| Convertible Notes Payable | Some of the
Convertible Notes issued as described below included an anti-dilution provision that allowed for the adjustment of the conversion
price. The Company considered the guidance provided by the FASB in Determining Whether an Instrument Indexed to an Entitys
Own Stock Convertible notes at June 30,
2015 and December 31, 2014 are summarized as follows:
June
30, 2015 December
31, 2014
Convertible Notes Payable Unrelated Party $ 21,200 $ 9,000
Convertible Notes Payable Related Party 165,000 165,000
Discount on notes (6,208 )
Total - Current $ 179,992 $ 174,000 Convertible Notes Payable
Unrelated Party On April
17, 2014, the Company entered into an unsecured Convertible Note (Note 3) in the amount of $9,000. Note 3 was convertible
into Common Shares of the Company at $0.005 per share at the option of the holder. Note 3 bore interest at eight percent per year,
matured on June 17, 2014, and was unsecured. All principal and unpaid accrued interest was due at maturity. As of June 30, 2015,
the Company is in default on Note 3. The balance of the note was $9,000 and $9,000 at June 30, 2015 and December 31, 2014, respectively. On May 6,
2015, the Company entered into a 10% convertible promissory note (Note 4) with an unrelated entity in the amount
of $12,200. Note 4 bore interest at ten percent per year, matured on September 3, 2015, and was unsecured. Note 4 was convertible
into Common Shares of the Company at the conversion ratio of 50% discount to market at the lowest traded price within 20 business
days prior to Notice of Conversion. This gives rise to derivative liability accounting related to this Note since
the conversion ratio is considered floorless. Accordingly,
Note 4 has been evaluated with respect to the terms and conditions of the conversion features contained in Note 4 to determine
whether they represent embedded or freestanding derivative instruments under the provisions of ASC 815. The Company determined
that the conversion features contained in Note 4 for $12,200 carrying value represents a freestanding derivative instrument that
meets the requirements for liability classification under ASC 815. As a result, the fair value of the derivative financial instrument
in the note is reflected in the Companys balance sheet as a liability. The fair value of the derivative financial instrument
of the convertible note was measured using the Black-Scholes valuation model at the inception date of Note 4 and will do so again
on each subsequent balance sheet date. Any changes in the fair value of the derivative financial instruments are recorded as non-operating,
non-cash income or expense at each balance sheet date. The table
below sets forth the assumptions for Black-Scholes valuation model on May 6, 2015 (inception) and June 30, 2015, respectively.
For the period ended June 30, 2015, the Company had initial loss of $10,295 due to derivative liabilities, and decreased the derivative
liability of $22,495 by $1,280, resulting in a derivative liability of $21,215 at June 30, 2015.
Reporting Date Fair Value Term (Years) Assumed Conversion
Price Market Price on Issuance
Date Volatility Percentage Risk-free Rate
5/6/2015 $ 22,495 0.33 $ 0.825 $ 1.69 507% 0.0002
6/30/2015 $ 21,215 0.18 $ 0.375 $ 0.80 513% 0.0001 As of June
30, 2015, the carrying values of Note 4 were $5,992 and the debt discount was $6,208. The Company recorded interest expense related
to Note 4 in amount of $184 during the six months ended June 30, 2015. The accrued interest of Note 4 was $184 as of June 30,
2015.
The Notes
Proceeds $ 12,200
Less derivative liabilities on initial recognition (12,200 )
Value of the Notes on initial recognition 0
Add accumulated accretion expense 5,992
Balance as of June 30, 2015 $ 5,992 Convertible Notes Payable
Related Party On April
21, 2008, the Company entered into an unsecured Convertible Debenture (Debenture 1) with a shareholder in the amount
of $150,000. Debenture 1 was convertible into Common Shares of the Company at $0.03 per share at the option of the holder no earlier
than August 21, 2008. Debenture 1 bore interest at 12% per year, matured in August 2009, and was unsecured. All principal and
unpaid accrued interest was due at maturity. In conjunction with the Debenture 1, the Company also issued warrants to purchase
5,000,000 shares of the Companys Common Stock at $0.03 per share. The warrants expired on April 20, 2013. As a result of
issued warrants, the Company recorded a $150,000 debt discount during 2008 which has been fully amortized. The Company is in default
on Debenture 1, and the warrants have not been exercised. The balance of Debenture 1 was $150,000 and $150,000 at June 30, 2015
and December 31, 2014, respectively. On March
11, 2009, the Company entered into an unsecured Convertible Debenture (Debenture 2) with a shareholder in the amount
of $15,000. Debenture 2 was convertible into Common Shares of the Company at $0.03 per share at the option of the holder. Debenture
2 bore interest at 12% per year, matured on March 11, 2014, and was unsecured. All principal and unpaid accrued interest was due
at maturity. The balance of Debenture 2 was $15,000 and $15,000 at June 30, 2015 and December 31, 2014, respectively. The following
is a schedule showing the future minimum loan payments in the future 5 years.
Year
ending December 31,
2015 $ 186,200
2016 0
2017 0
2018 0
2019 0
Total $ 186,200 |
