5. CONVERTIBLE DEBT

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

5. CONVERTIBLE DEBT

NOTE 5 – CONVERTIBLE DEBT

	March 31, 2016		December 31, 2015
Convertible note - related party, Due December 31, 2017 unsecured (2)		500,000		500,000
Convertible note - 12% due January 1, 2017 (3)		58,556		58,556
Convertible note - 12% due January 1, 2017 (3)		28,278		28,278
Convertible note - 12% due January 1, 2017 (3)		186,316		186,316
Convertible note - 12% due January 1, 2017 (3)		-0-		126,000
Convertible note - 12% due January 1, 2017 (3)		117,113		117,113
Convertible note - 12% due January 1, 2017 (3)		117,113		117,113
Convertible note - 12% due January 1, 2017 (3)		55,895		55,895
Convertible note - 12% due January 1, 2017 (3)		67,074		67,074
Convertible note - 12% due January 1, 2017 (3)		23,442		23,442
Convertible note - 12% due January 1, 2017 (3)		23,442		23,442
Convertible note - 12% due January 1, 2017  (3)		27,116		27,116
Convertible note - 12% due January 1, 2017 (3)		116,966		116,966
Convertible note – 10% due January 1, 2017 (3)		25,000		25,000
Convertible note – 10% due January 1, 2017 (6)		50,000		-0-
Convertible note – 10% due January 1, 2017 (5)		100,000		-0-
Convertible note – 10% due January 8, 2017 (6)		50,000		50,000
Convertible note – 10% due March 31, 2017 (4)		100,000		100,000
Convertible note - stockholder, 10%, due April 30, 2013, unsecured (1)		25,000		25,000
Convertible note – 10% due April, 1, 2016 (7)		18,500		23,500
Totals		1,740,811		1,586,656

(1) At the option of the holder the convertible note may be converted into shares of the Company’s common stock at the lesser of $0.40 or 20% discount to the market price, as defined, of the Company’s common stock. The Company is currently in discussions with the lender on a payment schedule.

The outstanding balance of this note is convertible into a variable number of the Company’s common stock. Therefore the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.”  The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have being amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Black Scholes Option Model with a risk-free interest rate of ranging from 0.018% to .02%, volatility ranging from 160% of 336%, trading prices ranging from $.07 per share to $0.105 per share and a conversion price ranging from $0.084 per share to $0.40 per share.

Accrued interest on this note that was charged to operations for the quarter ended March 31, 2016 totaled approximately $935 The balance of the convertible note at March 31, 2016 including accrued interest and net of the discount amounted to $38,390.

A recap of the balance of outstanding convertible debt at March 31, 2016 is as follows:

Principal balance	$	25,000
Accrued interest		13,390
Balance maturing for the period ending:
March 31, 2016	$	38,390

The Company valued the derivative liabilities at March 31, 2016 at $20,265. The Company recognized a change in the fair value of derivative liabilities for the three months ended March 31, 2015 of $7,243, which were charged to operations..  In determining the indicated values at March 31, 2016, the Company used the Black Scholes Option Model with risk-free interest rates ranging from 0.018% to 0.02%, volatility ranging from 160% to 336%, a trading price of $.07, and conversion prices ranging from $.05 per share. 

(3) On December 31, 2015 the Company renegotiated twelve (12) convertible and non-convertible notes payable. The Total face value of the notes issued was $888,500 the six month notes were due on December 31, 2015 The new notes are convertible after January 1, 2016 and are convertible into the Company’s common stock at a conversion rate of $0.03 per share. The market value of the stock at the date when the debt becomes convertible was $0.087. The debt was issued is a result of a financing transaction and contain a beneficial conversion feature. As of December 31, 2015, the balance was $947,311. The beneficial conversion feature in the amount of $947,311 will be expensed as interest over the term of the note (one year). All these amended debts have a price adjustment provision. Therefore the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.”  The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have being amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Black Scholes Option Model with a risk-free interest rate of ranging from 0.05% to 1.06%, volatility ranging from 155% of 221%, trading prices ranging from $.078 per share to $0.1 per share and a conversion price ranging from $0.03 per share to $0.04 per share. The total derivative liabilities associated with these notes are $3,449,588 at March 31, 2016

(4) On September 8, 2015 the Company received a total of $100,000 from an accredited investor in exchange for a two year note in the aggregate amount of $100,000 with interest accruing at 10%. The note holder is entitled to subscribe for and purchase from the company 3,161,583 paid and non-assessable shares of the Common Stock at the price of $0.0316297 per share (the “Warrant Exercise Price”) for a period of five (5) years commencing from the earlier of such time as that certain $100K, 10% promissory note due September 9, 2017 has been fully repaid or the start of the Acceleration Period as defined in “The Note” or September 9, 2017.

On September 9, 2015 the Company received a total of $100,000 from an accredited investor in exchange for a two year note in the aggregate amount of $100,000 with interest accruing at 10%. The note holder is entitled to subscribe for and purchase from the company 3,161,583 paid and non-assessable shares of the Common Stock at the price of $0.0316297 per share (the “Warrant Exercise Price”) for a period of five (5) years commencing from the earlier of such time as that certain $100K, 10% promissory note due September 9, 2017 has been fully repaid or the start of the Acceleration Period as defined in “The Note” or September 9, 2017.

(7) On July 27, 2015 the company issued a note payable for $28,500 The Company agrees to pay to the Holder $28,500 plus accrued interest pursuant to the following schedule:

An initial payment of $5,000 is due no later than December 1, 2015. This amount represents the balance of the security deposit due for the lease of Commercial/Manufacturing Space occupied by MJAI Oregon 1, LLC, a majority-owned subsidiary of the company.

A final payment of $18,500 principal, plus any accrued Interest at 10% is due no later than April 1, 2016. This amount represents the balance of accrued rent due for the initial monthly lease payments from August 1, 2015 through March 31, 2016

The note is convertible after March 31, 2016 and is convertible into the Company’s common stock at a conversion rate of $0.10 per share or 20% discount to the thirty day moving average stock price.  

(6) In January of 2016 the Company received $50,000 from the issuance of convertible debt. Interest is stated at 12% The Note and Interest is convertible into common shares at $0.03 per share. The Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.”  The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have being amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Black Scholes Option Model with a risk-free interest rate of ranging from 0.05% to .14%, volatility ranging from 155% of 243%, trading prices ranging from $.078 per share to $0.1 per share and a conversion price of $0.03 per share. The total derivative liabilities associated with this note is $84,153 at March 31, 2016 . Note is Due in January of 2017

(5) On March 31 of 2016 the Company received $100,000 from the issuance of convertible debt. Interest is stated at 12% The Note and Interest is convertible into common shares at $0.03 per share. The Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.”  The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have being amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Black Scholes Option Model with a risk-free interest rate of ranging from 0.05% to .14%, volatility ranging from 155% of 243%, trading prices ranging from $.078 per share to $0.1 per share and a conversion price of $0.03 per share. The total derivative liabilities associated with this note is $163,721 at March 31, 2016 . Note is Due in January of 2017