CONVERTIBLE NOTES PAYABLE | Note 5. CONVERTIBLE NOTES PAYABLE Note Payable-BS In March 2011, the Company issued $800 aggregate principal amount of 6% convertible notes due in January 2012. Interest on the notes accrue at the rate of 6% per annum and are payable when the notes mature. The notes matured prior to conversion but have not been repaid. Interest continues to accrue at the rate of 6% per annum. The holder of one of the notes converted $110 of note principal into 1,100,000 shares of common stock as follows: Principal Date of Conversion Amount Converted Conversion Shares June 2013 $ 70 $ 0.0001 700,000 August 2013 $ 40 $ 0.0001 400,000 In August 2013, in a private transaction, the same note holder transferred $330 of the remaining note principal plus $55 in accrued interest to a third party. In August 2013, in a private transaction, the new note holder transferred $5 of the remaining note principal to a third party who then converted the note into 50,000 shares of common stock. In September 2013, the new note holder converted $100 of note principal into 1,000,000 shares of common stock. In September 2013, in a private transaction, the new note holder transferred $35 of the remaining note principal to a third party who then converted the note into 350,000 shares of common stock. In November and December 2013, the new note holder converted an additional $90 of note principal into 900,000 shares of common stock as follows: Principal Date of Conversion Amount Converted Conversion Shares November 2013 $ 40 $ 0.0001 400,000 December 2013 $ 50 $ 0.0001 500,000 In March and April 2014, the new note holder converted an additional $90 of note principal into 900,000 shares of common stock as follows: Principal Date of Conversion Amount Converted Conversion Shares March 2014 $ 5 0 $ 0.0001 500,000 April 2014 $ 40 $ 0.0001 400,000 Subsequent to these conversions there remains $125 in note principal outstanding at September 30, 2016. Note Payable-SF In July 2013, the holder of the second note converted $240 of note principal into 400,000 shares of the Company's common stock at $0.0006 per share. At September 30, 2016 and December 31 2015, the note had a remaining principal balance of $60 and $60, respectively. At any time on or after the maturity date, the holders of the notes, have the option of converting any of the unpaid principal and interest into the Company's common stock. The notes plus any accrued but unpaid interest are convertible at the rate of $0.0001 per share at the time of conversion up to a maximum of 9.99% of the then issued and outstanding common stock, or 11,025,605 shares at September 30, 2016 and 3,506,665 shares at December 31, 2015. Note Payable-RK In May 2012, the Company issued a $25,000 6% per annum note that matured in November 2012. In December 2012 the note was amended to be a convertible note. Interest on the note accrues interest at 6% per annum and is payable when the note matures. The holder of the $25,000 note had the option of converting it at any time prior to maturity. The note plus any accrued but unpaid interest were convertible at the rate of $0.001 per share at the time of conversion up to a maximum of 9.99% of the then issued and outstanding common stock. The holder of the note converted $1,010 of note principal into 1,010,000 shares of common stock as follows: Principal Date of Conversion Amount Converted Conversion Shares December 2012 $ 150 $ 0.001 $ 150,000 January 2013 $ 660 $ 0.001 $ 660,000 March 2013 $ 200 $ 0.001 $ 200,000 In July 2013, the Company retired $14,000 of note principal in payment for consulting services provided to the note holder. In July 2013, the note holder converted $300 of note principal into 300,000 shares of the Company's common stock. In July 2013, in a private transaction, the note holder transferred the remaining note principal balance of $9,690 to a third party (See Note Payable-NW Note Payable-NW After receiving the transfer of the principal balance of $9,690 in July 2013 in the private transaction noted in Note Payable-RK In October 2013, the note holder converted $400 of note principal into 400,000 shares of the Company's common stock at $0.001 per share. In October 2014, the note holder converted $1,100 of note principal into 1,100,000 of the Company's common stock.The note holder has the option of converting the balance at any time with the approval of the Board of Directors. The note plus any accrued but unpaid interest are convertible at the rate of $0.001 per share at the time of conversion up to a maximum of 9.99% of the then issued and outstanding common stock, or 11,025,605 shares at September 30, 2016 and 3,506,665 shares at December 31, 2015. In August 2016, the note holder converted $3,000 of note principal into 3,000,000 shares of the Company's common stock. At September 30, 2016 and December 31, 2015, the remaining principal balance on this portion of the note is $715 and $3,715 respectively. Note Payable-MC #1 In August 2013, the note holder/stockholder who received the $4,475 in principal from the aforementioned noteholder, converted $700 of note principal into 700,000 shares of the Company's common stock at $0.001 per share. In October 2013, in a private transaction, this note holder transferred $1,000 of note principal to a third party of which $700 was converted into 700,000 shares in June 2014. The remaining principal balance on this portion of the note at September 30, 2016 and December 31, 2015 is $2,075. The note holder has the option of converting the balance at any time with the approval of the Board