Convertible Notes Payable | Note 8. Convertible Notes Payable Convertible notes payable consists of the following as of April 30, 2016 and January 31, 2016: April 30, 2016 January 31, 2016 Convertible note dated April 30, 2015, bearing interest at 10% per annum, maturing on April 30, 2017 and convertible into shares of common stock at $0.02 per share $ — $ 68,206 Convertible note dated July 31, 2015, bearing interest at 10% per annum, maturing on July 31, 2017 and convertible into shares of common stock at $0.01 per share. 73,940 73,940 Convertible note dated October 31, 2015, bearing interest at 10% per annum, maturing on October 31, 2018 and convertible into shares of common stock at $0.50 per share. 260,089 260,089 Convertible note dated January 31, 2016, bearing interest at 10% per annum, maturing on January 31, 2019, and convertible into shares of common stock at $0.52 per share. 82,735 82,735 Convertible note dated March 14, 2016, bearing interest at 8% per annum, maturing March 14, 2017, and convertible into shares of common stock at a 45% discount to the lowest market price over the preceding 20 trading days. 22,991 — Convertible note dated March 14, 2016, bearing interest at 8% per annum, maturing March 14, 2017, and convertible into shares of common stock at a 45% discount to the lowest market price over the preceding 20 trading days. 65,000 — Convertible note dated April 30, 2016, bearing interest at 10% per annum, maturing April 30, 2017, and convertible into shares of common stock at a 60% discount to the volume weighted average share price over the preceding 5 days, subject to a minimum conversion rate of $0.01 per share. 67,986 — Total convertible notes payable $ 572,741 $ 484,970 Less: short-term convertible notes payable (87,991 ) — Less: discount on noncurrent convertible notes payable (461,978 ) (467,420 ) Convertible notes payable, net of discount $ 22,772 $ 17,550 Short-term convertible notes payable 87,991 — Discount on short-term convertible notes payable (81,441 ) — Convertible notes payable, net of discount $ 6,550 $ — During the three months ended April 30, 2016 and 2015, we recorded amortization of discounts on all convertible notes payable and recognized interest expense of $64,354 and $209,906, respectively. Advances Refinanced into Convertible Promissory Notes During the three months ended April 30, 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 Beneficial Conversion Feature April 30, 2015 April 30, 2017 10% $ 0.02 $ 73,654 $ 73,654 During the three months ended April 30, 2016, we have 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 at maturity along with accrued interest. The Convertible Promissory Notes 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, 2016 April 30, 2019 10% 60% discount $ 67,986 Total $ 67,986 We evaluated the application of ASC 470-50-40/55, Debtor’s Accounting for a Modification or Exchange of Debt Instrument We evaluated the terms of the new note in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock Modifications of Convertible Promissory Notes On March 14, 2016, a third party purchased the outstanding principal and accrued interest of our convertible promissory noted dated April 30, 2015. We came to an agreement with the purchaser to change the conditions of the note. Principal and accrued interest on the existing note were refinanced into $68,991 of principal on the new note. The maturity date was changed to March 14, 2017. The interest rate was lowered to 8%, and the conversion rate was change to a 45% discount to the lowest trading price over the preceding 20 days with a floor on the conversion price of $0.00005. We evaluated the terms of the new note in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock We evaluated the terms of the modified note in accordance with ASC Topic No. 470 – 50, Modifications and Extinguishments Convertible Promissory Notes Issued for Cash On March 14, 2016, we issued a convertible promissory note to a third party for cash. The note (the “front-end note”) was in the amount of $65,000, and it matures on March 14, 2017. The note bears interest at 8% per year and is convertible into shares of our common stock at a 45% discount to our lowest trading price over the preceding 20 days with a floor on the conversion price of $0.00005. We evaluated the terms of the note in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock On the same date we issued a second note (the “back-end note”) in the amount of $65,000 in exchange for a note receivable in the same amount. The back-end note matures on March 14, 2017. The note bears interest at 8% per year and is convertible into shares of our common stock at a 45% discount to our lowest trading price over the preceding 20 days with a floor on the conversion price of $0.00005. As of April 30, 2016, we had not yet received the proceeds from this note. The note is secured by the note receivable for $65,000 from the same party. See Note 6. Since we have not received any proceeds from this note, we have not recorded the back-end note and the note receivable on our balance sheet as of April 30, 2016. Conversions to Common Stock During three months ended April 30, 2015, the holders of our convertible notes elected to convert principal and interest into shares of common stock as detailed below: Date Amount Converted Number of Shares Issued February 16, 2015 $ 6,655 133,092 February 16, 2015 77,752 1,555,044 April 30, 2015 184,000 4,600,000 Total $ 268,407 6,288,136 During three months ended April 30, 2016, the holders of our convertible promissory notes converted $47,105 of principal and accrued interest into 170,746 shares of our common stock. See Note 10. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement which provided for conversion. |