NOTE 6  -CONVERTIBLE PROMISSORY NOTES  

The Company entered into securities purchase agreements (the “Purchase Agreement”) with two investors and issued convertible promissory notes in the amount of $38,000 and $43,000 respectively (the “Notes”).The Notes were dated December 1, 2014 and May 7, 2015, bore interest at 8% per annum and mature on September 3, 2015 and February 11, 2016, respectively. The notes are convertible into shares of the Company's common stock at the greater of; (i) the variable conversion price (58% multiplied by the market price) that is equal to the average of the three (3) lowest closing bid prices of the Common Stock during the ten (10) trading day period prior to the date of conversion or (ii) the fixed conversion price of $.00005. The Notes also contain a prepayment option whereby the Company may make payments to the holder based on the length of time the Note has been outstanding, upon three (3) trading days' prior written notice to the holder.

 

During the first 30 days, the Company may make a payment to the holder equal to 115% of the then outstanding unpaid principal and interest, from days 31 until 60 days, the Company may make a payment to the holder equal to 120% of the then outstanding unpaid principal and interest, from days 61 until 90 days, the Company may make a payment to the holder equal to 125% of the then outstanding unpaid principal and interest, from days 91 until 120 days the Company may make a payment to the holder equal to 130% of the then outstanding unpaid principal and interest, from days 121 until 150 days, the Company may make a payment to the holder equal to 135% of the then outstanding unpaid principal and interest, from days 151 until 180 days, the Company may make a payment to the holder equal to 140% of the then outstanding unpaid principal and interest, after 180 days, the Company has no right of prepay. In the event of default before the maturity dates, the payment is immediately due, in the amount of 22% of the outstanding unpaid principal, along with interest and any penalties.

 

Beneficial Conversion Feature

 

In connection with the convertible note entered into in December 2014 and May 2015, the Company determined that a beneficial conversion feature existed on the date the note was issued. The beneficial conversion feature related to this note was valued as the difference between the effective conversion price (computed by dividing the relative fair value allocated to the convertible note by the number of shares the note is convertible into) and the fair value of the common stock multiplied by the number of shares into which the note may be converted.

 

In accordance with ASC 470 “Debt with Conversion and other Options”, the intrinsic value of the beneficial conversion features were recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the instrument. The Company recorded beneficial conversion features related to the December 2014 convertible note financing of $27,500 and a beneficial conversion feature of $31,000 related to the May 2015 note.

 

In June, 2015 the convertible note holder converted the $38,000 December note of $38,000 in principal and $1,520 in accrued interest into 1,432,859 shares of common stock. Upon conversion, the remaining discount on the notes payable was recognized as interest totaling $15,287.

 

The Company had no convertible promissory notes outstanding as of September 30, 2014.