Note 5 - Convertible Promissory Notes Payable | 4. Convertible Notes Payable During the year ended December 31, 2013, the Company issued Convertible Promissory Notes (the Notes ) for cash totaling $977,200. The Notes bear interest at 10% per annum, are unsecured and due in one year from the date of issuance. At the maturity date, the holders of the Notes have the right to convert the unpaid principal and accrued interest into shares of common stock of the Company at a price of $1.00 per share. Accrued interest on the Notes was $32,199 at December 31, 2013. During the year ended December 31, 2014, we sold an additional $210,000 principal amount of one-year notes, bearing an interest rate of 10% per annum and convertible at any time following issuance until maturity into Shares of Common Stock of the Company at a price of $1.00 per Share. During the year ended December 31, 2014, Convertible Promissory Notes became due and convertible at a discount to the then current market price in accordance with terms of the Notes. As a result, the Company recorded a total of $127,400 in debt discount to interest expense related to the beneficial conversion feature during the year ended December 31, 2014. At December 31, 2014, the Company had no unamortized debt discount on Convertible Promissory Notes. In February, 2015, the Company converted an aggregate of $84,200 of principal and $ 6,420 in accrued interest on 10% convertible notes into 90,620 shares of Common Stock. The Company realized a net gain of $5,136 in interest conversion. The balance of the notes matured between January 2015 and March 2015. In June 2015 the company converted an aggregate of $234,000 of note holder debt, $215,000 of principle and accrued interest of $19,000 into 234,000 shares. For the same period the company realized a gain on interest of $12,160. As of September 30, 2015, $360,000 worth of Notes have matured and have not converted into common shares. In the event one or more of the holders should elect to convert the notes, the issuance of shares of our common stock in satisfaction of the notes will be dilutive to our current stockholders. If the notes are not converted, we will be required to satisfy the notes in cash. If Note holders do not elect to convert their debt into common stock, the Company may need to raise additional capital to retire the Notes. We do not have sufficient cash to satisfy the presently due notes, nor the balance of these notes when they become due and there are no assurances we will be able to raise the funds if necessary. Accrued interest on the Notes was $38,097 and $39,643 at September 30, 2015 and September 30, 2014, respectively. During the nine months ended September 30, 2015, the Company received proceeds of $17,500 from the issuance of three promissory bridge notes. The notes bear interest at 15% per annum, are unsecured, and are due six months from the date of issuance. At maturity the notes become convertible at $0.20 subject to certain reset provisions. In addition the notes become convertible upon an equity financing transaction of at least $500,000. At Maturity the note holders will also receive two shares of restricted common stock for every dollar loaned to the company. On July 24, 2015, the Company extended the expiration of its 5,000,000 issued and outstanding Common Stock Purchase Warrants by an additional two years. All of the Warrants are exercisable at a price of $.25 per Share. |