4. Convertible Promissory Notes	6 Months Ended
Jun. 30, 2015
Notes
4. Convertible Promissory Notes	4. Convertible promissory notes During the six months ended June 30, 2015, the Company issued $203,500 of its convertible promissory notes for cash. The notes bear interest at the rate of 8% until they mature, or until there is an event of default; thereafter, any portion of the principal or interest which has not been settled will be subject to interest at the rate of 22% per annum. $53,500 of the notes issued during the six months ended June 30, 2015 mature on October 12, 2015, and may be prepaid during the period from issuance to April 9, 2015, in full, at various rates ranging from 125% to 145% of the principal balance plus accrued interest to the date of prepayment. The holder has the option to convert any balance of principal and interest which is unpaid at April 9, 2015 or thereafter, into common stock of the Company. The rate of conversion for these notes is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 49%. $53,500, representing the relative fair value of the beneficial conversion feature of the notes at date of issuance, was allocated to additional paid in capital. $53,500 of the notes of the notes issued during the six months ended June 30, 2015 mature on December 4, 2015, and may be prepaid during the period from issuance to August 28, 2015, in full, at various rates ranging from 125% to 145% of the principal balance plus accrued interest to the date of prepayment. The holder has the option to convert any balance of principal and interest which is unpaid at August 28, 2015 or thereafter, into common stock of the Company. The rate of conversion for these notes is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 49%. $53,500, representing the relative fair value of the beneficial conversion feature of the notes at date of issuance, was allocated to additional paid in capital. $53,500 of the notes of the notes issued during the six months ended June 30, 2015 mature on December 31, 2015, and may be prepaid during the period from issuance to September 23, 2015, in full, at various rates ranging from 125% to 145% of the principal balance plus accrued interest to the date of prepayment. The holder has the option to convert any balance of principal and interest which is unpaid at September 23, 2015 or thereafter, into common stock of the Company. The rate of conversion for these notes is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 49%. $53,500, representing the relative fair value of the beneficial conversion feature of the notes at date of issuance, was allocated to additional paid in capital. $43,000 of the notes of the notes issued during the six months ended June 30, 2015 mature on March 9, 2016, and may be prepaid during the period from issuance to November 30, 2015, in full, at various rates ranging from 125% to 145% of the principal balance plus accrued interest to the date of prepayment. The holder has the option to convert any balance of principal and interest which is unpaid at November 30, 2015 or thereafter, into common stock of the Company. The rate of conversion for these notes is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 49%. $35,584, representing the relative fair value of the beneficial conversion feature of the notes at date of issuance, was allocated to additional paid in capital. During the six months ended June 30, 2015, holders of the convertible promissory notes exercised the conversion feature of the notes, and converted $91,000 of note principal, plus $3,635 of accrued interest thereon, into 4,723,850 shares of the Company’s common stock. The Company exercised the prepayment option of the notes during the six months ended June 30, 2015, and settled in cash $134,000 of the notes plus $65,409 of accrued interest and bonus interest thereon. The convertible promissory notes contain penalty provisions relating to events of default, pursuant to which the Company could be required not only to pay interest at the rate of 22% following such an event, but also to pay immediately 150% of the principal outstanding plus accrued interest and penalty interest; alternatively, the Company could be required, at the discretion of the holder, to issue stock in satisfaction of the value determined under such penalty provisions, at the rate of conversion in effect at such time as the holder so elects. In addition to non-payment of the note principal and interest at maturity or failure to transfer stock on receipt of a notice of conversion from the holder, events of default include making an assignment or appointment of a receiver or trustee, ceasing operations, liquidating assets or entering into bankruptcy proceedings; certain money judgments filed against the Company; breach of covenants, representations or warranties under the note; delisting of the Company’s stock or failure to comply with the exchange act; failure to maintain property or rights which are necessary to the Company’s business; certain restatements of the Company’s financial statements as filed with the SEC during the preceding two years; effectuating a reverse stock split without first providing the holder with 20 days’ notice of such occurrence; replacing the Company’s transfer agent without first providing to the successor transfer agent, the necessary instructions to effect a transfer of stock to the holder pursuant to the terms of the note. The discount to market conversion feature of the convertible promissory notes causes a theoretical possibility that the Company may be required to settle the notes by issuing more shares than are authorized. Furthermore, this feature causes the notes to fall within the FAS 133 definition of a derivative liability. Management has calculated that the maximum number of shares required to convert the principal plus accrued interest on the convertible notes at June 30, 2015 was 16,730,143, which represents less than 5% of the authorized, unissued shares at that date, and has also estimated that the fair value of the notes at June 30, 2015 approximates face value, therefore no adjustment for fair value restatement has been made. The convertible promissory notes are being accreted to their face value over the term of the notes through periodic charges to interest expense, using the effective interest rate method. During the three and six months ended June 30, 2015, accretion of $61,437 (2014: $42,120) and $205,857 (2014: 66,264), respectively, was included in interest and financing costs. Also included in interest and financing costs for the three and six months ended June 30, 2015 is $20,948 (2014: $27,755) and $68,760 (2014: $30,606), respectively, relating to accrued coupon-rate and bonus interest on the convertible promissory notes; and $5,953 (2014: $3,422) and $14,829 (2014: $6,976), respectively, relating to the amortization of deferred finance fees incurred in connection with the placement of the convertible promissory notes. At June 30, 2015, the fair value of the stock issuable to fully convert the convertible promissory note principal was $535,365, which exceeded the principal amount outstanding on that date by $331,865.

