Debt | 12 Months Ended |
Dec. 31, 2014 |
Debt Disclosure [Abstract] | |
Debt | Note 4 - Debt |
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(A) Accounts payable – related parties |
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The following table represents the accounts payable to related parties as of December 31, 2014 and December 31, 2013, respectively: |
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| | | 12/31/14 | | | | 12/31/13 | |
Salaries | | | 353,913 | | | | 182,080 | |
Expenses | | | 7,071 | | | | 9,973 | |
| | $ | 360,984 | | | $ | 192,053 | |
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As discussed in note no. 4(C), the Company converted $324,475 of related party accounts payable into a convertible loan during the year ended December 31, 2013. |
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(B) Related Party – short term |
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The Company received loans from related parties. The loans are non-interest bearing, unsecured and due on demand. The following table represents the loans payable activity as of December 31, 2014 and as of December 31, 2013, respectively: |
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Loans payable – related party – December 31, 2013 | | $ | 57,194 | | | | | |
Proceeds from loans | | | 1,401 | | | | | |
Repayments | | | - | | | | | |
Loans payable – related party – December 31, 2014 | | $ | 58,595 | | | | | |
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(C) Related party – long term |
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The Company has accrued salary to the officers and directors of the Company based on the terms of the employment agreements entered into with each officer. As at December 31, 2013, $209,475 was due to the Chief Executive Officer and $115,000 was due to the Chief Financial Officer. During the quarter ended March 31, 2013, the Company converted these amounts to Convertible Loans Payable. These amounts have a term of two years and are repayable on demand and will accrue interest at 10% on the loan period. The agreement also gives an option to the officers of the Company to convert all or part of the debt that the Company maintains with them into restricted shares at $1.20 per share. |
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On November 15, 2014, the board of directors agreed to modify the conversion terms of the loan and extend the term until December 31, 2015. The new conversion terms are as follows: 50% of the average 10 day closing price prior to the conversion. This modification caused the initial notes to be deemed extinguished. The company has accounted for the corresponding debt discount, derivate liability and gain on extinguishment attached to these notes. At December 31, 2014, the Company had incurred $32,537 of interest expense, accrued $56,873 of interest, amortized debt discount for a total of $33,800 and recognized a gain on conversion of $22,486. |
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The principal balance outstanding of the loan payable account (net of unamortized debt discount of $268,189) as at December 31, 2014 is $33,800. |
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(D) Notes payable |
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On October 9, 2013, the Company secured a two month loan for GBP 75,000 (equivalent to $120,420) with the understanding that the Company will issue 10,000 common restricted shares, issued to the lender on December 7, 2013, and also repay 35,000 GBP (equivalent to $56,196) in lieu of interest. As the principal and interest was not paid back to the lender on time, the Company compensated the lender with an additional 20,000 common restricted shares and for this the lender agreed to a five month extension. This stock compensation was issued to the lender also on December 12, 2013. This loan is currently in default. Total accrued interest as at December 31, 2014 is $106,196. |
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Loan granted in 2013 | | $ | 120,420 | | | | | |
Interest accrued in 2013 | | | 56,196 | | | | | |
Balance at December 31, 2013 | | $ | 176,616 | | | | | |
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Interest accrued in 2014 | | | 50,000 | | | | | |
Balance at December 31, 2014 | | $ | 226,616 | | | | | |
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On October 17, 2013, the Company secured a three month bridge loan for 200,000 GBP (equivalent to $319,598) with the agreement to repay the principle plus 5% per month interest on or before January 18, 2014. This loan is currently in default. At December 31, 2014, our Company and the note holder are in dispute regarding the interest that is effectively payable. Also, the noteholder received the 1,600,000 shares (DSI) that were pledged in a private company and is currently trying to sell the shares. The shares pledged formed part of the assets of our company. Total accrued interest as at December 31, 2014 is $429,799. |
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Loan granted in 2013 | | $ | 319,598 | | | | | |
