Convertible Note Payables | Note 8 – CONVERTIBLE NOTE PAYABLES On November 1, 2016, the Company entered into four convertible promissory notes with three unrelated parties. The principle amount is $10,000 for each note and carries interest of 12% annum. All four notes were scheduled to mature on April 30, 2017. The notes may be converted into common stock of the Company at any time by the election of the lender at a conversion price of $0.075 per share. The Company recorded a debt discount of $16,000 for the difference in the conversion price and the fair market value on the date of agreement. The debt discount is being amortized over the term of the notes. On April 30, 2017, the Company extended the term of the four notes by 90 days until July 29, 2017. The remaining debt discount is being amortized over the extended term. During the three and nine months ended September 30, 2017, the Company amortized $0 and $10,667, respectively, of the debt discount. During the three and nine months ended September 30, 2017, the Company recorded $1,200 and $3,600, respectively, of interest expense. The four loans are in default and the Company is currently renegotiating the terms of the loans with the three unrelated parties. On October 26, 2016, the Company entered into a convertible note agreement, with an accredited investor, for $65,000. The note bears interest at 12% per annum and was due and payable on July 26, 2017. The note has financing cost of $9,500 associated with it. This deferred financing fee has been deducted directly from the carrying value of the note, pursuant to ASU 2015-03. The deferred financing fee is being amortized over the term of the convertible note payable. The Company may prepay the note in full together with any accrued and unpaid interest plus any applicable pre-payment premium set forth in the note. Until the Ninetieth (90th) day after the Issuance Date the Company may pay the principal at a cash redemption premium of 135%, in addition to outstanding interest, which can be paid without the Holder’s consent; from the 90th day to the One Hundred and Twentieth (120th) day after the Issuance Date, the Company may pay the principal at a cash redemption premium of 140%, in addition to outstanding interest, which can be paid without the Holder’s consent; from the 12th day to the One Hundred and Eightieth (180th) day after the Issuance Date, the Company may pay the principal at a cash redemption premium of 145%, in addition to outstanding interest, which can be paid without the Holder’s consent. After the 180th day up to the Maturity Date this Note shall have a cash redemption premium of 150% of the then outstanding principal amount of the Note, plus accrued interest and Default Interest if any, which may only be paid by the Company upon Holder’s prior written consent The note is convertible into fully paid and non-assessable shares of common stock, after 180 days from the date of the note, at a conversion price which is lower of: (i) a 50% discount to the lowest trading price during the previous twenty trading days prior to the date of a conversion notice; or (ii) a 50% discount to the lowest trading price during the previous twenty trading days before the date that this note was executed. Since the conversion price of the note is variable, the conversion option has been treated as a derivative liability. The derivative liability on the note was calculated, using the Binomial model, to be $242,450, of which $55,500 was recorded as a debt discount and the balance $186,950 was recorded as an interest expense, at inception. As of December 31, 2016, the derivative liability amounted to $270,025. On April 25, 2017, the Company entered into a note amendment whereby, the maturity of the note was extended to January 26, 2018 and the principal was increased by $7,800 to $72,800. The Company wired $33,118 to the note holder as loan extension fee. The derivative liability was recalculated on September 30, 2017 as $231,504 and the difference in the value was recorded as a change in derivative liability in the income statement. The additional finance fee of $7,800 is being amortized over the remaining term of the note. The remaining debt discount of $18,500, as of the date of amendment, is also being amortized over the remaining term of the note. The Company amortized a debt discount of $6,167 and $34,944, respectively, during the three months and nine months ended September 30, 2017. The Company amortized the finance fee of $3,656 and $10,315, respectively, during the three months and nine months ended September 30, 2017. Interest expense of $2,184 and $6,248 was accrued on the convertible note respectively, during the three months and nine months ended September 30, 2017. Additional interest of $33,118 was paid in cash on April 25, 2017, pursuant to the amended note terms. The variables used for the Binomial model are as listed below: ● Volatility: 286% ● Risk free rate of return: 1.20% ● Expected term: 118 days On January 6, 2017, the Company entered into a convertible note agreement with a third party for $78,750. The Company received $70,000, net of the financing fee of $8,750. This deferred financing fee has been deducted directly from the carrying value of the note, pursuant to ASU 2015-03. The deferred financing fee is being amortized over the term of the convertible note