Note 5 - Notes Payable and Long Term Loan

12 Months Ended

Dec. 31, 2015

Debt Disclosure [Abstract]

Note 5 - Notes Payable and Long Term Loan

Note 5 - Notes payable and Long Term Loan

Notes Payable

In October 2013, the Company initiated a private placement for up to $500,000 of financing by the issuance of notes payable at a minimum of $25,000, one unit. The notes bear interest at 10% per annum and are due and payable with accrued interest one year from issuance. Also, the Company agreed to issue 125,000 shares of its common stock for each unit. In July 2014, the Company initiated a private placement for up to $500,000 of financing by the issuance of notes payable at a minimum of $25,000, one unit. The notes bear interest at 10% per annum and are due and payable with accrued interest one year from issuance. Also, the Company agreed to issue 50,000 shares of its common stock for each unit. In October 2014, the Company initiated a private placement for up to $500,000 of financing by the issuance of notes payable at a minimum of $25,000, one unit. The notes bear interest at 10% per annum and are due and payable with accrued interest one year from issuance. Also, the Company agreed to issue 50,000 shares of its common stock for each unit. In August 2015, the Company initiated a private placement for up to $500,000 of financing by the issuance of notes payable at a minimum of $25,000, one unit. The notes bear interest at 10% per annum and are due and payable with accrued interest one year from issuance. Also, the Company agreed to issue 100,000 shares of its common stock for each unit. At issuance of each private placement note payable agreement, the Company records a discount at the greater of the principal balance of the note payable or the fair value of the common stock issued in connection with the note. The discount is amortized over the life of each note, one year. During the year ended December 31, 2015, the Company has issued promissory notes for an aggregate principal of approximately $615,000 under these private placements, and recorded discounts amounting to $223,551 in connection with these. During the year ended December 31, 2014, the Company issued promissory notes for an aggregate principal of approximately $753,000, and recorded discounts amounting to $6,976 in connection with these. As of December 31, 2015, notes payable outstanding under these private placements are $1,688,750.

As of December 31, 2015, the Company had notes payable to related parties amounting to$245,000. Refer to Note 7 – Related Party Transactions.

During the year ended December 31, 2015, the Company issued twelve Convertible Debentures (“Variable Debentures”) for $921,250 with original terms of 9 months to three years and interest rates ranging from 0% to 10% which contain variable conversion rates with a discount of ranging from 25% to 53% of the Company’s common stock based on the terms included in the Variable Debentures. Certain of the Variable Debentures contain prepayment options which enable the Company to prepay the notes for periods of 0-180 days subsequent to issuance at premiums ranging from 120% to145%. The Company recorded a derivative liability as a result of the conversion feature. The derivative liability was allocated between a note discount, up to the value of the Variable Debenture, and interest expense for the excess, and the note discount is being amortized over the life of the Variable Debenture. During the year ended December 31, 2015, the Company recorded $859,071 in discounts on these Variable Debentures. As of December 31, 2015, ten of these Variable Debentures are outstanding, with a gross amount of $783,250.

During July 2015, the Company entered into a settlement agreement with the holder of a $100,000 Variable Debenture wherein the Note was exchanged for 900,000 shares of common stock, with the restriction that the shares may be sold from time to time at various prices of $0.60 and above. During December 2015, the Company entered into a settlement agreement with the holder of a $38,000 Variable Debenture wherein the Company repaid in full the Note balance with a cash payment of $56,590. In accordance with ASC 470-50, Debt Modifications and Extinguishments, the Company recognized a $127,674 net loss on extinguishment of debt in connection with these settlement agreements.

		As of  December 31,
		2015		2014
Notes payable at beginning of period	$	1,377,416	$	710,072
Notes payable issued		1,586,250		935,500
Repayments of notes payable in cash		(138,000)		-
Less amounts converted to stock		(491,915)		(268,156)
Notes payable at end of period		2,333,751		1,377,416
Less debt discount		(799,307)		(2,391)
	$	1,534,444	$	1,375,025
Notes payable issued to related parties	$	245,000	$	291,000
Notes payable issued to non-related parties	$	1,289,444	$	1,084,025

The maturity dates on the notes payable are as follows:
				Related
	Twelve months ending,	Non-related parties		parties		Total
	December 31, 2016	$	1,583,751	$	245,000	$	1,828,751
	December 31, 2017	$	455,000	$	-	$	455,000
	December 31, 2018	$	50,000	$	-	$	50,000
	Total	$	2,088,751	$	245,000	$	2,333,751

Long Term Loan

The Company has financed the purchase of an automobile. The maturity dates on the loan are as follows:

Maturity dates of long term debt
	Twelve months ending,
	December 31, 2016	$	12,031
	December 31, 2017	$	12,395
	December 31, 2018	$	4,221
		$	28,647
	Current portion	$	12,031
	Long term portion	$	16,616

Acquisition Payable

In connection with the Company’s acquisition of IPR in 2012, IPR recorded a $155,000 long-term acquisition payable for costs that were not paid at closing. These payable is non-interest bearing and IPR agreed to make payments up to 25% of the proceeds from any private placement or gross profits earned by IPR until the obligation is satisfied. The percentage of the proceeds to be paid is at the sole discretion of IPR’s Chief Executive Officer and the ex-Chief Executive Officer of the Company based on the liquidity of the Company.

Effective Interest Rate

During the year ended December 31, 2015 and 2014, the Company’s effective interest rate was 95% and 11%, respectively.