NOTES
TO FINANCIAL STATEMENTS
December
31, 2015 and 2014
1.
ORGANIZATION
Powerdyne,
Inc., was incorporated on February 2, 2010 in Nevada, and is registered to do business in Rhode Island and Massachusetts. On February
7, 2011, Powerdyne, Inc. merged with Powerdyne International, Inc., formerly Greenmark Acquisition Corporation, a publicly held
Delaware corporation.
On
December 13, 2010, Powerdyne International, Inc., formerly Greenmark Acquisition Corporation, filed an Amended and Restated Articles
of Incorporation in order to, among other things, increase the authorized capital stock to 300,000,000 common shares, par value
$0.0001 per share. Unless the context specifies otherwise, as discussed in Note 2, references to the “Company” refers
to Powerdyne International, Inc. and Powerdyne, Inc. after the merger.
At
the closing of the merger, each share of Powerdyne, Inc.’s common stock issued and outstanding immediately prior to the
closing of the Merger was exchanged for the right to receive 7,520 shares of common stock of Powerdyne International, Inc. Accordingly,
an aggregate of 188,000,000 shares of common stock of Powerdyne International, Inc. were issued to the holders of Powerdyne, Inc.’s
common stock.
On
July 25, 2014, Powerdyne International, Inc. filed Form 14C in order to increase the authorized capital stock to 550,000,000 common
shares, par value $0.0001 per share.
On
January 26, 2015, Powerdyne International, Inc. filed a Certificate of Amendment to its Certificate of Incorporation with the
Secretary of State of the State of Delaware increasing the authorized capital stock to 2,020,000,000 shares consisting of 2,000,000,000
common shares, par value $0.0001 per share and 20,000,000 shares which may be designated as common or preferred stock, par value
$0.0001 per share.
The
Company has begun production and distribution of completely packaged independent electrical generator units that run on environmentally-friendly
fuel sources, such as natural gas and propane.
2.
REVERSE MERGER ACCOUNTING
On
February 7, 2011, Greenmark Acquisition Corporation, which was a publicly held Delaware corporation, merged with Powerdyne, Inc.
Upon closing of the transaction, Greenmark Acquisition Corporation, the surviving corporation in the merger, changed its name
to Powerdyne International, Inc.
The
merger was accounted for as a reverse-merger, and recapitalization in accordance with generally accepted accounting principles
in the United States (“GAAP”). Powerdyne, Inc. was the acquirer for financial reporting purposes and the Company was
the acquired company. Consequently, the assets and liabilities and the operations that are reflected in the historical financial
statements prior to the merger are those of Powerdyne, Inc. and have been recorded at the historical cost basis of Powerdyne,
Inc., and the financial statements after completion of the merger include the assets and liabilities of the Company and Powerdyne,
Inc., historical operations of Powerdyne, Inc. and operations of the Company from the closing date of the merger. Common stock
and the corresponding capital amounts of the Company pre-merger were retroactively restated as capital stock shares reflecting
the exchange ratio in the merger. In conjunction with the merger, the Company received no cash and assumed no liabilities from
Greenmark Acquisition Corporation.
3.
BASIS OF PRESENTATION
The
accompanying audited financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) and include all the notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered
necessary for fair presentation of the financial statements have been included.
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial
statements. Such financial statements and accompanying notes are the representations of the Company’s management, who are
responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted
in the United States of America (“GAAP”) in all material respects, and have been consistently applied in preparing
the accompanying financial statements.
Going
Concern
Since
its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting
management and technical staff, acquiring operating assets and raising capital. The Company has not generated significant revenues
from its principal operations, and there is no assurance of future revenues. As of December 31, 2015, the Company had an accumulated
deficit of $3,189,717. The Company’s continuation as a going concern is dependent on its ability to generate sufficient
cash flows from operations to meet its obligations and/or obtaining additional financing from its members or other sources, as
may be required.
The
Company’s activities will necessitate significant uses of working capital beyond December 31, 2015. Additionally, the Company’s
capital requirements will depend on many factors, including the success of the Company’s sales and the status of competitive
products. The Company plans to continue financing its operations with cash received from financing activities and revenue from
operations.
While
the Company strongly believes that its capital resources will be sufficient in the near term, there is no assurance that the Company’s
activities will generate sufficient revenues to sustain its operations without additional capital or, if additional capital is
needed, those such funds, if available, will be obtainable on terms satisfactory to the Company.
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern; however, the
above condition raises substantial doubt about the Company’s ability to do so. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications
of liabilities that may result should the Company be unable to continue as a going concern.
Use
of Estimates
In
preparing these audited financial statements, management is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements
and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Fair
Value of Financial Instruments
The
Company follows guidance for accounting for fair value measurements of financial assets and financial liabilities and for fair
value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring
basis. Additionally, the Company adopted guidance for fair value measurement related to nonfinancial items that are
recognized and disclosed at fair value in the financial statements on a nonrecurring basis. The guidance establishes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority
to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy
are as follows:
Level
1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability
to access at the measurement date.