Interest accrued in 2013 | | $ | 39,602 | | | | | |
Balance at December 31, 2013 | | $ | 359,200 | | | | | |
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Accrued interest and expenses in 2014 | | $ | 390,197 | | | | | |
Balance at December 31, 2014 | | $ | 749,397 | | | | | |
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On November 29, 2013, the Company received a loan in the amount of $450,000 from United Kingdom resident and subsequently the Company issued a Convertible Note due on November 25, 2014 (“Convertible Note”). The Convertible Note bears interest at the rate of 10% per annum until maturity. The Convertible Note may be converted into shares of the issuer’s common stock at a conversion price of $.50 per share at the option of the holder of the Convertible Note. If the Convertible Note is not paid in full or converted into common stock of the Company prior to its maturity date, then the Convertible Note will accrue interest at the rate of 4.5% per annum from the maturity date until paid in full. This $450,000 loan was used as a guarantee for a loan amounting to $3,540,000 applied for to a United Kingdom financial institution on December 9, 2013. At December 23, 2014 the loan had still not been approved due to technical reasons solely related to the lender so the Company made the decision to request back the $450,000 cash collateral and subsequently paid back the principal to the note holder plus $5,000 of interest. At December 31, 2014 the Company incurred a total interest expense of $42,971, owed the noteholder $37,971 of accrued interest as the principal had been paid back in full. |
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(E) Convertible notes and derivative liability |
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We have evaluated the terms and conditions of the notes. Because the economic characteristics and risks of the equity linked conversion options are not clearly and closely related to a debt-type host, the conversion features require classification and measurement as derivative financial instruments. The accounting treatment of derivative financial instruments requires that the Company record the initial fair value of the derivative first by allocating the fair value of the embedded derivative as a reduction to the face value of the debt recorded as a contra liability or debt discount to be accreted over the term of the note. On each reporting date, the fair value of the embedded derivative is calculated with changes in value recorded to other expense. |
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| ● | LG Capital LLC: | | | | | | |
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On May 1, 2014 (the “Closing Date”), the Company issued a $100,000 convertible promissory note (the “LG Note”) to LG Capital Funding, LLC, a New York limited liability company (the “Lender”). The LG Note provides up to an aggregate of $100,000 in gross proceeds. The LG Note matures on May 1, 2015, accrues interest of 8% and is convertible into shares of common stock any time 180 days after May 1, 2014, at a conversion price equal to 60% of lowest daily VWAP of the Common Stock as reported on the National Quotations Bureau OTCQB exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future (“Exchange”), for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company. Accrued interest shall be paid in shares of common stock at any time at the discretion of the Lender pursuant to the conversion terms above. The first LG Note may be prepaid within 180 days with penalty. The note may not be prepaid after the 180th day. |
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The principal amount of $50,000 under the second note shall be received by the Company no later than January 1, 2015. All principal under this Note shall be due and payable no later than July 1, 2015. This Full Recourse Note shall bear simple interest at the rate of 8%. This amount was not received and as on December 19, 2014 the noteholder decided not to lend any further amounts. As such the second note and corresponding subscription receivable was cancelled and a gain on debt settlement of $46,673 was recognized. |
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The fair value of the derivative liability as at December 31, 2014, was determined using the Black Scholes option pricing model with a quoted market price of $0.0080, a conversion price of $0.00465, expected volatility of 474.25%, no expected dividends, a remaining term of 4 months and a risk-free interest rate of 0.04% resulting in a fair value per share of $0.0070 multiplied by the 11,327,736 shares that would be issued if the Note was exercised on the Effective Date. |
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As of December 31, 2014 a total interest of $2,677 was accrued and a total of $83,423 debt discount was amortized leaving an unamortized balance of $16,577. The fair value of derivative liability as on December 31, 2014 is recorded at $78,874, thereby recognizing a net loss on derivative liability as at December 31, 2014 of ($25,547). |
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| ● | Adar Bay LLC: | | | | | | |