of Directors. The note plus any accrued but unpaid interest are convertible at the rate of $0.001 per share at the time of conversion up to a maximum of 9.99% of the then issued and outstanding common stock, or 11,025,605 shares at September 30, 2016 and 3,506,665 shares at December 31, 2015. Note Payable-MC #2 In April 2015, the Company issued a $3,000 8% per annum note that matures in October 2015. The holder of the note has the right to convert the principal into shares of the Company's common stock at any time 180 days after the closing date at $0.0001 per share. Interest on the note accrues interest at 8% per annum and is payable when the note matures. The entire pricipal balnce in the amount of $3,000 remains due on the note at September 30, 2016 and December 31, 2015 Convertible Note Payable-VV to LG (8%) #1 In July 2015, the Company issued a convertible note payable in the principal amount of $59,000. The note matured in March 2016 and bears interest at 8%. Beginning 180 days following the closing date the note holder shall have the right to convert any or all of the outranking principal balance into shares of the Company's common stock at the discounted rate of 55% of the average of the three lowest market trading prices during the 10 days immediately preceding the conversion date. Through a series of conversions during the nine months ended September 30, 2016, the note holder converted all the entire note principal and accrued interest into common stock thereby leaving no principal balance remaining on the note at September 30, 2016. Convertible Note Payable-VV (8%) #2 In August 2015, the Company issued a convertible note payable in the principal amount of $38,000. The note matured in March 2016 and bears interest at 8%. Beginning 180 days following the closing date the note holder shall have the right to convert any or all of the outranking principal balance into shares of the Company's common stock at the discounted rate of 55% of the average of the three lowest market trading prices during the 10 days immediately preceding the conversion date. The entire principal balance in the amount of $38,000 remains due on the note as of September 30, 2016. Convertible Note Payable-LGC (8%) On October 8, 2015, the Company issued a convertible note payable in the principal amount of $31,000 with an Original Issue Discount of $1,500. The note matures on October 8, 2016 and bears interest at 8%. The note holder has the right at any time to convert any part or all of the outstanding unpaid principal balance into shares of the Company's common stock at the discounted rate of 58% of the lowest market trading price during the 20 days prior to and including the conversion date. On September 21, 2016 the note holder converted $6,000 of the principal note into common stock thereby leaving a remaining principal balance of $25,000 due on the note at September 30, 2016. The matured note was not paid off by the Company on October 8, 2016 and the noteholder intends to convert the note balance into common stock. Debenture Payable - (5%) B (Original $100K) In June 2015, the Company issued a convertible note payable in the principal amount of $100,000. The note matures in December 2015 and bears interest at 5%. Beginning 180 days following the closing date the note holder shall have the right to convert any or all of the outranking principal balance into shares of the Company's common stock at the discounted rate of 50% of the average of the three lowest market trading prices during the 3 days immediately preceding the conversion date. The remaining principal balance on the note at June 30, 2016 was $40,000 after a private sale of $60,000 in principal and deemed accrued interest on May 2, 2016 to another investor and the issuance of a replacement note by the Company - see below- Convertible Note Payable-SO-B (8%) (Original $60k) On September 27, 2016 the remaining $40,000 in principal balance and accrued interest on the note was sold in a private transaction to another investor and the Company issued a replacement note in the amount of $50,000. Both of the above noted transactions which took place on May 2, 2016 and September 27, 2016 respectively, resulted in a loss on the extinguishment of the original debt in the amount of $4,733 from deeming accrued interest in excess of actual accruals. This loss is reported in the statement of operations for the quarter and nine months ended September 30, 2016. As a result of the aforementioned transactions and conversions, there is no principal balance remaining on the original $100,000 note as of September 30, 2016. Convertible Note Payable-SO-B (8%) (Original $60k) On May 2, 2016, the Company issued to an Investor a replacement redeemable convertible note in the principal amount of $60,000 ("the Replacement Note"). The Note, which matures on May 2, 2017, pays interest at the rate of 8% per annum. This Replacement Note partially replaces a note originally issued on June 12, 2015 in the principal amount of $100,000 The holder of the note is entitled, at its option beginning on the 6 month anniversary, to convert all or any of the principal face amount of the Note then outstanding into shares of the Company's common stock at the price equal to 55% of the lowest trading price for the twenty prior trading days including the date of conversion. Any unamortized original issue discount and deferred financing costs from the original note was expensed upon replacement. The derivative discount and liability on the original note was appropriately accounted for upon replacement and a