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NOTES PAYABLE, RELATED PARTIES
 12 Months Ended
Dec. 31, 2015
Notes to Financial Statements  
NOTE 7 - NOTES PAYABLE, RELATED PARTIES

As of December 31, 2015 and 2014, notes payable, related parties are as follows:

 

    2015     2014  
Convertible note payable dated July 22, 2010, in default   $ 15,000     $ 15,000  
Note payable dated January 14, 2011, in default     6,000       6,000  
Note payable dated April 14, 2011, in default     25,000       25,000  
Note payable dated April 15, 2011, in default     25,000       25,000  
Note payable dated January 18, 2012, in default     5,000       5,000  
Note payable dated January 20, 2012, in default     5,000       5,000  
Note payable dated May 21, 2012, in default     15,000       15,000  
Note payable dated May 30, 2012, in default     20,000       20,000  
Series A Convertible note, in default     20,000       20,000  
Convertible notes payable, dated July 6, 2012, in default     30,000       30,000  
Convertible note payable, dated July 10, 2012, in default     15,000       15,000  
Note payable, dated September 14, 2012, in default     6,000       6,000  
Convertible note payable, dated September 7, 2012, in default     43,000       43,000  
Convertible note payable, dated October 4, 2012, in default     50,000       50,000  
Convertible note payable, dated September 5, 2013, in default     10,000       10,000  
Convertible note payable, dated September 16, 2013, in default     3,000       3,000  
Note payable dated September 17, 2013, in default     5,221       5,221  
Note payable, dated October 24, 2013     30,000       30,000  
Note payable, dated November 7, 2013     40,000       40,000  
Note payable. dated December 6, 2013     5,000       5,000  
Note payable, dated December 18, 2013     30,000       30,000  
Note payable, dated January 9, 2014     25,000       25,000  
Convertible note payable, dated February 28, 2014, net of unamortized debt discount of $2,064 and $14,833, respectively     197,936       185,167  
Convertible note payable, dated April 24, 2014, net of unamortized debt discount of $775 and $3,235, respectively     24,225       21,765  
Convertible note payable, dated November 7, 2014, net of unamortized debt discount of $1,733 and $3,761, respectively     23,267       21,239  
Convertible notes payable, dated December 4, 2014, net of unamortized debt discount of $1,532 and $3,182, respectively     48,468       46,818  
Note payable, dated January 25, 2015     25,000       -  
Convertible note payable, dated March 3, 2015, net of unamortized debt discount of $2,701     47,299       -  
Convertible note payable, dated May 12, 2015, net of unamortized debt discount of $750     19,250       -  
Note payable, dated June 18, 2015     25,000       -  
Note payable, dated July 13, 2015     12,500       -  
Note payable, dated August 5, 2015     25,000       -  
Note payable, dated August 19, 2015     50,000          
Total     926,166       703,210  
Less current portion     (789,616 )     (298,221 )
Long term portion   $ 136,550     $ 404,989  

 

As described in Note 8 below, On July 22, 2010, investors loaned the Company an aggregate of $260,000 on three-year Series C Convertible Notes with an interest rate of 14%, of which $15,000 was a related party. See Note 8 for full details.

 

On January 14, 2011, a stockholder loaned $6,000 (unsecured) to the Company with a due date of June 30, 2011. The loan had been extended to December 31, 2011. The Company is currently in default. The loan carries interest at the rate of 12% per annum. The lender received a warrant to purchase 60,000 shares of the common stock of the Company at an exercise price of $0.25 per share. The warrant has a five year exercise period. The note was recorded net of a deferred debt discount of $2,220, based on the relative fair value of the warrant. Such discount was amortized over the original term of the note.

 

On April 14, 2011, a stockholder and Board member loaned $25,000 (unsecured) to the Company with a due date of July 31, 2011. The loan had been extended to December 31, 2011. The Company is currently in default. The loan carries interest at the rate of 12% per annum. The lender received a warrant to purchase 250,000 shares of the common stock of the Company at an exercise price of $0.25 per share. The warrant has a five year exercise period. The Company had recorded a deferred debt discount of $8,850 that was amortized over the original term of the debt.