Level
2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly.
Level
3 inputs are unobservable inputs for the asset or liability.
The
Company monitors the market conditions and evaluates the fair value hierarchy levels at least quarterly. For any transfers in
and out of the levels of the fair value hierarchy, the Company elects to disclose the fair value measurement at the beginning
of the reporting period during which the transfer occurred.
The
Company’s financial instruments consisted of cash, accounts payable and accrued liabilities, advances to stockholders, notes
payable and convertible debt. The estimated fair value of cash, accounts payable and accrued liabilities, advances to stockholders,
and notes payable approximates its carrying amount due to the short maturity of these instruments. The recognition of the derivative
values of convertible debt are based on the weighted-average Black-Scholes option pricing model.
Cash
The
Company considers all highly-liquid investments with maturities of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of December 31, 2015 and December 31, 2014, respectively.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents.
The Company places its cash with high quality banking institutions. From time to time, the Company may maintain cash balances
at certain institutions in excess of the Federal Deposit Insurance Corporation limit. The Company has not incurred any loss from
this risk.
Property
and Equipment
Property
and equipment is stated at cost. Capital expenditures for improvements and upgrades to existing equipment are also capitalized.
Maintenance and repairs are expensed as incurred. The equipment is depreciated over 10 years on a straight-line basis. Vehicles
are depreciated over 5 years using the straight-line basis. Depreciation expense for the periods ended December 31, 2015 and 2014
was $10,925 and $13,240, respectively.
Derivatives
and Hedging
In
April 2008, the FASB issued a pronouncement that provides guidance on determining what types of instruments or embedded features
in an instrument held by a reporting entity can be considered indexed to its own stock for the purpose of evaluating the first
criteria of the scope exception in the pronouncement on accounting for derivatives. This pronouncement was effective for financial
statements issued for fiscal years beginning after December 15, 2008. The adoption of these requirements can affect the accounting
for many convertible instruments with provisions that protect holders from a decline in the stock price. Each reporting period,
the Company evaluates whether convertible debt to acquire stock of the Company contain provisions that protect holders from declines
in the stock price or otherwise could result in modification of the exercise price under the respective convertible debt agreements.
The Company determined that the conversion features in the convertible notes issued during the year ended December 31, 2013 and
2014, as well as the first, second, and third quarters of 2015 contained such provisions and recorded such instruments as derivative
liabilities. See Note 8, Convertible Debt.
Long-Lived
Assets
In
accordance with ASC 350-30 (formerly SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets
), the
Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their then carrying
values may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future
cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying
amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available,
or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. The Company’s
management currently believes there is impairment of its long-lived assets. There can be no assurance however, that market
conditions will not change or demand for the Company’s products under development will continue. Either of these could result
in future impairment of long-lived assets.
Income
Taxes
As
a result of the implementation of certain provisions of ASC 740,
Income Taxes
, (formerly FIN 48,
Accounting for Uncertainty
in Income Taxes – An Interpretation of FASB Statement No. 109),
(“ASC 740”), which clarifies the accounting
and disclosure for uncertainty in tax positions, as defined. ASC 740 seeks to reduce the diversity in practice associated with
certain aspects of the recognition and measurement related to accounting for income taxes.
In
2010, the Company adopted Accounting for Uncertain Income Taxes under the provisions of ASC 740. ASC 740 clarifies the accounting
for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in
the financial statements. It also provides guidance on derecognition, measurement, classification, interest and penalties, accounting
in interim periods, disclosure and transition. The Company did not recognize any additional liability for unrecognized tax benefits
as a result of the adoption of ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable
to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will
not be realized.
We
believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that
will result in a material change to our financial position. Therefore, no reserves for uncertain income tax positions have been
recorded pursuant to ASC 740. In addition, we did not record a cumulative effect adjustment related to the adoption of ASC 740.
Our policy for recording interest and penalties associated with income-based tax audits is to record such items as a component
of income taxes.
Our
tax provision determined using an estimate of our annual effective tax rate using enacted tax rates expected to apply to taxable
income in the years in which they are earned, adjusted for discrete items, if any, that are taken into account in the relevant
period. Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a
cumulative adjustment. Income taxes payable as of December 31, 2015 and December 31, 2014 were $500 and $956, respectively.
Loss
per Common Share
Basic
loss per common share excludes dilutive securities and is computed by dividing net loss by the weighted average number of common
shares outstanding during the period. Diluted earnings per common share reflect the potential dilution that could occur if securities
or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock
that then shared in the earnings of the entity. Since the Company has only incurred losses, basic and diluted loss per share is
the same. As of December 31, 2015 and 2014, there were no outstanding dilutive securities.
