4. NOTES PAYABLE

3 Months Ended

Mar. 31, 2016

Payables and Accruals [Abstract]

4. NOTES PAYABLE

NOTE 4 – NOTE PAYABLE

	March 31, 2016		December 31, 2015
Loan payable - Stockholder, 8%, Due December 31, 2017, unsecured (1)	$	250,000	$	250,000
Loan payable - Stockholder, 8%, Due September 21, 2017, unsecured (4)	$	50,000	$	50,000
Loan payable - Stockholder, 8%, Due September 21, 2017, unsecured (4)	$	100,000	$	100,000
Loan payable - Stockholder, 8%, Due September 21, 2017, unsecured (4)	$	50,000	$	50,000
	$	450,000	$	450,000

(1) At December 31, 2013 the Company was indebted to an affiliated shareholder of the Company for $840,955, which consisted of $737,100 principal and $103,895 accrued interest, with interest accruing at 10%. On January 2, 2014 the Company entered into a Debt Modification Agreement whereby the total amount of the debt was reduced to $750,000.00 and there is no accrued interest or principal due until December 31, 2017. $500,000 of the debt is convertible into 50,000 Series C Convertible Preferred Shares of AFAI, which if converted are subject to resale restrictions through December 31, 2015. The two-year note in the aggregate amount of $500,000 is convertible into the Company’s preferred stock at a conversion rate of $10.00 per share of preferred. At a conversion rate of 433.9297 common shares to 1 preferred share, this would result in a total of 21,696,485 common shares issued if all debt was converted. The market value of the stock at the date of issuance of the debt was $0.04. The debt issued is a result of a financing transaction and contain a beneficial conversion feature valued at $500,000 to be amortized over the life of the debt. Total amortization for the quarter ended March 31, 2016 was $49,727. As of March 31, 2016, the balance of the debt was $500,000. The net balance reflected on the balance sheet is $149,727. The remaining $250,000 is not convertible. The company has imputed interest on both the convertible debt and the non-convertible debt. The company used an interest rate of 4% for calculation purposes. The net balance of $250,000 of the non-convertible portion is reflected on the balance sheet, plus imputed interest of $30,000.