DEBT

12 Months Ended

Dec. 31, 2015

Notes to Financial Statements

NOTE 5 - DEBT

Convertible Notes Payable – Related Party

Convertible notes payable, related party consisted of the following at December 31:

	2015		2014
Convertible note payable to the Holland Family Trust, maturing on September 30, 2016, with interest at 10%	$	222,572	$	222,572
Convertible note payable to Craig Holland, maturing on September 30, 2016, with interest at 10%		813,602		813,602
Convertible note payable to Craig Holland, maturing on December 31, 2016, with interest at 10%		186,450		186,450
Convertible note payable to Mick Donahoo, maturing on December 31, 2016, with interest at 10%		186,450		186,450
Convertible note payable to Craig Holland, maturing on December 31, 2016, with interest at 10%		6,925		11,532
Convertible note payable to Mick Donahoo, maturing on December 31, 2016, with interest at 10%		31,042		35,648
Total	$	1,447,041	$	1,456,254

The "Holland Family Trust Convertible Note" is convertible into Company common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The "Variable Conversion Price" shall mean 50% multiplied by the Market Price (representing a discount rate of 50%). "Market Price" means the average of the three lowest trading prices for the Company's common stock during the twenty-five (25) trading-day period ending on the latest complete trading day prior to the date of conversion. "Fixed Conversion Price" shall mean $0.00005.

The Company evaluated the Holland Family Trust Convertible Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The note payable is convertible into common stock at the discretion of the Holland Family Trust. Furthermore, at any time, the Company may pay the balance of the unconverted note payable in cash.

As of September 30, 2014, $72,107 of accrued interest was added to the note principal and $813,602 of the note was transferred to Craig Holland. A new convertible note for $222,572 was issued to the Holland Family Trust with the same terms as the previous note, with the exception of the maturity date, which was extended to September 30, 2016. As of December 31, 2015 and 2014, accrued interest related to the Holland Family Trust Convertible Note was $27,867 and $5,610, respectively.

On September 30, 2014, $813,602 principal balance (including interest) of the Holland Family Trust Convertible Note was transferred to Craig Holland (the "Holland Transferred Convertible Note"). The Holland Transferred Convertible Note retains the same terms as the original Holland Family Trust Convertible Note with the exception of the maturity date, which was extended to December 31, 2016. As of December 31, 2015 and 2014, accrued interest related to the Holland Transferred Convertible Note was $101,867 and $20,507, respectively.

On December 31, 2013, the Company converted $186,450 of accrued salaries due to Craig Holland into a convertible note (the "Holland Accrued Salary Note") and converted $186,450 of accrued salaries due to Mick Donahoo into a convertible note (the "Donahoo Accrued Salary Note"). The Holland Accrued Salary Note and the Donahoo Accrued Salary Note are convertible into Company common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The "Variable Conversion Price" shall mean 50% multiplied by the Market Price (representing a discount rate of 50%). "Market Price" means the average of the three lowest trading prices for the Company's common stock during the twenty-five (25) trading-day period ending on the latest complete trading day prior to the Conversion Date. "Fixed Conversion Price" shall mean $0.00005.

The Company evaluated the Holland Accrued Salary Note and the Donahoo Accrued Salary Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, the conversion feature does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. As of December 31, 2015 and December 31, 2014, there was accrued interest related to each of these notes of $37,290 and $18,645, respectively.

On December 31, 2013, the Company converted a note payable to Mick Donahoo of $55,250 and accrued interest of $15,399 into a new convertible related party note in the amount of $70,649 (the "Mick Donahoo Convertible Note").

On December 31, 2013, the Company converted a note payable to Craig Holland of $35,100 and accrued interest of $11,432 into a new convertible related party note in the amount of $46,532 (the "Craig Holland Convertible Note").

The Mick Donahoo Convertible Note and the Craig Holland Convertible Note are convertible into Company common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The "Variable Conversion Price" shall mean 50% multiplied by the Market Price (representing a discount rate of 50%). "Market Price" means the average of the three lowest trading prices for the Company's common stock during the twenty-five (25) trading-day period ending on the latest complete trading day prior to the Conversion Date. "Fixed Conversion Price" shall mean $0.00005.