The
following table represents the computation of basic and diluted losses per share:
|
|
|
Year ended
December 31,
2015
|
|
|
Year ended
December 31,
2014
|
|
|
|
|
|
|
|
|
|
|
Loss available for common shareholder
|
|
$
|
(539,060
|
)
|
|
$
|
(1,068,733
|
)
|
|
Basic and fully diluted loss per share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic and diluted
|
|
|
963,014,524
|
|
|
|
223,942,983
|
|
Net
loss per share is based upon the weighted average shares of common stock outstanding.
Recent
Accounting Pronouncements
In
June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements.
ASU 2014-10 eliminates the distinction of a development stage entity and certain related disclosure requirements, including the
elimination of inception-to-date information on the statements of operations, cash flows and stockholders’ equity. The amendments
in ASU 2014-10 will be effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods
within those annual periods, however early adoption is permitted. The Company adopted ASU 2014-10 since the quarter ended June
30, 2014, thereby no longer presenting or disclosing any information required by Topic 915.
In
August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40):
Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”).
ASU 2014-15, which is effective for annual reporting periods ending after December 15, 2016, extends the responsibility for performing
the going-concern assessment to management and contains guidance on how to perform a going-concern assessment and when going-concern
disclosures would be required under U.S. GAAP. The Company elected to adopt ASU 2014-15 effective with this financial statement.
Management’s evaluations regarding the events and conditions that raise substantial doubt regarding the Company’s
ability to continue as a going concern have been disclosed in this Note 5.
5.
GOING CONCERN
The
Company has generated $752 in revenue since inception to date and has sustained operating losses during the year ended
December 31, 2015. The Company had a working capital deficit of $373,708 and an accumulated deficit of $3,189,717 as of
December 31, 2015. The Company's continuation as a going concern is dependent on its ability to generate sufficient cash
flows from operations to meet its obligations and/or obtaining additional financing from its members or other sources, as may
be required.
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern; however, the
above condition raises substantial doubt about the Company's ability to do so. The financial statements do not include any adjustments
to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of
liabilities that may result should the Company be unable to continue as a going concern.
In
order to maintain its current level of operations, the Company will require additional working capital from either cash flow from
operations or from the sale of its equity. However, the Company currently has no commitments from any third parties for the purchase
of its equity. If the Company is unable to acquire additional working capital, it will be required to significantly reduce its
current level of operations.
6.
PROPERTY AND EQUIPMENT - NET
Equipment
consists of the following as of December 31, 2015 and December 31, 2014:
|
|
|
December 31,
2015
|
|
|
December 31,
2014
|
|
|
Machinery and equipment
|
|
$
|
171,043
|
|
|
$
|
131,087
|
|
|
Less impairment of equipment
|
|
|
(38,484
|
)
|
|
|
(38,484
|
)
|
|
|
|
|
132,559
|
|
|
|
92,603
|
|
|
Less accumulated depreciation
|
|
|
(53,528
|
)
|
|
|
(42,603
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Property and Equipment
|
|
$
|
79,031
|
|
|
$
|
50,000
|
|
Equipment
is stated at cost and depreciated on a straight-line basis over the assets’ estimated useful lives: machinery and equipment 10 years. Total depreciation expense for the periods ended December 31, 2015 and 2014 was $10,925 and
$13,240, respectively.
During
the year ended December 31, 2014, the Company determined that machinery and equipment was impaired due to changes in technology
resulting in more cost effective production of the gensets. The residual value of this machinery and equipment is $50,000; therefore
$38,484 was recorded as an impairment loss. As of December 31, 2015, there is no additional impairment loss recognized.
7.
LEASE
On
March 11, 2015 the Company finalized its negotiations with Farmacia Brisas del Mar, a corporation organized under the laws of
Puerto Rico (the “Lessee”), and the Company and the Lessee have entered into a five-year contract to lease power generating
equipment to Lessee based upon power consumption. In addition, the custom designed system will also provide cogeneration capabilities
with the addition of chillers to support the air conditioning demands. The agreement provides for a payment to the Company
of a monthly fee equal to the greater of a set monthly base rate or a monthly base rate plus an additional amount based on kilowatt
wattage. The agreement provides for termination only in the event of nonperformance by the Company unless Lessee pays all payments
due for the remainder of the term. The agreement contains representation and warranties, default provisions and indemnification
provisions typical for agreements of this type.
8.
COMMON STOCK
Stock
issued for services
During
the year ending December 31, 2014 the total number of shares of common stock issued for services was 46,078,214 and the Company
valued the total of the stock issued for services to be $142,703.
On
May 1, 2015
the Company issued 600,000 shares to a consultant as compensation for services
rendered. The Company valued the stock at $0.0005, for a total of $300.
