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Notes and Convertible Notes Payable

3 Months Ended

Mar. 31, 2015

Note 8 – Notes and Convertible Notes Payable

At March 31, 2015 and December 31, 2014, notes payable and accrued interest consisted of:

	March 31, 2015		December 31, 2014
Notes payable and accrued interest - Rasel	$	-	$	73,282
Note payable and accrued interest - Glendon		-		43,464
Note payable and accrued interest - Third Party Financier 1		22,285		33,959
Note payable and accrued interest - Third Party Financier 2		-		8,592
Note payable and accrued interest - Blackbridge		-		92,451
Note Payable - Vulcan		-
Note payable - GV Global, net after BCF fully discounted		8,414		-

	$	30,699	$	251,748

a) Convertible Notes Payable

On October 6, 2009, the Company signed a note payable for $25,000 to Rasel Ltd due on October 6, 2010, bearing interest at 4% per annum. The proceeds were used to pay for half of existing accounts payable for legal fees incurred at the Company’s inception. On October 20, 2009, the Company signed a note payable for $50,000 payable to Rasel due on October 20, 2010, bearing interest at 4% per annum (collectively, the “Rasel Note”). These proceeds were used to pay for startup costs, audit fees and future expenses. On January 22, 2010, the Company signed a note payable for $50,000 payable to Rasel due on October 30, 2011, bearing interest at 4% per annum. These proceeds were used for working capital and expenditures. On January 22, 2010, the Company signed an amendment to extend the maturity date of the promissory notes in the amount of $25,000 and $50,000 dated October 6, 2009 and October 20, 2009, respectively, to October 30, 2011. On March 2, 2011, the Company and Rasel agreed to extend the maturity of all notes to December 31, 2012, in consideration of adding a conversion feature to the notes with either a 5% discount to the market price or a fixed price of $0.60. The extension of maturity was effective as of December 30, 2010.

About 50% of the note balance at December 31, 2013 ($73,812.50) was paid off in 2014 by Financier 2. On January 22, 2015, the Company entered into an Exchange Agreement with GV Global Communications Inc. ("GV Global") – which hold the 50% of the remaining balance of the note in default, pursuant to which GV Global exchanged $75,273 in debt into a 10% Convertible Debenture in the principal amount of $75,273 (the "GV Note"). The GV Note matures January 21, 2017 (the "Maturity Date") and interest associated with the GV Note is 10% per annum, which is payable on the Maturity Date. The GV Note is convertible into shares of common stock of the Company, at the option of GV Global, at a conversion price of $0.00752734. GV Global has agreed to restrict its ability to convert the GV Note and receive shares of common stock such that the number of shares of common stock held by it in the aggregate and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.

The GV Note was issued to GV Global in reliance upon exemptions from registration pursuant to Section 3(a)(9) under the Securities Act of 1933. GV Global is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933. The Company has accrued $1,248 of interest expense in 2014 in connection with this note.

At March 31, 2015, the balance of the Rasel note is zero.

b) Note Payable

On December 31, 2012, the Company converted a payable in the amount of $155,542 to a note payable. The note bears annual interest at 10%, and was to mature on December 31, 2012. The Company has negotiated an extension to the maturity date until December 31, 2013.

On January 22, 2015, the Company entered into an Exchange Agreement with Vladimir Kirish pursuant to which Mr. Kirish converted $197,717.22 in debt payable for Glendon and part of accounts payable of 43,464.4 and154, 252.82 respectively by the Company into post-split 50,000 restricted shares of common stock (the "Kirish Shares"). Mr. Kirish acquired the debt from a third party. The Kirish Shares were issued to Mr. Kirish in reliance upon exemptions from registration pursuant to Section 3(a)(9) under the Securities Act of 1933. Mr. Kirish is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.