4. Convertible Promissory Notes

6 Months Ended

Jun. 30, 2015

4. Convertible promissory notes

During the six months ended June 30, 2015, the Company issued $203,500 of its convertible promissory notes for cash. The notes bear interest at the rate of 8% until they mature, or until there is an event of default; thereafter, any portion of the principal or interest which has not been settled will be subject to interest at the rate of 22% per annum.

$53,500 of the notes issued during the six months ended June 30, 2015 mature on October 12, 2015, and may be prepaid during the period from issuance to April 9, 2015, in full, at various rates ranging from 125% to 145% of the principal balance plus accrued interest to the date of prepayment. The holder has the option to convert any balance of principal and interest which is unpaid at April 9, 2015 or thereafter, into common stock of the Company. The rate of conversion for these notes is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 49%. $53,500, representing the relative fair value of the beneficial conversion feature of the notes at date of issuance, was allocated to additional paid in capital.

$53,500 of the notes of the notes issued during the six months ended June 30, 2015 mature on December 4, 2015, and may be prepaid during the period from issuance to August 28, 2015, in full, at various rates ranging from 125% to 145% of the principal balance plus accrued interest to the date of prepayment. The holder has the option to convert any balance of principal and interest which is unpaid at August 28, 2015 or thereafter, into common stock of the Company. The rate of conversion for these notes is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 49%. $53,500, representing the relative fair value of the beneficial conversion feature of the notes at date of issuance, was allocated to additional paid in capital.

$53,500 of the notes of the notes issued during the six months ended June 30, 2015 mature on December 31, 2015, and may be prepaid during the period from issuance to September 23, 2015, in full, at various rates ranging from 125% to 145% of the principal balance plus accrued interest to the date of prepayment. The holder has the option to convert any balance of principal and interest which is unpaid at September 23, 2015 or thereafter, into common stock of the Company. The rate of conversion for these notes is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 49%. $53,500, representing the relative fair value of the beneficial conversion feature of the notes at date of issuance, was allocated to additional paid in capital.

$43,000 of the notes of the notes issued during the six months ended June 30, 2015 mature on March 9, 2016, and may be prepaid during the period from issuance to November 30, 2015, in full, at various rates ranging from 125% to 145% of the principal balance plus accrued interest to the date of prepayment. The holder has the option to convert any balance of principal and interest which is unpaid at November 30, 2015 or thereafter, into common stock of the Company. The rate of conversion for these notes is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 49%. $35,584, representing the relative fair value of the beneficial conversion feature of the notes at date of issuance, was allocated to additional paid in capital.

During the six months ended June 30, 2015, holders of the convertible promissory notes exercised the conversion feature of the notes, and converted $91,000 of note principal, plus $3,635 of accrued interest thereon, into 4,723,850 shares of the Company’s common stock.

The Company exercised the prepayment option of the notes during the six months ended June 30, 2015, and settled in cash $134,000 of the notes plus $65,409 of accrued interest and bonus interest thereon.

The convertible promissory notes contain penalty provisions relating to events of default, pursuant to which the Company could be required not only to pay interest at the rate of 22% following such an event, but also to pay immediately 150% of the principal outstanding plus accrued interest and penalty interest; alternatively, the Company could be required, at the discretion of the holder, to issue stock in satisfaction of the value determined under such penalty provisions, at the rate of conversion in effect at such time as the holder so elects. In addition to non-payment of the note principal and interest at maturity or failure to transfer stock on receipt of a notice of conversion from the holder, events of default include making an assignment or appointment of a receiver or trustee, ceasing operations, liquidating assets or entering into bankruptcy proceedings; certain money judgments filed against the Company; breach of covenants, representations or warranties under the note; delisting of the Company’s stock or failure to comply with the exchange act; failure to maintain property or rights which are necessary to the Company’s business; certain restatements of the Company’s financial statements as filed with the SEC during the preceding two years; effectuating a reverse stock split without first providing the holder with 20 days’ notice of such occurrence; replacing the Company’s transfer agent without first providing to the successor transfer agent, the necessary instructions to effect a transfer of stock to the holder pursuant to the terms of the note.

The discount to market conversion feature of the convertible promissory notes causes a theoretical possibility that the Company may be required to settle the notes by issuing more shares than are authorized. Furthermore, this feature causes the notes to fall within the FAS 133 definition of a derivative liability. Management has calculated that the maximum number of shares required to convert the principal plus accrued interest on the convertible notes at June 30, 2015 was 16,730,143, which represents less than 5% of the authorized, unissued shares at that date, and has also estimated that the fair value of the notes at June 30, 2015 approximates face value, therefore no adjustment for fair value restatement has been made.

The convertible promissory notes are being accreted to their face value over the term of the notes through periodic charges to interest expense, using the effective interest rate method. During the three and six months ended June 30, 2015, accretion of $61,437 (2014: $42,120) and $205,857 (2014: 66,264), respectively, was included in interest and financing costs.

Also included in interest and financing costs for the three and six months ended June 30, 2015 is $20,948 (2014: $27,755) and $68,760 (2014: $30,606), respectively, relating to accrued coupon-rate and bonus interest on the convertible promissory notes; and $5,953 (2014: $3,422) and $14,829 (2014: $6,976), respectively, relating to the amortization of deferred finance fees incurred in connection with the placement of the convertible promissory notes.

At June 30, 2015, the fair value of the stock issuable to fully convert the convertible promissory note principal was $535,365, which exceeded the principal amount outstanding on that date by $331,865.