5. CONVERTIBLE NOTE PAYABLE

12 Months Ended

Dec. 31, 2013

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

5. CONVERTIBLE NOTE PAYABLE

During the year ended December 31, 2013, the Company signed Convertible Promissory Notes which refinanced non-interest bearing advances in the amount of $575,958 into convertible notes payable.  The Convertible Promissory Notes bear interest at 10% per annum and are payable along with interest.  The Convertible Promissory Notes are convertible into common stock at the option of the holder at a rate of $0.01 per share.

Date Issued	Maturity Date	Note Amount		Balance as of December 31, 2013
April 1, 2013	March 31, 2015	$	96,463	$	25,613
June 30, 2013	June 30, 2015		167,185		167,185
September 30, 2013	September 30, 2015		312,310		312,310
Total		$	575,958	$	505,108

The Company evaluated the terms of these notes in accordance with ASC Topic No. 815 – 40, Derivatives and Hedging - Contracts in Entity’s Own Stock and determined that the underlying common stock is indexed to the Company’s common stock. The Company determined that the conversion features did not meet the definition of a liability and therefore did not bifurcate the conversion features and account for them as a separate derivative liabilities. The Company evaluated the conversion features for a beneficial conversion feature. The effective conversion price was compared to the market price on the date of the notes and was deemed to be less than the market value of underlying common stock at the inception of the note.  Therefore, the Company recognized beneficial conversion features in the amounts of $96,463, $167,185, and $312,310 on April 1, 2013, June 30, 2013 and September 30, 2013, respectively. The beneficial conversion features were recorded as an increase in additional paid-in capital and a discount to the Convertible Notes Payable. The discounts to the Convertible Notes Payable will be amortized to interest expense over the life of the note.

The holders of the $517,673 Convertible Note Payable signed on October 7, 2011 elected to convert principal and interest as follows:

Date	Principal and Interest Converted		Common Stock Issued upon Conversion
January 14, 2013		84,000		2,800,000
February 28, 2013		18,000		600,000
March 11, 2013		57,000		1,900,000
March 18, 2013		36,303		1,210,088
Total	$	195,303		6,510,088

The unamortized discount related to this principal was $71,878. This amount was immediately amortized to interest expense. The converted principal amount and interest of $195,303 was recognized as an increase in stockholders’ equity as a result of this conversion. There was no gain or loss on the conversion, because it was effected in accordance with the terms of the convertible note agreement.

The holders of the $251,468 Convertible Note Payable signed on October 31, 2012 elected to convert principal and interest as follows:

Date	Principal and Interest Converted		Common Stock Issued upon Conversion
April 30, 2013	$	80,000	$	4,000,000
June 14, 2013		40,000		2,000,000
July 8, 2013		36,500		1,825,000
July 12, 2013		36,500		1,825,000
July 15, 2013		36,500		1,825,000
July 22, 2013		36,500		1,825,000
Total	$	266,000	$	13,300,000

The unamortized discount related to this principal was $208,102. This amount was immediately amortized to interest expense. The converted principal amount of $266,000 was recognized as an increase in stockholders’ equity as a result of this conversion. There was no gain or loss on the conversion, because it was effected in accordance with the terms of the convertible note agreement.

The holder of the $96,463 Convertible Note Payable issued on April 1, 2013 elected to convert principal and interest as follows:

Date	Principal and Interest Converted		Common Stock Issued upon Conversion
October 1, 2013	$	36,500	$	3,650,000
November 6, 2013		20,000		2,000,000
November 20, 2013		20,000		2,000,000
Total	$	76,500	$	7,650,000

The unamortized discount related to this principal was $50,395. This amount was immediately amortized to interest expense. The converted principal amount of $76,500 was recognized as an increase in stockholders’ equity as a result of this conversion. There was no gain or loss on the conversion, because it was effected in accordance with the terms of the convertible note agreement.

On February 28, 2013, the holder of the 10% Subordinated Convertible Note Payable dated May 23, 2010 elected to convert principal in the amount of $7,632 into 763,184 shares of common stock. There was no gain or loss on the conversion, because it was effected in accordance with the terms of the convertible note agreement.