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On May 1, 2014 (the “Closing Date”), the Company entered into a Securities Purchase Agreement with Adar Bay, LLC (“Adar Bay”) providing for the purchase of a Convertible Redeemable Note (the “AB Note”) in the aggregate principal amount of $100,000. The AB Note provides up to an aggregate principal amount of $100,000.00 (with the first note being in the amount of $50,000.00 and the second note being in the amount of $50,000.00 (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock, $0.001 par value per share, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note. The first of the two notes (the “First Note”) shall be paid for by the Buyer as set forth herein. The second note (the “Second Note”) shall initially be paid for by the issuance of an offsetting $50,000 secured note issued to the Company by the Buyer (“Buyer Note”), provided that prior to conversion of the Second Note, the Buyer must have paid off the Buyer Note in cash such that the Second Note may not be converted until it has been paid for in cash. |
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The first note matures on May 1, 2015, accrues interest of 8% and is convertible into shares of common stock any time 180 days after May 1, 2014, at a conversion price equal to 60% of lowest daily VWAP of the Common Stock as reported on the National Quotations Bureau OTCQB exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future (“Exchange”), for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company. Accrued interest shall be paid in shares of common stock at any time at the discretion of the Lender pursuant to the conversion terms above. The First Note may be prepaid within 180 days with penalty. The First Note may not be prepaid after the 180th day. |
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The principal amount of $50,000 under the second note shall be received by the Company no later than January 1, 2015. All principal under this Note shall be due and payable no later than July 1, 2015. This Full Recourse Note shall bear simple interest at the rate of 8%. This amount was not received and as on December 24, 2014 the noteholder decided not to lend any further amounts. As such the second note and corresponding subscription receivable was cancelled and a gain on debt settlement of $75,601 was recognized. |
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The fair value of the derivative liability as at December 31, 2014, was determined using the Black Scholes option pricing model with a quoted market price of $0.0080, a conversion price of $0.00465, expected volatility of 474.25%, no expected dividends, over remaining term of 4 months and a risk-free interest rate of 0.040% resulting in a fair value per share of $0.0070 multiplied by the 8,403,170 shares that would be issued if the Note was exercised on the Effective Date. |
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During the quarter ended December 31, 2014, after the initial 180 days, the Company repaid $13,000 in principal by the issuance of 518,498 shares of common stock priced between $0.08 to $0.0844 per share. As a result a total of $13,000 of debt discount was amortized and $27,364 was recognized as loss on conversion. |
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As of December 31, 2014 a total interest of $2,518 was accrued and a total of $85,579 debt discount was amortized leaving an unamortized balance of $14,421. The fair value of derivative liability as on December 31, 2014 is recorded at $58,511, thereby recognizing a net loss on derivative liability as at December 31, 2014 of ($38,056). |
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| ● | JMJ Financial | | | | | | |
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On June 12, 2014 (the “Closing Date”), the Company issued a $250,000 convertible promissory note (the “JMJ Note”) to JMJ Financial, a Nevada sole proprietorship (the “Lender”). The JMJ Note provides up to an aggregate of $250,000 in gross proceeds. The JMJ Note matures on June 12, 2016, accrues interest of 12% and is convertible into shares of common stock any time after the agreement was signed. The Conversion Price is the lesser of $.30 or 60% of the lowest trade price in the 25 trading days previous to the conversion. The Note also contemplated a further 10% discount to market if the shares were not deliverable by DWAC. Accrued interest shall be paid in shares of common stock at any time at the discretion of the Lender pursuant to the conversion terms above. This Note may be prepaid interest free within 90 days with the accrued interest at 12% per annum and the OID proportional to $25,000. The note may not be prepaid after the 91th day. The Company opted to receive only $55,000 of the possible $250,000. |
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The fair value of the derivative liability as at December 31, 2014, was determined using the Black Scholes option pricing model with a quoted market price of $0.0080, a conversion price of $0.0045, expected volatility of 328.59%, no expected dividends, over remaining term of 1.45 years and a risk-free interest rate of 0.25% resulting in a fair value per share of $0.0077 multiplied by 14,638,222 shares that would be issued if the Note was exercised on the Effective Date. |
