| Note 6 - Convertible Note Payable | Convertible notes payable consist of the following
at September 30, 2015 and December 31, 2014, respectively:
September 30, December 31,
2015 2014
On September 21, 2015, the Company received net proceeds of $45,000 in exchange for an 8% interest bearing; unsecured convertible promissory note dated September 3, 2015 with a face value of $48,000 ("First Vis Vires Note"), which matures on June 8, 2016. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to the greater of fifty eight percent (58%) of the average of the three (3) lowest closing bid prices over the 10 days prior to conversion, or a fixed rate of $0.00001 per share. The note includes various prepayment penalties ranging from 112% through 130%, and default provisions of 150% of the then outstanding principal and interest, and an interest rate of 22% thereafter. The debt holder is limited to owning 4.99% of the Company's issued and outstanding shares. The Company must at all times reserve at least 20,250,000 shares of common stock for potential conversions. $ 48,000 $ -
On September 2, 2015, the Company received net proceeds of $50,000 in exchange for a non-interest bearing, unsecured convertible promissory note with a face value of $55,000 ("First JMJ Note"), which matures on September 1, 2016, as part of a larger financing agreement that enables the Company to draw total proceeds of $250,000 at the discretion of the lender. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to the greater of sixty percent (60%) of the lowest trading price of the Company's common stock over the twenty five (25) trading days prior to the conversion request date, or a fixed rate of $0.00005 per share, as amended within the original promissory note on September 8, 2015 (In the case that conversion shares are not deliverable by DWAC an additional 10% discount will apply; and if the shares are ineligible for deposit into the DTC system and only eligible for Xclearing deposit an additional 5% discount shall apply; in the case of both an additional cumulative 15% discount shall apply). The note carries a one-time twelve percent (12%) of principal interest charge in the event of default, and the debt holder is limited to owning 4.99% of the Company's issued and outstanding shares. The promissory note carries a $5,000 Original Issue Discount that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. The Company reserved at least 24 million shares of common stock for potential conversions. 55,000 -
On February 24, 2015, we entered into a Securities
Purchase Agreement with Adar Bays, LLC ("Adar Bays"), pursuant to which we sold to Adar Bays an 8% Convertible
Promissory Note in the original principal amount of $44,100.00 (the "First Adar Note"). The Note has a maturity date
of February 24, 2016, and is convertible after 180 days into our common stock at the higher of (i) $0.001 cents per share
or (ii) 70% of the average of the two (2) lowest closing prices of our common stock for the fifteen (15) trading days prior to
receipt of a conversion notice from Adar Bays. The shares of common stock issuable upon conversion of the Note will be restricted
securities as defined in Rule 144 promulgated under the Securities Act of 1933. The Note can be prepaid by us at a premium as follows: (a) between 1 and 30 days after issuance
115% of the principal amount; (b) between 31 and 60 days after issuance
121% of the principal amount; (c) between 61 and 90 days after issuance
127% of the principal amount; (d) between 91 and 120 days after issuance
133% of the principal amount; (e) between 121 and 150 days after issuance
139% of the principal amount; and (f) between 151 and 180 days after issuance
140% of the principal amount. There is no right to pre-payment after 180
days. The purchase and sale of the Note closed on March 2, 2015, the date that the purchase price was delivered to us. The note
holder elected to convert a total of $7,000 of principal in exchange for 459,242 shares of common stock on September, 2015. 37,100 -
On January 30, 2015, we entered into a Securities
Purchase Agreement with LG Capital Funding, LLC ("LG Capital"), pursuant to which we sold to LG Capital a 8% Convertible
Promissory Note in the original principal amount of $82,687.00 (the " Second LG Note"). The Note has a maturity date
of January 29, 2016, and is convertible after 180 days into our common stock at the higher of (i) $0.001 cents per share
or (ii) 70% of the average of the two (2) lowest closing bid prices of our common stock for the fifteen (15) trading days prior
to receipt of a conversion notice from LG Capital. The shares of common stock issuable upon conversion of the Note will be restricted
securities as defined in Rule 144 promulgated under the Securities Act of 1933. The Note can be prepaid by us at a premium as follows: (a) between 1 and 30 days after issuance
115% of the principal amount; (b) between 31 and 60 days after issuance
121% of the principal amount; (c) between 61 and 90 days after issuance
126% of the principal amount; (d) between 91 and 120 days after issuance
132% of the principal amount; (e) between 121 and 150 days after issuance
138% of the principal amount; and (f) between 151 and 180 days after issuance
140% of the principal amount. There is no right to pre-payment after 180