The Company evaluated the Mick Donahoo Convertible Note and the Craig Holland Convertible Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The agreements modified the debt to make it convertible into common stock of the Company. As of December 31, 2015 and December 31, 2014, there was accrued interest payable related to these notes totaling of $5,146 and $4,699, respectively.

On October 23, 2014, Craig Holland converted $35,000 principal and $2,836 accrued interest into 39,829,849 shares of the Company's common stock.

On October 23, 2014, Mick Donahoo converted $35,000 principal and $2,836 accrued interest into 39,829,849 shares of the Company's common stock.

On October 8, 2015, Craig Holland converted $4,607 principal and $2,028 accrued interest into 12,637,860 shares of the Company's common stock.

On October 8, 2015, Mick Donahoo converted $4,607 principal and $2,028 accrued interest into 12,637,860 shares of the Company's common stock.

Effective October 15, 2015, we entered into an Amendment to Convertible Promissory Note with each of Craig Holland and Mick Donahoo with respect to the Craig Holland Convertible Note and the Mick Donahoo Convertible Note. The parties agreed to modify the terms of the notes such that in the event the lender issues a valid conversion notice and the conversion notice results in a conversion price less than the then-par value of the Company's common stock, the conversion will be effected at par value with additional principal amounts added to the note equal to the value of the common shares that were not able to be issued due to the conversion price being less than the par value of the Company's common stock. As the amendment did not alter the shares received by converting the notes, no additional value was recorded by the Company as a result of these amendments.

Total accrued interest payable for the related party convertible notes was $209,461 and $68,106 as of December 31, 2015 and December 31, 2014, respectively.

Convertible Notes Payable – Non-Related Party

Convertible notes payable – non-related party consisted of the following at December 31:

	2015			2014
Convertible note payable to Robert Cowdell, maturing on December 31, 2016, with interest at 10%	$	61,443		$	61,443
Convertible note payable to an accredited investor, with interest at 10%		-			45,300
Convertible note payable to an accredited investor, maturing on September 30, 2016, with interest at 10%		31,126			50,000
Convertible note payable to an accredited investor, maturing on September 30, 2016, with interest at 10%		50,000			50,000
Convertible note payable to an accredited investor, maturing on September 30, 2016, with interest at 10%		50,000			50,000
Convertible note payable to an accredited investor, maturing on September 30, 2016, with interest at 10%		50,000			50,000
Convertible note payable to an accredited investor, maturing on September 30, 2016, with interest at 10%		50,000			50,000
Convertible note payable to an accredited investor, maturing on June 25, 2017, with interest at 10%		50,000			50,000
Convertible note payable to an accredited investor, maturing on June 25, 2017, with interest at 10%		50,000			50,000
Convertible note payable to an accredited investor, maturing on June 25, 2017, with interest at 10%		50,000			50,000
Convertible note payable to an accredited investor, maturing on June 25, 2017, with interest at 10%		50,000			50,000
Convertible note payable to an accredited investor, maturing on June 25, 2017, with interest at 10%		50,000			50,000
Convertible note payable to an accredited investor, maturing on June 25, 2017, with interest at 10%		100,000			100,000
Convertible note payable to an accredited investor, maturing on June 25, 2017, with interest at 10%		50,000			50,000
Convertible note payable to an accredited investor, maturing on June 25, 2017, with interest at 10%		70,000		-
Convertible note payable to an accredited investor, maturing on June 25, 2017, with interest at 10%		30,000		-
Convertible note payable to an accredited investor, maturing on November 11, 2016, with interest at 10%		30,000		-
Convertible note payable to an accredited investor, maturing on November 11, 2016, with interest at 10%		40,000		-
Convertible note payable to an accredited investor, maturing on November 11, 2016, with interest at 10%		110,000		-
Convertible note payable to an accredited investor, maturing on November 11, 2016, with interest at 10%		88,000		-
Convertible note payable to an accredited investor, maturing on November 11, 2016, with interest at 10%		90,000		-
Convertible note payable to an accredited investor, maturing on November 11, 2016, with interest at 10%		90,000		-
Convertible note payable to an accredited investor, maturing on April 28, 2017, with interest at 10%		65,000		-
Convertible note payable to an accredited investor, maturing on April 28, 2017, with interest at 10%		65,000		-
Convertible note payable to an accredited investor, maturing on April 28, 2017, with interest at 10%		60,000		-
Convertible note payable to an accredited investor, maturing on April 28, 2017, with interest at 10%		50,000		-
Convertible note payable to an accredited investor, maturing on April 28, 2017, with interest at 10%		50,000		-
Convertible note payable to an accredited investor, maturing on April 28, 2017, with interest at 10%		50,000		-
Total		1,585,569			756,743
Less discount	(180,208		)	(343,902		)
Net convertible notes payable	$	1,405,361		$	412,841

