Note 6 - Loans Payable	3 Months Ended
Mar. 31, 2015
Notes
Note 6 - Loans Payable	NOTE 6 – LOANS PAYABLE On December 20, 2012, we received gross proceeds of $100,000 pursuant to the terms of a Loan Agreement dated December 20, 2012. The loan is secured by a deed of assignment for certain future inventory and proceeds from the sale of that inventory as described in the deed of assignment. The loan was payable on June 23, 2013, six months from the date of the agreement. On June 23, 2013 we did not repay the loan and it is in default. As a result of the default, the interest rate on the loan is 109.5% per annum from the date of default. We recognized $28,931 and $27,000 of interest expense for the three months ended March 31, 2015 and 2014, respectively. Effective January 20, 2015 the holders of the Notes under the Loan Agreement dated December 20, 2012 as discussed in Note 8 converted $100,000 of principal and $427,031 of accrued interest under the Notes into Units of common stock and warrants priced at $0.75 per unit. We issued an aggregate of 702,709 shares of common stock and three year warrants to purchase 702,709 shares of common stock at an exercise price of $1.00 per share. The fair value of the common stock was $702,709 based on the market price of our common stock on the date of conversion of $1.00 per share. The fair value of the warrants to purchase shares of our common stock was $405,022. We recognized a loss on debt conversion for the three months ended March 31, 2015 in the amount of $580,700. The fair value of the warrants issued upon conversion was computed using the Black Scholes Option Pricing model using the following assumptions – expected life – 3 years, risk free interest rate – 0.85%, volatility – 91.3%, and an expected dividend rate of 0%.

Note 6 - Loans Payable

3 Months Ended

Mar. 31, 2015

NOTE 6 – LOANS PAYABLE

On December 20, 2012, we received gross proceeds of $100,000 pursuant to the terms of a Loan Agreement dated December 20, 2012. The loan is secured by a deed of assignment for certain future inventory and proceeds from the sale of that inventory as described in the deed of assignment. The loan was payable on June 23, 2013, six months from the date of the agreement. On June 23, 2013 we did not repay the loan and it is in default. As a result of the default, the interest rate on the loan is 109.5% per annum from the date of default. We recognized $28,931 and $27,000 of interest expense for the three months ended March 31, 2015 and 2014, respectively.

Effective January 20, 2015 the holders of the Notes under the Loan Agreement dated December 20, 2012 as discussed in Note 8 converted $100,000 of principal and $427,031 of accrued interest under the Notes into Units of common stock and warrants priced at $0.75 per unit. We issued an aggregate of 702,709 shares of common stock and three year warrants to purchase 702,709 shares of common stock at an exercise price of $1.00 per share. The fair value of the common stock was $702,709 based on the market price of our common stock on the date of conversion of $1.00 per share. The fair value of the warrants to purchase shares of our common stock was $405,022. We recognized a loss on debt conversion for the three months ended March 31, 2015 in the amount of $580,700.

The fair value of the warrants issued upon conversion was computed using the Black Scholes Option Pricing model using the following assumptions – expected life – 3 years, risk free interest rate – 0.85%, volatility – 91.3%, and an expected dividend rate of 0%.