days. The purchase and sale of the Note closed on January 30, 2015, the date that the purchase price was delivered to
us. The note holder elected to convert a total of $21,619, consisting of $20,687 of principal and $932 of interest, in exchange
for a total of 1,792,248 shares of common stock on various dates between August 4, 2015 and September 18, 2015. 62,000 -
On November 25, 2014, the Company received an unsecured loan from Typenex Co-Investment, LLC ("First Typenex Note") in the amount of $86,500, bearing interest at 10%, maturing on August 25, 2015, in exchange for net proceeds of $75,000 after the deduction of $4,000 of loan origination costs and an original issue discount ("OID") of $7,500. The Company also issued Typenex warrants to purchase 351,455 shares of common stock at a strike price of $0.18 per share over a five year term from the date of investment. The principal and interest is convertible into shares of common stock at the discretion of the note holder at the lesser of (i) $0.18 per share, or (ii) 70% (the "Conversion Factor") multiplied by the Market Price (as defined in the Note). If the Market Price of our common stock falls below $0.10 per share after the issuance of the Note, the Conversion Factor will automatically be reduced by 5% for all conversions completed while the Market Price is below $0.10 per share. Notwithstanding the foregoing, so long as no Event of Default has occurred, the Conversion Price shall be not less than $0.0001 (the "Conversion Floor"). For the avoidance of doubt, upon the occurrence of an Event of Default, the Conversion Floor shall not apply to any future Conversions and shall be of no further force or effect. The note can be prepaid upon notice to Typenex any time prior to the first conversion at a premium of 120% of the then outstanding balance of the Note. The note carries a default interest rate of 22% per annum. The note holder elected to convert a total of $54,000 of principal in exchange for 1,465,518 shares of common stock on various dates between June 3, 2015 and August 25, 2015. 32,500 86,500
Total convertible notes payable 234,600 86,500
Less unamortized debt discounts:
Discount on beneficial conversion feature 99,160 32,137
Original issue discount 6,305 6,511
Discount on warrants - 32,973
Convertible notes payable 129,135 14,879
Less: current portion 129,135 14,879
Convertible notes payable, less current portion $ - $ - The Company recognized interest expense for
the nine months ended September 30, 2015 and 2014, respectively, as follows:
September 30, September 30,
2015 2014
Interest on convertible notes $ 12,194 $ -
Interest on related party loans - 29,455
Amortization of loan origination costs 7,688 -
Amortization of beneficial conversion feature 74,988 -
Amortization of OID 11,243 -
Amortization of warrants 32,973 -
Total interest expense $ 139,086 $ 29,455 In addition, the Company recognized and measured
the embedded beneficial conversion feature present in the convertible debts by allocating a portion of the proceeds equal to the
intrinsic value of the feature to additional paid-in-capital. The intrinsic value of the feature was calculated on the commitment
date using the effective conversion price of the convertible debt. This intrinsic value is limited to the portion of the proceeds
allocated to the convertible debt. The aforementioned accounting treatment resulted
in debt discounts equal to $153,048 and $82,500 during the nine months ended September 30, 2015 and the year ended December 31, 2014,
respectively. The discount, including Original Issue Discounts of $11,037 and $7,500 and Warrant Discounts of $-0- and $37,981
during the nine months ended September 30, 2015 and the year ended December 31, 2014, respectively, is amortized
on a straight line basis from the dates of issuance until the earlier of the stated redemption date of the debts, as noted above
or the actual settlement date. During the nine months ended September 30, 2015 and 2014, the Company recorded debt
amortization expense in the amount of $119,204 and $-0-, respectively, attributed to the aforementioned debt discounts. The convertible notes, consisting of total
original face values of $48,000 from Vis Vires Group, Inc., JMJ Financial $44,100, from Adar Bays, LLC, $82,687 from
LG Capital Funding, LLC, and $86,500 from Typenex Co-Investment, LLC that created the beneficial conversion features
carried a default provision that placed a "maximum share amount" on the note holder that can be owned as a result of
the conversions to common stock by the note holder of 4.99% of the issued and outstanding shares of the Company. Vis Vires Group, Inc. Convertible Note On September 21, 2015, we received
proceeds from a Securities Purchase Agreement we entered into on September 3, 2015 with VIS Vires Group, Inc.,
pursuant to which we sold to VIS Vires an 8% Convertible Promissory Note ("First VIS Vires Note") in the original
principal amount of $48,000. The First VIS Vires Note has a maturity date of June 8, 2016, and is convertible after
180 days into our common stock at the higher of (i) $0.00001 cents per share or (ii) fifty eight percent (58%) of the average of
the three (3) lowest closing bid prices over the 10 days prior to receipt of a conversion notice. The shares of common stock issuable upon conversion
of the First Vis Vires Note are restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933.
