Note G - Convertible Promissory Notes Payable

3 Months Ended

Mar. 31, 2015

Notes

Note G - Convertible Promissory Notes Payable

NOTE G – Convertible Promissory Notes Payable

 As of March 31, 2015, the Company has outstanding four (4) security purchase agreements with accredited investors for the sale of convertible promissory notes bearing interest at 8.0% - 12%, per annum.  Pursuant to the convertible promissory notes the investor may convert the amount paid towards the Securities Purchase Agreements into common stock of the company at a conversion price equal to 50% - 55% of the average of the 3 lowest volume weighted average trading prices during the 10 day period ending on the latest complete trading day prior to the conversion date.   Trading price means the closing bid price on the OTC Market Over-the-Counter Bulletin Board Pink Sheets.

The conversion rights embedded in the notes are accounted for as a derivative financial instruments because of the down round feature of the conversion price.  The beneficial conversion feature was valued at the date of issuance using the Black-Scholes-Merton options pricing model with the following assumptions:  risk free interest rates ranging from .07% to .15%, contractual expected life of nine (9) to twelve (12) months, expected volatility of 185% to 236%, calculated using the historical closing price of the company’s common stock, and dividend yield of zero, resulting in fair market value.

The Company had convertible debentures outstanding as follows:

March 31, 2015	Outstanding Balance of Convertible Debenture	Unamortized Discount	Net of Principal and Unamortized Discount
Convertible Debentures
January 10, 2014 - Debenture	$7,150	––	$7,150
February 28, 2014 – Debenture	13,910	––	13,910
April 2, 2014 – Debenture	17,815	––	17,815
June 18, 2014 – Settlement Agreement	58,420	––	58,420
Total Convertible Debentures	$97,295	––	$97,295

December 31, 2014	Outstanding Balance of Convertible Debenture	Unamortized Discount	Net of Principal and Unamortized Discount
Convertible Debentures
January 10, 2014 - Debenture	$7,150	––	$7,150
February 28, 2014 – Debenture	13,910	(2,063)	11,847
April 2, 2014 – Debenture	20,000	(6,000)	14,000
June 18, 2014 – Settlement Agreement	58,420	(16,228)	42,192
Total Convertible Debentures	$99,480	(24,291)	$75,189