4. Notes Payable

12 Months Ended

Dec. 31, 2014

Notes

4. Notes Payable

4.           Notes Payable

On June 6, 2013, the Company received funds of $20,000 from Jim Collord, a director.  In accordance with the terms of the note, the Company pays Mr. Collord 1% per month for interest. See Note 7. 

On July 31, 2013 the Company received $20,000 from Rolf Hess, a stockholder, under a convertible promissory note.  Terms of the note called for interest at 1% per month, with the entire balance of principal and interest due in full on December 1, 2013.  The convertible promissory note contained the option for the holder to convert any portion of the principal and interest into Company common stock at 75% of the average closing bid price of the stock for the twenty trading days ending the day prior to the conversion.  At inception, management determined the conversion price would have been $0.054.  On that date, the market price for the Company’s common stock exceeded the conversion price as calculated.

The convertible note contained a beneficial conversion feature of $9,425 which was recognized as a discount on the note on the date of issuance. The discount was amortized over the note term using the straight-line method, which approximates the effective interest method. For the year ended December 31, 2013, the Company recorded $9,425 in interest expense related to the amortization of the discount. This note was converted to common stock and warrants in the private placement on December 1, 2013 (See Note 2).