The issuance of the First Vis Vires Note was exempt from the registration requirements of the Securities Act of 1933 pursuant
to Rule 506 of Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar
with our operations, and there was no solicitation. The Company evaluated the First Vis Vires
Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price
and, as such, did not constitute a derivative liability. The beneficial conversion feature discount resulting from the conversion
price of $0.00747 below the market price on September 21, 2015 of $0.016 provided a value of $39,448, of which $1,360
and $-0- was amortized during the nine months ended September 30, 2015 and 2014, respectively. JMJ Financial Convertible Note On September 2, 2015, we entered
into a Securities Purchase Agreement with JMJ Financial, pursuant to which we sold to JMJ Financial a 12% Convertible Promissory
Note ("First JMJ Note") in the original principal amount of $55,000. The First JMJ Note has a maturity date of September 1, 2016,
and is convertible after 180 days into our common stock at the higher of (i) $0.00005 cents per share or (ii) sixty percent (60%)
of the lowest trading price of the Company's common stock over the twenty five (25) trading days prior to receipt of a conversion
notice. The shares of common stock issuable upon conversion
of the First JMJ Note are restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The issuance
of the First JMJ Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Rule 506 of
Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar with our operations,
and there was no solicitation. The Company evaluated the First JMJ Note and
determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as
such, did not constitute a derivative liability. The beneficial conversion feature discount resulting from the conversion price
of $0.0194 below the market price on September 2, 2015 of $0.032 provided a value of $50,000, of which $3,836 and $-0-
was amortized during the nine months ended September 30, 2015 and 2014, respectively. Adar Bays, LLC Convertible Note On February 24, 2015, we entered
into a Securities Purchase Agreement with Adar Bays, LLC, pursuant to which we sold to Adar Bays an 8% Convertible
Promissory Note ("First Adar Bays Note") in the original principal amount of $44,100. The First Adar Bays Note
has a maturity date of February 24, 2016, and is convertible after 180 days into our common stock at the higher of (i)
$0.001 cents per share or (ii) 70% of the average of the two (2) lowest closing prices of our common stock for the fifteen (15)
trading days prior to receipt of a conversion notice. The shares of common stock issuable upon conversion
of the First Adar Bays Note are restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933.
The issuance of the First Adar Bays Note was exempt from the registration requirements of the Securities Act of 1933 pursuant
to Rule 506 of Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar
with our operations, and there was no solicitation. The Company evaluated the First Adar Bays
Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price
and, as such, did not constitute a derivative liability. The beneficial conversion feature discount resulting from the conversion
price of $0.0473 below the market price on February 24, 2015 of $0.14 provided a value of $20,420, of which $13,501 and
$-0- was amortized during the nine months ended September 30, 2015 and 2014, respectively. LG Capital Funding, LLC Convertible Note On January 30, 2015, we entered into
a Securities Purchase Agreement with LG Capital Funding, LLC, pursuant to which we sold to LG Capital an 8%
Convertible Promissory Note ("Second LG Capital Note") in the original principal amount of $82,687. The Second LG Capital
Note has a maturity date of January 29, 2016, and is convertible after 180 days into our common stock at the higher of
(i) $0.001 cents per share or (ii) 70% of the average of the two (2) lowest closing prices of our common stock for the fifteen
(15) trading days prior to receipt of a conversion notice. The shares of common stock issuable upon conversion
of the Second LG Capital Note are restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933.
The issuance of the Second LG Capital Note was exempt from the registration requirements of the Securities Act of 1933 pursuant
to Rule 506 of Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar
with our operations, and there was no solicitation. The Company evaluated the Second LG Capital
Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price
and, as such, did not constitute a derivative liability. The beneficial conversion feature discount resulting from the conversion
price of $0.042 below the market price on January 30, 2015 of $0.14 provided a value of $32,143, of which $24,154 and
$-0- was amortized during the nine months ended September 30, 2015 and 2014, respectively. Typenex Co-Investment, LLC Convertible Note On November 25, 2014, we entered into a Securities
Purchase Agreement with Typenex Co-Investment, LLC, pursuant to which we sold to Typenex a 10% Convertible Promissory Note ("First
Typenex Note") in the original principal amount of $86,500. The First Typenex Note has a maturity date of August 25, 2015,
and is convertible into our common stock at the lesser of (i) $0.18 per share, or (ii) 70% (the "Conversion Factor")
multiplied by the Market Price (as defined in the Note). If the Market Price of our common stock falls below $0.10 per share after
the issuance of the Note, the Conversion Factor will automatically be reduced by 5% for all conversions completed while the Market
Price is below $0.10 per share. Notwithstanding the foregoing, so long as no Event of Default has occurred, the Conversion Price
shall be not less than $0.0001 (the "Conversion Floor"). For the avoidance of doubt, upon the occurrence of an Event
of Default, the Conversion Floor shall not apply to any future Conversions and shall be of no further force or effect. The shares of common stock issuable upon conversion
of the First Typenex Note are restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The issuance
of the First Typenex Note is exempt from the registration requirements of the Securities Act of 1933 pursuant to Rule 506
of Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar with our operations,
and there was no solicitation. The Company evaluated the First Typenex Note
and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and,
as such, does not constitute a derivative liability. The beneficial conversion feature discount resulting from the conversion price
of $0.1019 below the market price on November 25, 2014 of $0.225 provided a value of $37,019, of which $32,137 and $-0- was amortized
during the nine months ended September 30, 2015 and 2014, respectively. |