On December 31, 2013, the Company converted $55,429 of convertible debt and $6,014 in accrued interest due to Robert Cowdell (the "Convertible Cowdell Note") into a convertible note. The Convertible Cowdell Note is convertible into Company common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The "Variable Conversion Price" shall mean 50% multiplied by the Market Price (representing a discount rate of 50%). "Market Price" means the average of the three lowest trading prices for the Company's common stock during the twenty-five (25) trading-day period ending on the latest complete trading day prior to the Conversion Date. "Fixed Conversion Price" shall mean $0.00005. The Convertible Cowdell Note had accrued interest of $12,289 and $6,144 as of December 31, 2015 and 2014, respectively.

The Company evaluated the Convertible Cowdell Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The agreement modified the debt to make it convertible into common stock of the Company.

The convertible notes to an accredited investor (the "Accredited Investor") with outstanding balances at December 31, 2015 were issued in $50,000 tranches in January, February, March, April, May, June, July, August, September, October and December 2014, and tranches of $100,000 in November 2014, $70,000 in January 2015, two $30,000 tranches in February 2015, $40,000 in February 2015, $110,000 in March 2015, $88,000 in April 2015, $90,000 in May and June 2015, $65,000 in July and August 2015, $60,000 in September 2015 and $50,000 in October, November and December 2015. Each note is convertible into Company common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The "Variable Conversion Price" shall mean 50% multiplied by the Market Price (representing a discount rate of 50%). "Market Price" means the average of the three lowest trading prices for the Company's common stock during the twenty-five (25) trading-day period ending on the latest complete trading day prior to the Conversion Date. "Fixed Conversion Price" shall mean $0.00005. The notes also include conversion price reset features that are triggered when new equity issuances are made by the Company; as a result, this feature caused the Company to consider this feature a derivative liability. The maturity date of the notes is generally one year from the date of funding, with the maturity date of the tranches issued in February 2015 through December 2015 nine months from the date of funding. The due date of the note that includes tranches funded through May 2014 with outstanding principal balances totaling $231,126 as of December 31, 2015 was extended to September 30, 2015. The due date of the note that includes tranches funded from June 2014 through February 2015 with outstanding principal balances totaling $500,000 as of December 31, 2015 was extended to June 25, 2016.

The January 2014 derivative was valued as of January 6, 2014 at $44,493, which was recorded as a debt discount. During the year ended December 31, 2015, $731 was amortized from the debt discount. The debt discount was fully amortized at December 31, 2015. The January 2014 note had accrued interest of $5,814 and $4,863 as of December 31, 2015 and 2014, respectively.

The February 2014 derivative was valued as of February 18, 2014 at $44,556, which was recorded as a debt discount. During year ended December 31, 2015, $5,981 was amortized from the debt discount. The debt discount was fully amortized at December 31, 2015. The February 2014 note had accrued interest of $9,329 and $5,981 as of December 31, 2015 and 2014, respectively.

The March 2014 derivative was valued as of March 26, 2014 at $77,884, of which $50,000 was recorded as a debt discount with the remaining amount that exceeded the face value of the note expensed. During the year ended December 31, 2015, $11,644 was amortized from the debt discount. The debt discount was fully amortized at December 31, 2015. The March 2014 note had accrued interest of $8,836 and $3,836 as of December 31, 2015 and 2014, respectively.

