Convertible Note Payable

12 Months Ended

Dec. 31, 2017

Debt Disclosure [Abstract]

Convertible Note Payable

NOTE 5 - CONVERTIBLE NOTE PAYABLE

Convertible notes payable consists of the following:

	December 31, 2017			December 31, 2016
Total convertible notes payable		214,764			637,059
Less discounts		(42,534	)		(101,595	)
Convertible notes, net of discount	$	172,230		$	535,464

On February 28, 2017, we entered into a convertible promissory note pursuant to which we borrowed $14,489. Interest under the convertible promissory note is 10% per annum, and the principal and all accrued but unpaid interest is due on August 27, 2017. The note is convertible at any date after the issuance date at noteholders option into shares of our common stock at a variable conversion price of 50% of the two lowest day market price of our common stock during the previous 20 days immediately preceding the conversion date.

On May 15, 2017, we entered into a convertible promissory note pursuant to which we borrowed $115,000. Interest under the convertible promissory note is 10% per annum, and the principal and all accrued but unpaid interest is due on May 15, 2018. The note is convertible at any date after the issuance date at noteholders option into shares of our common stock at a variable conversion price of 64% of the lowest VWAP of our common stock during the previous 18 days immediately preceding the conversion date. The Company recorded a debt discount in the amount of $115,000 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $166,621 and an initial loss of $51,621 based on the Black Scholes Merton pricing model.

Interest expense (excluding amortization of debt discount) related to the convertible notes payable as of the year ended December 31, 2017 and 2016 was $96,993 and $143,093, respectively.

During the year ended December 31, 2017, the Company issued 711,291 shares of common stock (post-split) for the partial conversion of $215,076 in convertible notes payable. The converted portion of the notes also had associated derivative liabilities with fair values on the date of conversion of $1,271,691. The conversion of the derivative liabilities has been recorded through additional paid-in capital.

The following table presents details of the changes in the Company’s derivative liabilities associated with its convertible notes for the year ended December 31, 2017:

	Amount
Balance December 31, 2015	$	551,646
Debt discount originated from derivative liabilities		501,750
Initial loss recorded		1,563,080
Adjustment to derivative liability due to debt conversion		(1,573,237	)
Change in fair market value of derivative liabilities		(185,444	)

Balance December 31, 2016	$	857,795
Debt discount originated from derivative liabilities		129,489
Reclassification of derivative liability to paid-in capital due to debt conversion		(1,271,691	)
Change in fair market value of derivative liabilities		850,753
Adjustment to derivative liability due to debt settlement		(247,305	)
Balance December 31, 2017	$	319,041

The Company accounts for the fair value of the conversion features of its convertible debt in accordance with ASC Topic No. 815-15 “Derivatives and Hedging; Embedded Derivatives” (“Topic No. 815-15”). Topic No. 815-15 requires the Company to bifurcate and separately account for the conversion features as an embedded derivative contained in the Company’s convertible debt. The Company is required to carry the embedded derivative on its balance sheet at fair value and account for’ any unrealized change in fair value as a component of results of operations. The Company values the embedded derivatives using the Black-Scholes pricing model.

The Black-Scholes model utilized the following inputs to value the derivative liability at the date of issuance of the convertible note and at December 31, 2017:

Fair value assumptions – derivative notes:	December 31, 2017
Risk free interest rate		0.40-1.28	%
Expected term (years)		0.01-0.159
Expected volatility		289-377	%
Expected dividends		0	%

Settlement Agreements

On February 28, 2017, the Company entered into a certain settlement agreement with the holder of a certain note payable in the amount of $128,000 issued on September 8, 2015 for total proceeds of $121,755. The Company paid $21,755 cash and $100,000 of the note was purchased and assigned to a new noteholder. The difference between the original note and settlement amount of $6,245 has been recorded as a gain on settlement of notes payable as of December 31, 2017. Additionally, the new note holder agreed to forgive $50,000 of the assigned debt. The forgiven debt was recorded a gain on settlement of notes payable.

On June 23, 2017, the Company entered into a certain settlement agreement with the holder of a certain note payable in the amount of $237,750 issued on July 22, 2016 and a carrying amount as of the date of settlement of $249,421 including accrued interest and an associated derivative liability of $247,305 for 550,000 shares of common stock(post-split) with a fair value on the date of settlement of $495,000. The difference between the note and settlement amount of $1,726 has been recorded as a gain on settlement of notes payable.

During the year ended December 31, 2017, certain notes payable issued on February 13, 2014 and October 21, 2014 was forgiven by the noteholder. The carrying value of the notes payable and accrued interest of $32,375 was recorded a gain on settlement of notes payable.

During the year ended December 31, 2017, a note payable issued on April 17, 2014 was forgiven. The carrying value of the note payable of $5,000 was recorded a gain on settlement of notes payable as of December 31, 2017.

During the year ended December 31, 2017, the Company issued 70,000 shares of common stock (post-split) valued at $49,000 in settlement of a note payable issued on August 15, 2016. The carrying value of the note payable was $4,813 and difference between the fair value of the shares and note of $44,187 was recorded a loss on settlement of notes payable as of December 31, 2017.

During the year ended December 31, 2017, the Company issued 100,335 shares of common stock (post-split) valued at $82,500 in partial settlement of a note payable issued on May 15, 2017. The carrying value of the settled balance of note payable was $16,503 and difference between the fair value of the shares and note of $13,598 was recorded a loss on settlement of notes payable as of December 31, 2017.