 

On April 15, 2011, a stockholder and Board member loaned $25,000 (unsecured) to the Company with a due date of July 31, 2011. The note had been extended to December 31, 2011. The Company is currently in default. The loan carries interest at the rate of 12% per annum. The lender received a warrant to purchase 250,000 shares of the common stock of the Company at an exercise price of $0.25 per share. The warrant has a five year exercise period. The Company had recorded a deferred debt discount of $8,850 that was amortized over the original term of the debt. 

 

On May 27, 2011, a stockholder and Board member loaned an additional $15,000 (unsecured) (of which $5,000 has been repaid in 2011 and remainder of $10,000 repaid in 2014) to the Company with a due date of September 30, 2011. The note had been extended to December 31, 2011. The loan carries interest at the rate of 12% per annum. The lender received a warrant to purchase 150,000 shares of the common stock of the Company at an exercise price of $0.25 per share. The warrant has a five year exercise period. The Company had recorded a deferred debt discount of $5,610 that was amortized over the original term of the debt. 

 

On January 18, 2012, a stockholder and Board member loaned $5,000 (unsecured) to the Company with a demand due date. The loan carries interest at the rate of 12% per annum. The lender received a warrant to purchase 50,000 shares of the common stock of the Company at an exercise price of $0.25 per share. The warrant has a five year exercise period. The note was recorded net of a deferred debt discount of $2,495, based on the relative fair value of the warrant. Such discount was charged to operations at issuance.

 

On January 20, 2012, a stockholder and Board member loaned $5,000 (unsecured) to the Company with a demand due date. The loan carries interest at the rate of 12% per annum. The lender received a warrant to purchase 50,000 shares of the common stock of the Company at an exercise price of $0.25 per share. The warrant has a five year exercise period. The note was recorded net of a deferred debt discount of $2,435, based on the relative fair value of the warrant. Such discount was charged to operations at issuance date.

 

On May 21, 2012, a stockholder and Board member loaned $18,000 (unsecured) (of which $3,000 has been repaid in 2012) to the Company. The loan was due May 21, 2014 with interest at 12% per annum, and is currently in default.

 

On May 30, 2012, a stockholder and Board member loaned $20,000 (unsecured) to the Company due March 31, 2013 with interest at 12% per annum, and is currently in default.

 

As described in Note 8 below, from June 2009 to March 2010, investors loaned the Company an aggregate of $1,237,459 on three year Series A Convertible Notes with an interest rate of 14%, of which $20,000 was a related party note. See Note 8 for full description.

 

On July 6, 2012, a stockholder and Board member loaned $10,000 (unsecured) to the Company due July 6, 2014 with interest at 12% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The Company did not make payment on the maturity date, therefore the note is currently in default.

 

On July 6, 2012, a stockholder and Board member loaned $20,000 (unsecured) to the Company due July 6, 2014 with interest at 12% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The Company did not make payment on the maturity date, therefore the note is currently in default.

 

On July 10, 2012, a stockholder and Board member loaned $15,000 (unsecured) to the Company due July 10, 2014 with interest at 12% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The Company did not make payment on the maturity date, therefore the note is currently in default.

 

On September 14, 2012, a stockholder and Board member loaned $6,000 (unsecured) to the Company due September 14, 2014 with interest at 12% per annum. The Company did not make payment on the maturity date, therefore the note is currently in default.

 

On September 7, 2012, a stockholder and Board member loaned $43,000 (unsecured) to the Company due September 7, 2014 with interest at 12% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The Company did not make payment on the maturity date, therefore the note is currently in default.

 

On October 4, 2012, a stockholder and Board member loaned $50,000 (unsecured) to the Company due October 4, 2014 with interest at 12% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The Company did not make payment on the maturity date, therefore the note is currently in default.

 

On September 5, 2013, a stockholder and Board member loaned $10,000 (unsecured) to the Company due September 5, 2015 with interest at 10% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The company did not make payment on the maturity date, therefore the note is currently in default.

 

On September 16, 2013, a stockholder and Board member loaned $3,000 (unsecured) to the Company due September 16, 2015 with interest at 12% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The company did not make payment on the maturity date, therefore the note is currently in default.

 

On September 17, 2013, a stockholder and Board member loaned $5,221 (unsecured) to the Company due September 17, 2014 with interest at 12% per annum. The company did not make payment on the maturity date, therefore the note is currently in default.