The balance at March 31, 2015 and December 31, 2014, including accrued interest, is $0 and $43,464, respectively. The note was reduced for revenue during the fiscal quarter from the note holder. The Company settled the debt outstanding in the amount of $43,464 by assigning the receipt of the revenue to the creditor.

c) Issuance of note payable to third party

On July 24, 2013, the Company entered into a Securities Purchase Agreement with a third party financing source ("Financer 1"), for the issuance of an 8% convertible note in the principal amount of $42,500 (the "July 2013 Note"), of which $2,500 was for legal fees associated with the transaction. The financing closed on July 31, 2013.

The July 2013 Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on April 29, 2014. The July 2013 Note is convertible into common stock, at Financer’s option, at the greater of a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion or $0.00009. In the event the Company prepays the July 2013 Note in full, the Company is required to pay to Financer an amount in cash equal to all principal, interest and any other amounts owing multiplied by (i) 112% if prepaid during the period commencing on the closing date through 30 days thereafter, (ii) 121% if prepaid 31 days following the closing through 60 days following the closing and (iii) 126% if prepaid 61 days following the closing through 90 days following the closing and (iv) 131% if prepaid 91 days following the closing through 120 days following the closing and (v) 136% if prepaid 121 days following the closing through 150 days following the closing and (vi) 141% if prepaid 151 days following the closing through 180 days following the closing. After the expiration of 180 days following the date of the Note, the Company has no right of prepayment. Financer has agreed to restrict its ability to convert the July 2013 Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 9.99% of the then issued and outstanding shares of common stock. The total net proceeds the Company received from this offering were $42,500, less $2,500 in attorney’s fees. As of the date of the July 2013 Note, the Company is obligated on the Note issued to Financer in connection with the offering. The July 2013 Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company. The Company claims an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Act") for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated there under since, among other things, the transaction did not involve a public offering, Financer is an accredited investor, Financer had access to information about the Company and their investment, Financer took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.

In April 2014, Financier converted the entire remaining note balance, and released the company from its debt, which is a zero balance. In June of 2014, the Company issued another note to the Financier payable for $32,500 (“June 2014 Note”), of which $2,500 was for legal fees associated with the transaction. The terms of the new note were similar to the terms described above, with a maturity of March 5, 2015.

The June 2014 Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on maturity. The June 2014 Note is convertible into common stock, at Financer’s option, at the greater of a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion or $0.00001. In the event the Company prepays the June 2014 Note in full, the Company is required to pay to Financer an amount in cash equal to all principal, interest and any other amounts owing multiplied by (i) 112% if prepaid during the period commencing on the closing date through 30 days thereafter, (ii) 121% if prepaid 31 days following the closing through 60 days following the closing and (iii) 126% if prepaid 61 days following the closing through 90 days following the closing and (iv) 131% if prepaid 91 days following the closing through 120 days following the closing and (v) 136% if prepaid 121 days following the closing through 150 days following the closing and (vi) 141% if prepaid 151 days following the closing through 180 days following the closing. After the expiration of 180 days following the date of the Note, the Company has no right of prepayment.

Financer has agreed to restrict its ability to convert the June 2014 Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. The total net proceeds the Company received from this offering were $32,500, less $2,500 in attorney’s fees pursuant to the terms of this convertible agreement. As of the date of the June 2014 Note, the Company is obligated on the Note issued to Financer in connection with the offering. The June 2014 Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company.

The Company claims an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Act") for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated there under since, among other things, the transaction did not involve a public offering, Financer is an accredited investor, Financer had access to information about the Company and their investment, Financer took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.

In 2014, the Company accrued $1,734 of interest in connection with the July 2013 Note and the June 2014 Note. As of December 31, 2014, the June 2014 Note is in default. The balance at March 31, 2015 is $21,330 and accrued interest is $955; the note payable balance was reduced by $12,629 due to conversions in the first quarter. During the first fiscal quarter of 2015, Financier 1 sold the note to a third party in a deal to which the Company was not a party.