The April 2014 derivative was valued as of April 25, 2014 at $90,605, of which $50,000 was recorded as a debt discount with the remaining amount that exceeded the face value of the note expensed. During the year ended December 31, 2015, $15,753 was amortized from the debt discount. The debt discount was fully amortized at December 31, 2015. The April 2014 note had accrued interest of $8,425 and $3,425 as of December 31, 2015 and 2014, respectively.

The May 2014 derivative was valued as of May 21, 2014 at $95,029, of which $50,000 was recorded as a debt discount with the remaining amount that exceeded the face value of the note expensed. During the year ended December 31, 2015, $19,315 was amortized from the debt discount. The debt discount was fully amortized at December 31, 2015. The May 2014 note had accrued interest of $8,068 and $3,068 as of December 31, 2015 and 2014, respectively.

The June 2014 derivative was valued as of June 25, 2014 at $83,184, of which $50,000 was recorded as a debt discount with the remaining amount that exceeded the face value of the note expensed. During the year ended December 31, 2015, $24,110 was amortized from the debt discount. The debt discount was fully amortized at December 31, 2015. The June 2014 note had accrued interest of $7,575 and $2,575 as of December 31, 2015 and 2014, respectively.

The July 2014 derivative was valued as of July 15, 2014 at $73,999, of which $50,000 was recorded as a debt discount with the remaining amount that exceeded the face value of the note expensed. During the year ended December 31, 2015, $26,849 was amortized from the debt discount. The debt discount was fully amortized at December 31, 2015. The July 2014 note had accrued interest of $7,301 and $2,301 as of December 31, 2015 and 2014, respectively.

The August 2014 derivative was valued as of August 19, 2014 at $64,104, of which $50,000 was recorded as a debt discount with the remaining amount that exceeded the face value of the note expensed. During the years ended December 31, 2015, $31,644 was amortized from the debt discount. The debt discount was fully amortized at December 31, 2015. The August 2014 note had accrued interest of $6,836 and $1,822 as of December 31, 2015 and 2014, respectively.

The September 2014 derivative was valued as of September 17, 2014 at $62,915, of which $50,000 was recorded as a debt discount with the remaining amount that exceeded the face value of the note expensed. During the year ended December 31, 2015, $35,616 was amortized from the debt discount. The debt discount was fully amortized at December 31, 2015. The September 2014 note had accrued interest of $6,438 and $1,438 as of December 31, 2015 and 2014, respectively.

The October 2014 derivative was valued as of October 13, 2014 at $63,347, of which $50,000 was recorded as a debt discount with the remaining amount that exceeded the face value of the note expensed. During the year ended December 31, 2015, $39,178 was amortized from the debt discount. The debt discount was fully amortized at December 31, 2015. The October 2014 note had accrued interest of $6,069 and $1,068 as of December 31, 2015 and 2014, respectively.

The November 2014 derivative was valued as of November 7, 2014 at $99,757, which was recorded as a debt discount. During the year ended December 31, 2015, $84,998 was amortized from the debt discount. The debt discount was fully amortized at December 31, 2015. The November 2014 note had accrued interest of $11,644 and $1,671 as of December 31, 2015 and 2014, respectively.

The December 2014 derivative was valued as of December 17, 2014 at $58,456, of which $50,000 was recorded as a debt discount with the remaining amount that exceeded the face value of the note expensed. During the year ended December 31, 2015, $48,082 was amortized from the debt discount. The debt discount was fully amortized at December 31, 2015. The December 2014 note had accrued interest of $5,178 and $178 as of December 31, 2015 and 2014, respectively.

The January 2015 derivative was valued as of January 14, 2015 at $29,360, which was recorded as a debt discount. During the year ended December 31, 2015, $28,234 was amortized from the debt discount. The debt discount had a balance at December 31, 2015 of $1,126. The January 2015 note had accrued interest of $6,751 as of December 31, 2015.

The first February 2015 derivative was valued as of February 10, 2015 at $23,984, which was recorded as a debt discount. During the year ended December 31, 2015, $21,290 was amortized from the debt discount. The debt discount had a balance at December 31, 2015 of $2,694. The first February 2015 note had accrued interest of $2,671 as of December 31, 2015.

