 May 2013 March 2018 12 % 20,000 - 20,000 June 2013 March 2018 12 % 30,000 - 30,000 July 2014 June 2016 12 % 23,873 23,873 - July 2014 July 2015 8 % 77,725 77,725 - July 2014 January 2015 12 % 23,403 23,403 - August 2014 February 2015 12 % 50,000 50,000 - September 2014 June 2015 8 % 53,000 53,000 - October 2014 September 2015 8 % 25,000 25,000 - November 2014 November 2015 10 % 57,000 57,000 - December 2014 June 2016 12 % 25,000 25,000 - April 2015 October 2015 12 % 15,000 15,000 - May 2015 On demand 10 % 3,350 3,350 - May 2015 November 2015 12 % 37,000 37,000 - June 2015 December 2015 12 % 2,500 2,500 - July 2015 On demand 10 % 3,500 3,500 - September 2015 On demand 10 % 15,000 15,000 - Discount notes payable (143,092 ) (50,862 ) (92,230 ) Total $ 444,049 $ 360,489 $ 83,560 In Summary, during the first nine months ended September 30, 2015 and for the year ended December 31, 2014, the Company received $61,350 and $996,973 of notes payable, respectively, including convertible notes payable; the notes received during the first nine months ended September 30, 2015 have maturity terms ranging from on demand to six months and interest rates from 10% to 12%. The Notes contain various conversion rates and prepayment penalties. For the nine months ended September 30, 2015 and the year ended December 31, 2014, the Company has repaid $0 and $430,778 of principal, respectively, and all of the notes have been retired. Interest and amortization of debt discount recognized for the nine month periods ended September 30, 2015 and September 30, 2014 were $421,492 and $730,658 respectively. |