d) Third Party Note Payable

On May 13, 2014, the Company entered into an agreement with a third party financing source ("Financier 2"), for the issuance of an 8% convertible note in the principal amount of $147,625 (the "May 2014 Note"). In conjunction with the issuance of the May 2014 Note, an existing note holder (Rasel, owner of the Rasel Notes) agreed to have the proceeds of the May 2014 Note used to offset the amounts owed to them as evidenced by the Assignment of Convertible Debenture agreement dated May 12, 2014, between the holders of the Rasel Notes and Financier 2. The Assignment of Convertible Debenture agreement calls for the Financier 2 to make two payments of $73,812.50 each to the existing note holder (Rasel Notes). On May 13, 2014, the Financier 2 made the first payment to the existing note holder (Rasel Notes), however, Financier 2 defaulted on their obligation to make the second payment per the Assignment of Convertible Debenture agreement. As a result, the Company and Financier 2 have mutually agreed to release Financier 2 from its’ obligation for the second payment, and the other half of the note in the amount of $73,812.50 reverted back to Rasel.

The May 2014 Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on September 1, 2014. The May 2104 Note is convertible into common stock, at Financer 2’s option, at the greater of a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion or $0.0001.

Financer 2 has agreed to restrict its ability to convert the May 2014 Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. As of the date of the May 2014 Note, the Company is obligated on the Note issued to Financer 2 in connection with the offering. The May 2014 Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company.

During the fiscal year ended December 31, 2014, Financier 2 converted 64,400 post-split (322,000,000 pre-split) shares at an average valuation of approximately $0.98 on a post-split basis. The Company has accrued $957 in interest expense in 2014 in connection with this note. As of December 31, 2014, the balance of the note including accrued interest is $8,592. At March 31, 2015, the balance is zero, due to conversions in the amount of the balance owed during the quarter.

e) Convertible note payable to Blackbridge

On June 16, 2014, the Company entered into a set of agreements (collectively, the “Blackbridge Agreement”) with Blackbridge, a financial services firm. The Company and Blackbridge were discussing an equity line of credit, and the Company agreed to pay Blackbridge a commitment fee of 90,000,000 shares (18,000 shares post-split), and also issued a convertible note for $90,000 having a 5% interest rate that matures on December 16, 2014. The note can be converted after the maturity date. The conversion price is 90% multiplied by the market price, which is defined in the agreement as the lowest of the daily trading price for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date.

The` Company computed the fair value of the conversion feature at the commitment date, based on the following management assumptions:

Expected dividends	0%
Expected volatility	298%
Expected term: conversion feature	183 days
Risk free interest rate	0.11%

The fair value of the embedded conversion option on the commitment date was $7,238. The Company recorded a related debt discount of $7,238, which is amortized over the life of the debt. For the fiscal year ended December 31, 2014, the Company amortized $7,238 of debt discount.

At December 31, 2014, the Company remeasured the derivative liability and recorded a fair value of $0 due to the loan being in default. As a result of the remeasurement, the Company recorded a change in fair value associated with this derivative liability as an expense totaling $7,238 for the fiscal year ended December 31, 2014.

The Company does not believe that the debt is valid, but has accrued the notes on its financial statements to be conservative. The reason that it does not believe the Blackbridge Agreement to be valid is that the parties agreed at the time that the Blackbridge Agreement was signed that it would take 90-120 days to file an S-1 to register the shares needed for the equity line of credit and that such commitment fee would not be payable until such time. The Blackbridge Agreement states, however, that the Company has only 60 days from the date that the Agreement was signed to file an S-1 to register the shares, which the parties agreed was an impossible requirement to meet. The failure to meet that requirement was an event of default in the Blackbridge Agreement, and the counterparty, which could terminate the Blackbridge Agreement at its sole discretion, did not grant a waiver of this clause, despite knowing that that requirement was unrealistic, particularly given the Company’s thin cash position. The inability to register the shares within the required timeframe guaranteed the default of the Company under the Blackbridge Agreement from the outset. As such, the Company believes that said Agreement is null and void, because it lacked the capacity to perform under the Blackbridge.