payable. The note was due on October 6, 2017 and carries interest at the rate of 12% per annum. The note is convertible at the lower of ; (i) a 50% discount to the lowest trading price during the previous twenty five trading days prior to the date of a conversion notice; or (ii) a 50% discount to the lowest trading price during the previous twenty five trading days before the date that this note was executed. Since the conversion price of the note is variable, the conversion option has been treated as a derivative liability. The derivative liability on the note was calculated, using the Binomial model, to be $137,118, of which $70,000 was recorded as a debt discount and the balance $67,118 was recorded as an interest expense, at inception. On June 30, 2017, the Company entered into a note amendment agreement to increase the principal balance of the note by $14,100 to $92,850. The Company paid the $14,100 to the holder on July 6, 2017, to delay conversion option until September 5, 2017, pursuant to the amended terms. The derivative liability was recalculated on June 30, 2017 as $96,279 and the difference in the value was recorded as a change in derivative liability in the income statement. On September 27, 2017, the Company entered into a second note amendment agreement to increase the principal balance of the note by $21,100 to $99,850 to extend the conversion option date to November 7, 2017, and the maturity date to February 6, 2018. The Company wired $14,100 on September 27, 2017, to reduce the principal balance of the note to $85,750. The derivative liability was recalculated on September 30, 2017 as $257,250 and the difference in the value was recorded as a change in derivative liability in the income statement. The amendments resulted in an extension of the maturity date to February 6, 2018. The Company amortized a debt discount of $22,994 and $67,865, respectively, during the three months and nine months ended September 30, 2017. The Company amortized the finance fee of $17,359 and $22,968, respectively, during the three months and nine months ended September 30, 2017. Interest expense of $2,799 and $7,330 was accrued on the convertible note during the three months and nine months ended September 30, 2017. The variables used for the Binomial model are as listed below: January 6, 2017 September 30, 2017 ● Volatility: 206% Volatility: 286% ● Risk free rate of return: 1.03% Risk free rate of return: 0.96% ● Expected term: 98 days Expected term: 37 days On April 21, 2017, the Company entered into a convertible note agreement with a third party for $58,000. The Company received $55,000, net of the financing fee of $3,000. This deferred financing fee has been deducted directly from the carrying value of the note, pursuant to ASU 2015-03. The deferred financing fee is being amortized over the term of the convertible note payable. The note is due on January 30, 2018 and carries interest at the rate of 12% per annum. The note is convertible at any time starting after the first 180 days of the note and ending on the later of the maturity date or the date of payment. The note is convertible at 61% of the Market Price. Market price shall mean the average of the lowest two trading prices during the last fifteen trading day period completed on the latest trading day prior to the conversion. Since the conversion price of the note is variable, the conversion option has been treated as a derivative liability. The derivative liability on the note was calculated, using the Binomial model, to be $85,380, of which $55,000 was recorded as a debt discount and the balance $30,380 was recorded as an interest expense, at inception. The derivative liability was recalculated on September 30, 2017 as $114,172 and the difference in the value of $28,792, was recorded as a change in derivative liability in the income statement. The Company amortized a debt discount of $18,010 and $31,567, respectively, during the three and nine months ended September 30, 2017. The Company amortized the finance fee of $972 and $1,711, respectively, during the three and nine months ended September 30, 2017. Interest expense of $1,754 and $3,089, respectively, was accrued on the convertible note during the three and nine months ended September 30, 2017. The variables used for the Binomial model are as listed below: April 21, 2017 September 30, 2017 ● Volatility: 160% Volatility : 286% ● Risk free rate of return: 1.2% Risk free rate of return : 1.2% ● Expected term: 284 days Expected term: 122 days On May 31, 2017, the Company entered into a convertible note agreement with a third party for $28,000. The Company received $25,000, net of the financing fee of $3,000. This deferred financing fee has been deducted directly from the carrying value of the note, pursuant to ASU 2015-03. The deferred financing fee is being amortized over the term of the convertible note payable. The note is due on March 15, 2018 and carries interest at the rate of 12% per annum. The note is convertible at any time starting after the first 180 days of the note and ending on the later of the maturity date or the date of payment. The note is convertible at 61% of the Market Price. Market price shall mean the average of the lowest two trading prices during the last fifteen trading day period completed on the latest trading day prior to the conversion. Since