NOTES PAYABLE

3 Months Ended

Mar. 31, 2017

NOTE 4 – NOTES PAYABLE

Notes payable consist of the following as of March 31, 2017 and December 31, 2016:

	March 31,			December 31,
	2017			2016
Series A notes payable; interest at 8% per annum; principal and accrued interest due at maturity in October 2011 (past due)		50,000			50,000
Notes payable; interest rate at 5% per annum; principal and accrued interest due at maturity on June 30, 2017		99,000			79,000
Notes payable; interest rate at 0% per annum; principal and accrued interest due at maturity on June 30, 2017		125,000			-
Less: Unamortized discount		(109,988	)		(60,931	)
		164,012			68,069
Less: Current portion		164,012			68,069
	$	-		$	-

On January 24, 2017 and January 31, 2017, the Company issued notes payable in the amount of $20,000, in addition to warrants to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $0.40 per share and a term of five years. The notes bear interest at the rate of 5% per annum and are due on June 30, 2017. In accordance with FASB ASC 470-20, “Debt with Conversion and Other Options,” the proceeds of notes payable with detachable stock purchase warrants have been allocated between the two based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance. The portion allocated to the warrants has been accounted for as a discount to the notes payable and amortized over the term of the notes. The warrants were valued at $15,895 fair value, using the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 197.5% to 197.7%, risk free interest rate of 1.94% to 1.90% and expected option life of 5 years. The warrant values were treated as a discount to the value of the note payable in accordance with FASB ASC 835-30-25, Recognition and were accreted over the term of the note payable for financial statement purposes.

On February 13, 2017, the Company issued a note payable in the amount of $100,000 in addition to a warrant to purchase 5,000,000 shares of the Company’s common stock at at an exercise price of $0.40 per share and a term of five years. The notes bear no interest and are due on June 30, 2017. In accordance with FASB ASC 470-20, “Debt with Conversion and Other Options,” the proceeds of notes payable with detachable stock purchase warrants have been allocated between the two based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance. The portion allocated to the warrants has been accounted for as a discount to the notes payable and amortized over the term of the notes. The warrants were valued at $76,390 fair value, using the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 197.4% , risk free interest rate of 1.88% and expected option life of 5 years. The warrant values were treated as a discount to the value of the note payable in accordance with FASB ASC 835-30-25, Recognition and were accreted over the term of the note payable for financial statement purposes.

On March 28, 2017, the Company issued a note payable in the amount of $25,000 in addition to a warrant to purchase 1,250,000 shares of the Company’s common stock at at an exercise price of $0.40 per share and a term of five years. The notes bear no interest and are due on June 30, 2017. In accordance with FASB ASC 470-20, “Debt with Conversion and Other Options,” the proceeds of notes payable with detachable stock purchase warrants have been allocated between the two based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance. The portion allocated to the warrants has been accounted for as a discount to the notes payable and amortized over the term of the notes. The warrants were valued at $21,300 fair value, using the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 202.1% , risk free interest rate of 1.97% and expected option life of 5 years. The warrant values were treated as a discount to the value of the note payable in accordance with FASB ASC 835-30-25, Recognition and were accreted over the term of the note payable for financial statement purposes.

As of March 31, 2017 and December 31, 2016, accrued interest on notes payable was $31,983 and $29,668. Interest expense including accretion of debt discount for the three months ended March 31, 2017 and 2016 was $66,544 and $1,000.