XML 25 R13.htm IDEA: XBRL DOCUMENT v3.8.0.1
CONVERTIBLE NOTES PAYABLE
12 Months Ended
Dec. 31, 2017
Debt Disclosure [Abstract]  
CONVERTIBLE NOTES PAYABLE

NOTE 7 – CONVERTIBLE NOTES PAYABLE


Convertible Notes Payable – Third Parties`


At January 1, 2016 there were three convertible notes outstanding with balances of $684,660, $123,797 and $160,000 with accrued interest of $3,001, $1,926 and $0, respectively.  The first two notes bear interest at the rate of 10% per year (with a 15% default rate) and are convertible into shares of common stock at $0.05 per share.  The third note bears interest at the rate of 10% per year (with a 10% default rate) and is convertible into shares of common stock at $0.07 per share.


During 2016 the Company secured additional financing to cover its ongoing operations in the amount of  $460,000 by issuing various convertible notes bearing 10% annual interest (with a 15% default rate), secured by business assets and carrying exercise prices ranging between $0.06 and $0.07 per share.  During 2016 the Company approved the conversion of the convertible note payable in the amount of $123,797 into 2.7 million shares of common stock.


During 2017 the Company secured additional financing to cover its ongoing operations in the amount of  $380,000 by issuing various convertible notes bearing 10% annual interest (with a 15% default rate), secured by business assets and carrying exercise prices of $0.07 per share.  


During 2017 the Company approved the conversion of the convertible note in the amount of $684,660 of principal and accrued interest of $127,939 into 14.5 million shares of common stock.


At December 31, 2017 there are notes outstanding with principal balances which total $880,000. Of the notes, $840,000 are convertible notes bearing a 10% annual rate of interest (with a 15% default rate) and are convertible into shares of common stock at the rate of $0.06 to $0.07 per share.  The remaining $40,000 is a convertible note entered into on August 8, 2011 with a former Company Director.  That note was due on December 31, 2015, and bears a default interest rate of 10%.


Convertible Note Payable Related Parties


On July 12, 2017 and September 1, 2017, the Company issued promissory notes for $30,000 and $10,000, respectively, to an officer of the Company.  The notes bear interest at the rate of 8%, have a conversion feature for restricted common shares at $0.07 per share and maturity dates of December 31, 2018.


On July 12, 2017, an officer of the Company provided $7,000 to the Company under a line of credit.  On September 23, 2017, the Company paid $7,000 to fully retire that obligation.


At December 31, 2017 the Convertible Notes Payable Related Parties principal was $114,514, the unamortized discount was $33,099 and interest accrued and unpaid was $6,809.  The Company recorded interest expense of $1,907 during the year ended December 31, 2016 as it amortized the discount charges generated by the issuance of convertible notes payable.


On July 12, 2017 two officers assume responsibility for $54,513 of debt owed by the Company.  The officers are making payments against those debts until such time that the Company is able to make the payments on its own behalf.


Due to the Company’s lack of authorized shares necessary to settle these convertible instruments, in accordance with ASC 815-40-25, the Company determined that the conversion features related to these notes are derivative instruments since we do not have control to increase the number of authorized shares to settle these convertible instruments. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of the Notes and to fair value as of each subsequent reporting date. At the inception of the Note, the Company determined the fair value of the derivatives were $363,680. The fair value of the embedded derivatives were determined using the Binominal Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 68.68% to 141.83%, (3) weighted average risk-free interest rate of 1.53% to 1.76% (4) expected life of 0.08 to 1.00 years, and (5) the quoted market price of the Company’s common stock at each valuation date.