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During the quarter ended December 31, 2014, after the initial 90 days, the Company repaid $7,500 in principal by issuance of 600,000 shares of common stock at $0.0300 per share. As a result a total of $7,500 of debt discount was amortized and $6,078 was recognized as loss on conversion. |
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As of December 31, 2014 a total interest of $13,972, other fees of $4,400 was incurred, an accrued interest of $18,372 was recognized and a total of $20,194 debt discount was amortized leaving an unamortized balance of $34,807. The fair value of derivative liability as on December 31, 2014 is recorded at $112,941, thereby recognizing a net loss on derivative liability as at December 31, 2014 of ($62,363). |
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| ● | Asher Enterprises Inc. | | | | | | |
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On September 9, 2013, the Company secured a nine month convertible loan for $32,500 with an 8% interest rate due on June 11, 2014. The terms of the conversion will be a 42% discount to market based on an average price calculated on the 10 trading days prior to the conversion date. If the Company opts to pay the loan back on or before the 9 month period ends, hence not converting the debt into equity; borrower shall make payment to the holder of an amount in cash (the “Optional Prepayment Amount”) equal to 130% of total amount due inclusive of principal and interest accrued. Between October and December of 2014, the noteholder converted the loan by issuing 1,993,232 common shares of value $433,402 and recognizing a loss of $336,507 on conversion. |
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As of December 31, 2014 a total interest of $2,855 was paid and a total of $53,000 debt discount was amortized leaving an unamortized balance of $0. The fair value of derivative liability as on December 31, 2014 is recorded at $0, thereby recognizing a net gain on derivative liability as at December 31, 2014 of 9,105 |
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| ● | KMB Worldwide Inc. | | | | | | |
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The Company entered into Securities Purchase Agreement (the “Agreement”), dated as of September 25, 2014, with KMB Worldwide Inc. On October 2, 2014, the Company received $32,500 from a secured nine month convertible loan signed on September 29, 2014. The loan carried an 8% interest rate and will be due on June 29, 2015. The terms of the conversion will be a 42% discount to market based on an average price calculated on the 10 trading days prior to the conversion date. If the Company opts to pay the loan back on or before 180 days, hence not converting the debt into equity, borrower shall make payment to the holder of an amount in cash equal to 130% of total amount due inclusive of principal and interest accrued. On March 24, 2015, this note, the 8% per annum accrued interest and 130% premium was fully paid back to the noteholder. |
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The fair value of the derivative liability as at December 31, 2014, was determined using the Black Scholes option pricing model with a quoted market price of $0.0080, a conversion price of $0.0045, expected volatility of 401.89%, no expected dividends, over remaining term of 6 months and a risk-free interest rate of 0.12% resulting in a fair value per share of $0.0071 multiplied by the 7,294,445 shares that would be issued if the Note was exercised on the Effective Date. |
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As of December 31, 2014 a total interest of $657 was accrued and a total of $11,240 debt discount was amortized leaving an unamortized balance of $21,259. The fair value of derivative liability as on December 31, 2014 is recorded at $51,611, thereby recognizing a net loss on derivative liability as at December 31, 2014 of ($19,112). |
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| ● | Peter J. Smith | | | | | | |
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During the quarter ended March 31, 2013, the Company converted $209,475 of unpaid salary to Convertible Loan Payable. This amount will be advanced for a term of two years and is repayable on demand and will accrue interest at 10% on the loan period. The agreement also gave an option to the company´s CEO to convert all or part of the debt that the Company maintains with them into restricted shares at $1.20 per share. |
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On November 15, 2014 the board of directors agreed to modify the conversion terms of the loan and extend the term until December 31, 2015. The new conversion terms are now as follows: 50% of the average 10 day closing price prior to the conversion. This modification caused the initial note to be deemed extinguished. The company has accounted for the corresponding debt discount, derivate liability and gain on extinguishment attached to the note. |