the conversion price of the note is variable, the conversion option has been treated as a derivative liability. The derivative liability on the note was calculated, using the Binomial model, to be $37,967, of which $25,000 was recorded as a debt discount and the balance $12,967 was recorded as an interest expense, at inception. The derivative liability was recalculated on September 30, 2017 as $57,421 and the difference in the value of $19,455, was recorded as a change in derivative liability in the income statement. The Company amortized a debt discount of $7,986 and $10,590, respectively, during the three and nine months ended September 30, 2017. The Company amortized the finance fee of $958 and $1,271, respectively, during the three and nine months ended September 30, 2017. Interest expense of $847 and $1,123, respectively, was accrued on the convertible note during the three and nine months ended September 30, 2017. The variables used for the Binomial model are as listed below: May 31, 2017 September 30, 2017 ● Volatility: 189% Volatility: 286% ● Risk free rate of return: 1.17% Risk free rate of return: 0.96% ● Expected term: 288 days Expected term: 37 days On July 25, 2017, the Company entered into a convertible note agreement with a third party for $28,000. The Company received $25,000, net of the financing fee of $3,000. This deferred financing fee has been deducted directly from the carrying value of the note, pursuant to ASU 2015-03. The deferred financing fee is being amortized over the term of the convertible note payable. The note is due on April 30, 2018 and carries interest at the rate of 12% per annum. The note is convertible at any time starting after the first 180 days of the note and ending on the later of the maturity date or the date of payment. The note is convertible at 51% of the Market Price. Market price shall mean the average of the lowest two trading prices during the last fifteen trading day period completed on the latest trading day prior to the conversion. Since the conversion price of the note is variable, the conversion option has been treated as a derivative liability. The derivative liability on the note was calculated, using the Binomial model, to be $48,934, of which $25,000 was recorded as a debt discount and the balance $23,934 was recorded as an interest expense, at inception. The derivative liability was recalculated on September 30, 2017 as $38,156 and the difference in the value of $10,779, was recorded as a change in derivative liability in the income statement. The Company amortized a debt discount of $6,004, during the three and nine months ended September 30, 2017. The Company amortized the finance fee of $720, during the three and nine months ended September 30, 2017. Interest expense of $617, was accrued on the convertible note during the three and nine months ended September 30, 2017. The variables used for the Binomial model are as listed below: July 25, 2017 September 30, 2017 ● Volatility: 189% Volatility: 286% ● Risk free rate of return: 1.24% Risk free rate of return: 1.20% ● Expected term: 279 days Expected term: 212 days On September 15, 2017, the Company entered into a convertible note agreement with a third party for $25,000. The Company received $22,500, net of the financing fee of $2,500. This deferred financing fee has been deducted directly from the carrying value of the note, pursuant to ASU 2015-03. The deferred financing fee is being amortized over the term of the convertible note payable. The note is due on September 15, 2018 and carries interest at the rate of 10% per annum. The Company also granted a warrant with the convertible note to buy 250,000 shares of common stock of the Company at an exercise price of $0.10 per share. The Company valued the warrants using the black schools option pricing model at $14,700, which was recorded as a debt discount. The note is convertible at any time starting after the first 180 days of the note and ending on the later of the maturity date or the date of payment. The note is convertible at 61% of the Market Price. Market price shall mean the average of the lowest two trading prices during the last fifteen trading day period completed on the latest trading day prior to the conversion. Since the conversion price of the note is variable, the conversion option has been treated as a derivative liability. The derivative liability on the note was calculated, using the Binomial model, to be $113,636, of which $7,800 was recorded as a debt discount and the balance $105,836 was recorded as an interest expense, at inception. The derivative liability was recalculated on September 30, 2017 as $63,182 and the difference in the value of $50,455, was recorded as a change in derivative liability in the income statement. The Company amortized a debt discount of $925 during the three and nine months ended September 30, 2017. The Company amortized the finance fee of $103, during the three and nine months ended September 30, 2017. Interest expense of $103, was accrued on the convertible note during the three and nine months ended September 30, 2017. The variables used for the Binomial model are as listed below: September 15, 2017 September 30, 2017 ● Volatility: 286% Volatility: 286% ● Risk free rate of return: 1.17% Risk free rate of return: 1.20% ● Expected term: 137 days Expected term: 122 days |