Convertible Notes Payable | Note 6. Convertible Notes Payable Convertible Notes Payable consists of the following as of July 31, 2015 and January 31, 2015: July 31, 2015 January 31, 2015 Convertible note, dated July 31, 2013, bearing interest at 10 July 31, 2015 0.05 $ $ 6,317 Convertible note, dated April 30, 2014, bearing interest at 10 April 30, 2016 0.05 77,076 Convertible note, dated October 31, 2014, bearing interest at 10 October 31, 2016 0.05 223,506 Convertible note, dated January 31, 2015, bearing interest at 10 January 31, 2017 0.02 97,040 97,040 Convertible note, dated April 30, 2015, bearing interest at 10% April 30, 2017 0.02 73,654 Convertible note, dated July 31, 2015, bearing interest at 10 July 31, 2017 0.01 73,940 Total convertible notes payable $ 244,634 $ 403,939 Less: current portion of convertible notes payable (6,317 ) Less: discount on noncurrent convertible notes payable (233,685) (351,646 ) Convertible notes payable, net of discount $ 10,949 $ 45,976 Advances Refinanced into Convertible Promissory Notes During the six months ended July 31, 2015, the Company has signed convertible promissory notes that refinance non-interest bearing advances into convertible notes payable. The convertible promissory notes bear interest at 10% per annum and are payable along with accrued interest. The convertible promissory note and unpaid accrued interest are convertible into common stock at the option of the holder. Date Issued Maturity Date Interest Rate Conversion Rate Amount of Note April 30, 2015 April 30, 2017 10 % $ 0.02 $ 73,654 July 31, 2015 July 31, 2017 10 % $ 0.01 73,940 Total $ 147,594 The Company evaluated the application of ASC 470-50-40/55, Debtor's Accounting for a Modification or Exchange of Debt Instrument as it applies to the note listed above and concluded that the revised terms constituted a debt extinguishment due to the addition of the conversion feature. No gain or loss on the extinguishment was required to be recognized since the carrying amount of the existing debt approximated its fair value. The Company evaluated the terms of the new note in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity's Own Stock and determined that the underlying common stock is indexed to the Company's common stock. The Company determined that the conversion features did not meet the definition of a liability and therefore did not bifurcate the conversion feature and account for it as a separate derivative liability. The Company evaluated the conversion feature for a beneficial conversion feature. The effective conversion price was compared to the market price on the date of the note and was deemed to be less than the market value of underlying common stock at the inception of the note. Therefore, the Company recognized beneficial conversion discounts of $73,654 74,940 265,555 398,403 Conversions to Common Stock During six months ended July 31, 2015, the holders of the convertible note payable dated July 31, 2013 elected to convert principal and accrued interest in the amounts show below into share of common stock at a rate of $0.05 per share. On the conversion date, the unamortized discount related to the principal amount converted was immediately amortized to interest expense. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement that provided for conversion. Amount Converted Number of February 16, 2015 $ 6,655 133,092 Total $ 6,655 133,092 During six months ended July 31, 2015, the holders of the convertible note payable dated April 30, 2014 elected to convert principal and accrued interest in the amounts show below into share of common stock at a rate of $0.05 per share. On the conversion date, the unamortized discount related to the principal amount converted was immediately amortized to interest expense. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement that provided for conversion. Amount Converted Number of February 16, 2015 $ 77,752 1,555,044 Total $ 77,752 1,555,044 During six months ended July 31, 2015, the holders of the convertible note payable dated October 31, 2014 elected to convert principal and accrued interest in the amounts show below into share of common stock at a rate of $0.04 per share. On the conversion date, the unamortized discount related to the principal amount converted was immediately amortized to interest expense. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement that provided for conversion. Amount Converted Number of Shares Issued April 30, 2015 $ 184,000 4,600,000 June 5, 2015 51,089 1,277,211 Total $ 235,089 5,877,211 |