 

On October 24, 2013, a stockholder and Board member loaned $30,000 (unsecured) to the Company due October 24, 2016 with interest at 10% per annum.

 

On November 7, 2013, a stockholder and board member loaned $40,000 (unsecured) to the Company due November 7, 2017 with interest at 10% per annum.

 

On December 6, 2013, a stockholder and Board member loaned $5,000 (unsecured) to the Company due December 6, 2016 with interest at 12% per annum.

 

On December 18, 2013, a stockholder and Board member loaned $30,000 (unsecured) to the Company due December 18, 2018 with interest at 10% per annum.

 

On January 9, 2014, a stockholder and Board member loaned $25,000 (unsecured) to the Company due January 9, 2016 with interest at 10% per annum.

 

On February 28, 2014, the Company issued a $200,000 secured convertible note that matures on February 28, 2016. The note bears interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible note, the Company issued an aggregate of 2,000,000 warrants to purchase the Company's common stock at $0.15 per share over three years.

 

On April 24, 2014, the Company issued a $25,000 secured convertible note that matures on April 24, 2016. The note bears interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible note, the Company issued an aggregate of 250,000 warrants to purchase the Company's common stock at $0.15 per share over three years.

 

On November 7, 2014, the Company issued a $25,000 secured convertible note that matures on November 7, 2016. The note bears interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible note, the Company issued an aggregate of 250,000 warrants to purchase the Company's common stock at $0.15 per share over three years.

 

On December 4, 2014, the Company issued two $25,000 secured convertible notes that mature on December 4, 2016. The notes bear interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible note, the Company issued an aggregate of 500,000 warrants to purchase the Company's common stock at $0.15 per share over three years.

 

On January 25, 2015, a stockholder and Board member loaned $25,000 (unsecured) to the Company due April 25, 2016 with interest at 10% per annum.

 

On June 18, 2015, a stockholder and Board member loaned $25,000 (unsecured) to the Company due April 21, 2016 with interest at 10% per annum

 

On July 13, 2015, a stockholder and Board member loaned $12,500 (unsecured) to the Company due July 12, 2016 with interest at 12% per annum.

 

On August 5, 2015, a stockholder and Board member loaned $25,000 (unsecured) to the Company due January 1, 2016 with interest at 10% per annum with interest paid monthly for August and September 2015 and principal and interest payable from October through December 2015.

 

On August 19, 2015, a stockholder and Board member loaned $50,000 (unsecured) to the Company due February 19, 2016 with interest at 10% per annum.

 

On March 3, 2015, the Company issued a $50,000 secured convertible note that matures on March 3, 2017. The note bears interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible note, the Company issued an aggregate of 750,000 warrants to purchase the Company's common stock at $0.15 per share over three years.

 

On May 12, 2015, the Company issued a $20,000 secured convertible note that matures on May 12, 2017. The note bears interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible note, the Company issued an aggregate of 300,000 warrants to purchase the Company's common stock at $0.15 per share over three years.

 

In accordance with ASC 470-20, the Company recognized the value attributable to the warrants and the conversion feature in the aggregate amount of $5,713 and $37,830 to additional paid in capital and a discount against the 2014 and 2015 notes, respectively. The Company valued the warrants in accordance with ASC 470-20 using the Black-Scholes pricing model and the following assumptions: contractual terms of 3 years, a risk free interest rate of 0.69% to 1.09%, a dividend yield of 0%, and volatility of 289.98.76% to 317.93%. The debt discount attributed to the value of the warrants and conversion feature issued is amortized over the note's maturity period (two years) as interest expense.

 

For the years ended December 31, 2015 and 2014, the Company amortized $21,169 and $12,819 of debt discount to operations as interest expense.

 

Total unpaid accrued interest on the notes payable to related parties as of December 31, 2015 and 2014 was $233,856 and $143,526, respectively. During the year ended December 31, 2014 and 2013, the Company recorded interest expense of $90,508 and $69,738, respectively, in connection with the notes payable to related parties.

 

Aggregate maturities of long-term debt as of December 31:

 

    Amount  
Year ended December 31, 2016   $ 795,721  
Year ended December 31, 2017     110,000  
Year ended December 31, 2018 and thereafter     30,000  
Total   $ 935,721