In 2014, the Company accrued $2,451 of interest expense associated with this note; an additional $397 of interest was accrued during the first quarter of 2015. As of March 31, 2015, the balance is zero, as the Company issued 4,843,398 shares to Blackbridge to satisfy the balance at the time of conversion of $92,848.

f) Convertible Note Payable

On January 7, 2013, effective December 31, 2012, the Company, JV and Vulcan entered an agreement pursuant to which the JV Agreement was terminated, the Company issued to Vulcan a 4% convertible promissory note in the principal amount of $500,000 (the "Forex Note") and Vulcan issued to the Company a 10% Secured and Collateralized Promissory Note in the principal amount of $400,000. The Company recognized a debt discount in the amount of $100,000 for the difference in the face value of the note issued and the note received from the same party. The face value of the note payable is shown net of the debt discount. This debt discount will be amortized over the one-year life of the note. The note has a maturity date of December 31, 2013, and can be extended by the Company for an additional one year at which point the 4% interest rate will increase to 10% per annum. The Forex Note may be prepaid without penalty. The Forex Note conversion price is the Variable Conversion Price, which is defined as 50% multiplied by the average of the lowest three trading prices of the Company's common stock on the OTCBB during the 10-day trading period ending on the latest complete day of trading on the OTCBB prior to the date of conversion. The Variable Conversion Price cannot be less than $0.002 ($10,00 on a post-split basis). At no time will Vulcan convert any amount of the Forex Note into common stock that would result in Vulcan owning more than 4.99% of the common stock outstanding of the Company.

As of December 31, 2013, the entire debt discount has been amortized in the accompanying financial statements, and $20,000 of interest expense was accrued during the year ended December 31, 2013. An additional $43,561 of interest expense was accrued in fiscal year ended December 31, 2014. The Company is negotiating an offset of the Forex Note against the note receivable from Vulcan as final satisfaction, and will recognize a gain or loss on its financial statements at that time.

On November 14, 2014 the Company and the holder of the Vulcan note entered into settlement agreement terminate any and all agreements between them and to resolve all disputes existing between them, which are the subject of Holder’s draft complaint which has yet to be filed, upon the terms and conditions of which the Company will issue the Holder post-split 1,000,000 shares of common stock (the “Settlement Shares”) at a cost basis of $0.12 per share representing aggregate consideration of $120,000 (the “Settlement Amount”). The stock certificate representing the Settlement Shares shall bear the standard 1933 Act restrictive legend. Holder, at its sole option, at any time prior to June 30, 2015, may convert the Settlement Shares into Series D Preferred Shares with a stated value of $120,000, a conversion price of $0.12 and liquidation and dividend rights to be determined. As of March 31, 2015, the note balance is zero.

g) Convertible Note Payable

On January 22, 2015, the Company entered into an Exchange Agreement with GV Global Communications Inc. ("GV Global") pursuant to which GV Global exchanged $75,273 in debt into a 10% Convertible Debenture in the principal amount of $75,273 (the "GV Note"). The GV Note matures January 21, 2017 (the "Maturity Date") and interest associated with the GV Note is 10% per annum, which is payable on the Maturity Date. The GV Note is convertible into shares of common stock of the Company, at the option of GV Global, at a conversion price of $0.00752734. GV Global has agreed to restrict its ability to convert the GV Note and receive shares of common stock such that the number of shares of common stock held by it in the aggregate and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. The GV Note was issued to GV Global in reliance upon exemptions from registration pursuant to Section 3(a)(9) under the Securities Act of 1933. GV Global is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933. In addition, on March 2, 2015, the Company and GV Global Communications, Inc. ("GV") amended that certain 10% Convertible Debenture (the "GV Debenture") which debt underlying the GV Debenture was initially incurred on October 6, 2009 and exchanged for the GV Debenture on January 19, 2014. The parties agreed that the conversion price in the GV Debenture would not be impacted by the 1:1,000 stock split implemented by the Company on February 24, 2015 and will remain $0.0075273. Beneficial Conversion Feature (“BCF”) in the amount of 75,273 was fully amortized from the note balance.