Convertible Notes Payable

3 Months Ended

Dec. 31, 2015

Debt Disclosure [Abstract]

Convertible Notes Payable

Note 5. Convertible Notes Payable

Convertible notes payable consisted of the following at December 31, 2015 and September 30, 2015: 

	December 31, 2015			September 30, 2015
Convertible note dated September 30, 2013 in the original principal amount of $528,434, maturing September 30, 2016, bearing interest at 10% per year, convertible into common stock at a rate of $0.04 per share.	$	2,324		$	15,338
Convertible note dated June 30, 2014 payable in the original principal amount of $276,825, maturing June 30, 2016, bearing interest at 10% per year, convertible into common stock at a rate of $0.03 per share.		276,285			276,285
Convertible note dated December 31, 2014 in the original principal amount of $118,620, maturing December 31, 2016, bearing interest at 10% per year, convertible into common stock at a rate of $0.01 per share.		118,620			118,620
Convertible note dated March 31, 2015 in the original principal amount of $49,190, maturing March 31, 2017, bearing interest at 10% per year, convertible into common stock at a rate of $0.005 per share		49,190			49,190
Convertible note dated June 30, 2015 in the original principal amount of $66,074, maturing June 30, 2017, bearing interest at 10% per year, convertible into common stock at a rate of $0.53 per share		66,074			66,074
Convertible note dated September 30, 2015 in the original principal amount of $235,313, maturing September 30, 2018, bearing interest at 10% per year, convertible into common stock a rate of $0.75 per share		235,313			235,313
Convertible note dated December 31, 2015 in the original principal amount of $90,040, maturing December 31, 2018, bearing interest at 10% per year, convertible into common stock at a rate of $0.08 per share		90,040			—
Total convertible notes payable	$	837,846		$	760,820
Less: current portion of convertible notes payable		(397,229	)		(291,623	)
Less: discount on noncurrent convertible notes payable		(425,737	)		(425,214	)
Long-term convertible notes payable, net of discount	$	14,880		$	43,983
Current portion of convertible notes payable		397,229			291,623
Discount on current convertible notes payable		(258,831	)		(225,315	)
Current convertible notes payable, net of discount	$	138,398		$	66,308

All principal along with accrued interest is payable on the maturity date. The notes are convertible into common stock at the option of the holder. The holder of the notes cannot convert the notes into shares of common stock if that conversion would result in the holder owning more than 4.9% of the outstanding stock of the Company.

Advances Refinanced into Convertible Promissory Notes

During the three months ended December 31, 2015, the Company has signed Convertible Promissory Notes that refinance non-interest bearing advances into convertible notes payable. The Convertible Promissory Notes bear interest at 10% per annum and are payable along with accrued interest. The Convertible Promissory Note and unpaid accrued interest are convertible into common stock at the option of the holder.

Date Issued	Maturity Date	Interest Rate	Conversion Rate		Amount of Note		Beneficial Conversion Feature
December 31, 2015	December 31, 2018	10%		0.08		90,040		90,040
Total					$	90,040	$	90,040

The Company evaluated the terms of this note in accordance with ASC Topic No. 815 – 40, Derivatives and Hedging - Contracts in Entity’s Own Stock and determined that the underlying common stock is indexed to the Company’s common stock. The Company determined that the conversion feature did not meet the definition of a liability and therefore did not bifurcate the conversion feature and account for it as a separate derivative liability. The Company evaluated the conversion feature for a beneficial conversion feature. The effective conversion price was compared to the market price on the date of the notes and was deemed to be less than the market value of underlying common stock at the inception of the notes. Therefore, the Company recognized a beneficial conversion feature of $90,040 on December 31, 2015. The beneficial conversion feature was recognized as an increase in additional paid-in capital and a discount to the Convertible Notes Payable. The discount to the Convertible Notes Payable is being amortized to interest expense over the life of the notes using the effective interest method.

The Company evaluated the application of ASC 470-50-40/55, Debtor’s Accounting for a Modification or Exchange of Debt Instrument as it applies to the note listed above and concluded that the revised terms constituted a debt modification rather than a debt extinguishment because the present value of the cash flow under the terms of each of the new instruments was less than 10% from the present value of the remaining cash flows under the terms of the original notes. No gain or loss on the modifications was required to be recognized.

Conversions to Common Stock

During three months ended December 31, 2015, the holders of the Convertible Note Payable dated September 30, 2013 elected to convert principal and accrued interest in the amounts show below into share of common stock at a rate of $0.04 per share. On the conversion date, the unamortized discount related to the principal amount converted was immediately amortized to interest expense. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement that provided for conversion. 

Date	Amount Converted		Number of Shares Issued	Unamortized Discount
October 8, 2015	$	3,280	82,000	$	—
October 26, 2015		3,409	85,225		—
December 3, 2015		6,560	164,000		—
Total	$	13,249	331,225	$	—

During three months ended December 31, 2015, the holders of the Convertible Note Payable dated June 30, 2014 elected to convert principal and accrued interest in the amounts show below into share of common stock at a rate of $0.03 per share. On the conversion date, the unamortized discount related to the principal amount converted was immediately amortized to interest expense. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement that provided for conversion. 

Date	Amount Converted		Number of Shares Issued	Unamortized Discount
November 16, 2015	$	8,760	292,000	$	—
December 22, 2015		9,657	321,900		—
Total	$	18,417	613,900	$	—