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CONVERTIBLE DEBENTURES - RELATED PARTIES
12 Months Ended
Sep. 30, 2015
Notes to Financial Statements  
NOTE 6 - CONVERTIBLE DEBENTURES - RELATED PARTIES

On January 15, 2015 the Company amended the convertible debenture with the principal of $75,754 of a related party so that the debenture became anti-dilutive with a conversion price set at $0.35 regardless of any forward or reverse splits in the Company's common stock.

 

On February 23, 2015 a shareholder holding a debenture with a principal balance of $75,754 and other advances to the Company of $149,212 of which $24,398 was borrowed during September 30, 2015 and $124,814 was the outstanding balance at September 30, 2014 made demand for payment of the total amounts owed including interest. The Company was not able to pay the outstanding balances. The Company and shareholder came to an agreement that the shareholder could convert his $75,754 convertible note payable and interest at $0.15 and the advances of $149,212 plus further advances up to $150,000 at a 15% discount to the closing price as of date of the agreement or $0.15 per share. The shareholder agreed to advance an additional $50,000 to the Company to acquire assets for the Company. The $50,000 is not convertible and is accounted for as advances due to related party see Note 9.

 

The change is terms of the $75,754 convertible note created derivative liability and required the Company to record fair value at the inception of the derivative and for each subsequent reporting period. The fair value of the embedded derivatives at inception was determined using the Black Scholes based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 281.67%, (3) weighted average risk-free interest rate of 0.025%, (4) expected life of 2.52 year, and (5) estimated fair value of the Company's common stock is $6.00. The initial fair value of the embedded debt derivative was $1,610,091with the fair value calculated as of September 30, 2015 was $4,152,164. As of September 30, 2015 the change in fair value was measured with derivative liability loss of $4,152,164.

 

The addition of a conversion feature for the advances of $149,212 created a beneficial conversion feature as of September 30, 2015 of $149,212. Due to the advances having no terms and being due on demand, this amount was expensed as interest expense.

 

As of September 30, 2015 and 2014 the amount due under the convertible debentures to related party was $224,896 and $75,754 respectively.