The second February 2015 derivative was valued as of February 11, 2015 at $18,003, which was recorded as a debt discount. During the year ended December 31, 2015, $18,003 was amortized from the debt discount. The debt discount was fully amortized at December 31, 2015. The second February 2015 note had accrued interest of $2,663 as of December 31, 2015.

The third February 2015 derivative was valued as of February 25, 2015 at $19,494, which was recorded as a debt discount. During the year ended December 31, 2015, $19,494 was amortized from the debt discount. The debt discount was fully amortized at December 31, 2015. The third February 2015 note had accrued interest of $5,096 as of December 31, 2015.

The March 2015 derivative was valued as of March 10, 2015 at $31,885, which was recorded as a debt discount. During the year ended December 31, 2015, $31,885 was amortized from the debt discount. The debt discount was fully amortized at December 31, 2015. The March 2015 note had accrued interest of $8,951 as of December 31, 2015.

The April 2015 derivative was valued as of April 17, 2015 at $31,397, which was recorded as a debt discount. During year ended December 31, 2015, $29,456 was amortized from the debt discount. The debt discount had a balance at December 31, 2015 of $1,941. The April 2015 note had accrued interest of $6,244 as of December 31, 2015.

The May 2015 derivative was valued as of May 22, 2015 at $36,550, which was recorded as a debt discount. During the year ended December 31, 2015, $29,531 was amortized from the debt discount. The debt discount had a balance at December 31, 2015 of $7,019. The May 2015 note had accrued interest of $5,523 as of December 31, 2015.

The June 2015 derivative was valued as of June 23, 2015 at $41,878, which was recorded as a debt discount. During the year ended December 31, 2015, $29,192 was amortized from the debt discount. The debt discount had a balance at December 31, 2015 of $12,686. The June 2015 note had accrued interest of $4,734 as of December 31, 2015.

The July 2015 derivative was valued as of July 28, 2015 at $38,600, which was recorded as a debt discount. During the year ended December 31, 2015, $21,897 was amortized from the debt discount. The debt discount had a balance at December 31, 2015 of $16,703. The July 2015 note had accrued interest of $2,796 as of December 31, 2015.

The August 2015 derivative was valued as of August 21, 2015 at $37,269, which was recorded as a debt discount. During the year ended December 31, 2015, $17,954 was amortized from the debt discount. The debt discount had a balance at December 31, 2015 of $19,315. The August 2015 note had accrued interest of $2,369 as of December 31, 2015.

The September 2015 derivative was valued as of September 24, 2015 at $37,820, which was recorded as a debt discount. During the year ended December 31, 2015, $13,527 was amortized from the debt discount. The debt discount had a balance at December 31, 2015 of $24,293. The September 2015 note had accrued interest of $1,763 as of December 31, 2015.

The October 2015 derivative was valued as of October 23, 2015 at $35,290, which was recorded as a debt discount. During the year ended December 31, 2015, $8,887 was amortized from the debt discount. The debt discount had a balance at December 31, 2015 of $26,403. The September 2015 note had accrued interest of $959 as of December 31, 2015.

The November 2015 derivative was valued as of November 30, 2015 at $36,448, which was recorded as a debt discount. During the year ended December 31, 2015, $4,232 was amortized from the debt discount. The debt discount had a balance at December 31, 2015 of $32,216. The September 2015 note had accrued interest of $438 as of December 31, 2015.

The December 2015 derivative was valued as of December 21, 2015 at $37,163, which was recorded as a debt discount. During the year ended December 31, 2015, $1,351 was amortized from the debt discount. The debt discount had a balance at December 31, 2015 of $35,812. The September 2015 note had accrued interest of $166 as of December 31, 2015.

Total accrued interest payable for the non-related party convertible notes was $154,925 and $41,385 as of December 31, 2015 and 2014, respectively.

The Company recorded total interest expense, including debt discount and beneficial conversion feature amortization, for all debt of $887,447 and $903,811 for the years ended December 31, 2015 and 2014, respectively.