new derivative discount and liability for the replacement note appropriately recorded. During the months of May, June, July and September 2016, the holder of the aforementioned $60,000 Replacement Note converted $37,579 in principal to common stock leaving a principal balance payable of $22,421 on the note as of September 30, 2016. Convertible Note Payable-CB (5%) (Original $35k) On October 15, 2015 the Company issued a convertible note payable in the principal amount of $35,000 with an Original Issue Discount of $5,000. The note matures on October 15, 2016 and bears interest at 5%. The note holder has has the right at any time on or after the day that is six months from October 15, 2015 to convert any part or all of the outstanding unpaid principal balance into shares of the Company's common stock at the discounted rate of 55% of the lowest market trading prices during the 20 days prior to the conversion date. During the months of May, June and July 2016, the holder of the above $35,000 Note converted all of the principal to common stock thereby leaving no principal balance payable on the note as of September 30, 2016. Convertible Notes Payable-LGC (8%) On January 7 2016, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited investor (the “Investor”) for the sale of convertible redeemable notes in aggregate principal amount of $251,803. On January 7, 2016, the Company and the Investor conducted the first closing under the Purchase Agreement, pursuant to which the Company issued to the Investor (i) a convertible redeemable note in principal amount of $105,000 containing an original issue discount of $20,000 (the “$105K Note”); and (ii) a convertible redeemable note in principal amount of $50,000 (the “$50K Note” and together with the $105K Note, the “Notes”). Under the Purchase Agreement, on March 15, 2016 and June 15, 2016, the Company and the Investor conducted additional closings for the sale and purchase of additional notes having the same terms as the Notes in principal amounts equal to $50,000 and $46, 803, respectively (see Convertible Notes Payable-LGC (8%) BEN Convertible Notes Payable-LGC (8%) BEN In consideration for the issuance of the $105K Note, on January 13, 2016, the Company received net proceeds (after deducting the original issue discount and legal fees) in the amount of $75,697. In consideration for the issuance of the $50K Note, the Investor issued to the Company a $50,000 fully-collateralized secured promissory note (the “Investor Note”), pursuant to which the Investor agreed to pay the Company $50,000 on or before April 30, 2016. The Notes, which are due on January 7, 2017, bear interest at the rate of 8% per annum. Subject to a beneficial ownership limitation equal to 9.99%, principal and interest on the Notes is convertible into shares of the Company’s common stock (“Common Stock”) at a conversion price equal to 55% of the lowest trading price of Common Stock during the 20 trading day period prior to conversion. In accordance with the terms of the Purchase Agreement, the investor and the Company closed on the two outstanding notes ($50,000 and $46,803) in May and June 2016. The Company received the cash funding. As of September 30, 2016 the entire remaining principal balances of $50,000 and $46,803 respectively are outstanding. Convertible Notes Payable-SO (8%) On May 2, 2016, the Company issued to an Investor a convertible redeemable note in the principal amount of $57,750 ("the Note"). The Note, which matures on May 2, 2017, pays interest at the rate of 8% per annum. The note contains a 10% original issue discount. The holder of the note is entitled, at its option beginning on the 6 month anniversary, to convert all or any of the principal face amount of the Note then outstanding into shares of the Company's common stock at the price equal to 55% of the lowest trading price for the twenty prior trading days including the date of conversion. The entire principal balance in the amount of $57,750 was outstanding on the note at September 30, 2016. The Company’s convertible notes payable and the related derivative liabilities, derivative discount, deferred financing costs and original-issue discount are presented in the financial statements at September 30, 2016 as follows: Remaining Original Deferred Total Convertible Principal Issue Derivative Financing Notes Derivative Debt Amount Discount Discount Costs Payable Liability Note Payable - BS $ 125 - - - $ 125 - Note Payable - SF 60 - - - 60 - Note Payable - MC #1 2,075 - - - 2,075 - Note Payable - NW 715 - - - 715 - Note Payable - MC #2 3,000 - - - 3,000 - Debenture Payable (5%) - B (Original $100K) 40,000 - - (30 ) 39,970 - Convertible Note Payable - LGC (8%) 105,000 - (40,028 ) (5,414 ) 59,558 82,223 Convertible Note Payable - LGC (8%) BEN 50,000 - (27,273 ) - 22,727 70,322 Convertible Note Payable - LGC (8%) BEN 46,803 - (27,689 ) - 19,114 65,114 Convertible Note Payable - LGC (8%) 50,000 - (35,841 ) - 14,159 69,145 Convertible Note Payable - CB (5%) (Original $35k) - - - - - 1,210 Convertible Note Payable - LGC (8%) 25,000 (5,399 ) - - 19,601 19,807 Convertible Notes Payable - VV to LG (8%) #1 - - 1,358 - 1,358 - Convertible Notes Payable - VV (8%) #2 38,000 - - (680 ) 37,320 - Convertible Notes Payable - SO-B (8%) (Original $60k) 22,421 - - - 22,421 56,156 Convertible Notes Payable - SO (8%) 57,750 (3,092 ) - (2,932 ) 51,726 - $ 440,949 $ (8,491 ) $ (129,473 ) $ (9,055 ) $ 293,930 $ 363,977 As of September 30, 2016, the convertible notes payable can be converted into approximately 97,120,990 shares of common stock. |