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The fair value of the derivative liability as at December 31, 2014, was determined using the Black Scholes option pricing model with a quoted market price of $0.0080, a conversion price of $0.0063 expected volatility of 368.91%, no expected dividends, over remaining term of 1 year and a risk-free interest rate of 0.25% resulting in a fair value per share of $0.0075 multiplied by the 33,695,784 shares that would be issued if the Note was exercised on the Effective Date. |
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At December 31, 2014, the Company incurred interest expense of $21,037, accrued interest of $36,748 and amortized $21,820 of debt discount for this convertible loan note leaving an unamortized balance of $173,138. The fair value of derivative liability as on December 31, 2014 is recorded at $254,043, thereby recognizing a net loss on derivative liability as at December 31, 2014 of ($59,085). |
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| ● | Enzo Taddei | | | | | | |
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During the quarter ended March 31, 2013, the Company converted $115,000 of unpaid salary to Convertible Loan Payable. This amount will be advanced for a term of two years and is repayable on demand and will accrue interest at 10% on the loan period. The agreement also gave an option to the company´s CFO to convert all or part of the debt that the Company maintains with them into restricted shares at $1.20 per share. |
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On November 15, 2014 the board of directors agreed to modify the conversion terms of the loan and extend the term until December 31, 2015. The new conversion terms are now as follows: 50% of the average 10 day closing price prior to the conversion. This modification caused the initial note to be deemed extinguished. The company has accounted for the corresponding debt discount, derivate liability and gain on extinguishment attached to the note. |
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The fair value of the derivative liability as at December 31, 2014, was determined using the Black Scholes option pricing model with a quoted market price of $0.0080, a conversion price of $0.0063 expected volatility of 368.91%, no expected dividends, over remaining term of 1 year and a risk-free interest rate of 0.25% resulting in a fair value per share of $0.0075 multiplied by the 18,498,700 shares that would be issued if the Note was exercised on the Effective Date. |
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At December 31, 2014, the Company incurred $11,500 in interest expense, accrued interest of $20,125 and amortized $11,979 of debt discount for this convertible loan note leaving an unamortized balance of $95,051. The fair value of derivative liability as on December 31, 2014 is recorded at $139,467, thereby recognizing a net loss on derivative liability as at December 31, 2014 of ($32,437). |
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Convertible notes repaid: |
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On April 23, 2013, the Company secured a nine month convertible loan for $42,500 with an 8% interest rate due on January 29, 2014. The terms of the conversion will be a 42% discount to market based on an average price calculated on the 10 trading days prior to the conversion date. If the Company opts to pay the loan back on or before the 9 month period ends, hence not converting the debt into equity; borrower shall make payment to the holder of an amount in cash (the “Optional Prepayment Amount”) equal to 130% of total amount due inclusive of principal and interest accrued. On October 18, 2013, the Company exercised its option to prepay the loan it secured for $42,500. At December 31, 2014, the company had incurred interest and financing expense of $69,388, accrued $0 of interest and amortized $5,355 of debt discount for this convertible loan note leaving an unamortized balance of $0. |
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On June 4, 2013, the Company secured a twelve month convertible loan for $50,000 with the understanding that the Company will issue 10,000 common restricted shares in lieu of interest, these shares are not issued as of December 31, 2014 and accounted for as Stock Payable. The terms of the conversion will be either a $0.50 conversion price or a 25% discount to market based on an average price calculated on the 10 trading days prior to the conversion date, whichever is the lowest. This loan note was adjusted against and applied against the amount receivable for services rendered by the Company to the note holder on June 4, 2014. These shares will be issued within the month of April 2015. At December 31, 2014, the Company incurred a total of $901 in interest expense, had accrued $0 of interest and amortized $6,945 of debt discount for this convertible loan note leaving an unamortized balance of $0. |