On
July 29, 2015
the Company issued 1,000,000 shares to a consultant as compensation for services
rendered. The Company valued the stock at $0.0005, for a total of $500.
On
July 29, 2015
the Company issued 1,000,000 shares to a consultant as compensation for services
rendered. The Company valued the stock at $0.0005, for a total of $500.
On
July 29, 2015
the Company issued 90,000,000 shares to stockholder as compensation for services
rendered. The Company valued the stock at $0.0005, for a total of $45,000.
On
July 29, 2015
the Company issued 78,000,000 shares to stockholder as compensation for services
rendered. The Company valued the stock at $0.0005, for a total of $39,000.
On
July 29, 2015
the Company issued 89,000,000 shares to stockholder as compensation for services
rendered. The Company valued the stock at $0.0005, for a total of $44,500.
On
July 29, 2015
the Company issued 6,000,000 shares to a consultant as compensation for services
rendered. The Company valued the stock at $0.0005, for a total of $3,000.
On
July 29, 2015
the Company issued 3,000,000 shares to a consultant as compensation for services
rendered. The Company valued the stock at $0.0005, for a total of $1,500.
On
July 29, 2015
the Company issued 3,000,000 shares to a consultant as compensation for services
rendered. The Company valued the stock at $0.0005, for a total of $1,500.
On
July 29, 2015
the Company issued 2,000,000 shares to a consultant as compensation for services
rendered. The Company valued the stock at $0.0005, for a total of $1,000.
On
July 29, 2015
the Company issued 3,000,000 shares to a consultant as compensation for services
rendered. The Company valued the stock at $0.0005, for a total of $1,500.
On
July 29, 2015
the Company issued 2,000,000 shares to a consultant as compensation for services
rendered. The Company valued the stock at $0.0005, for a total of $1,000.
On
July 29, 2015
the Company issued 1,000,000 shares to a consultant as compensation for services
rendered. The Company valued the stock at $0.0005, for a total of $500.
During
the year ended December 31, 2015 279,600,000 shares were issued to consultants and stockholders as compensation for services rendered.
The Company valued the stock at $0.0005 per share for a total of $139,800.
Common
stock issued in exchange for debt
On
January 6, 2015 the Company issued 13,675,870 shares for the conversion and reduction of $5,000 of debt and $265 of accrued
interest held by a venture capital lender. On February 18, 2015 the Company issued 7,727,012 shares for the conversion and reduction
of $2,800 of debt and $175 of accrued interest held by a venture capital lender. On March 4, 2015 the Company issued 5,535,246
shares for the conversion and reduction of $2,000 of debt and $131 of accrued interest held by a venture capital lender. On March
10, 2015 the Company issued 18,427,386 shares for the conversion and reduction of $7,600 of debt and $508 of accrued interest
held by a venture capital lender. On March 23, 2015 the Company issued 20,907,750 shares for the conversion and reduction of $7,800
of debt held by a venture capital lender.
On
March 4, 2015 the Company issued 15,900,000 shares for the conversion and reduction of $6,678 of debt held by a venture capital
lender. On March 25, 2015 the Company issued 15,902,000 shares for the conversion and reduction of $6,679 of debt held by a venture
capital lender.
On
March 20, 2015 the Company issued 25,974,026 shares for the conversion and reduction of $10,000 of debt held by a venture capital
lender.
On
April 6, 2015 the Company issued 24,600,000 shares for the conversion and reduction of $10,332 of debt held by a venture
capital lender. On April 27, 2015 the Company issued 27,300,000 shares for the conversion and reduction of $8,190 of debt
held by a venture capital lender. On May 7, 2015 the Company issued 31,600,000 shares for the conversion and reduction of
$9,480 of accrued interest held by a venture capital lender. On May 21, 2015 the Company issued 35,078,875 shares for the
conversion and reduction of $8,121 of debt and $298 of accrued interest held by a venture capital lender. These conversions
extinguished the Company’s note payable with this venture capital lender.
On
April 6, 2015 the Company issued 27,272,727 shares for the conversion and reduction of $3,420 of debt and $7,080 of accrued interest
held by a venture capital lender. On April 27, 2015 the Company issued 35,454,545 shares for the conversion and reduction of $9,750
of debt held by a venture capital lender. On May 6, 2015 the Company issued 36,850,000 shares for the conversion and reduction
of $10,134 of debt held by a venture capital lender. On May 14, 2015 the Company issued 36,780,000 shares for the conversion and
reduction of $8,092 of debt held by a venture capital lender. On May 22, 2015 the Company issued 49,269,100 shares for the conversion
and reduction of $10,839 of debt held by a venture capital lender. On June 4, 2015 the Company issued 30,752,045 shares for the
conversion and reduction of $6,765 of debt held by a venture capital lender. These conversions extinguished the Company’s
note payable with this venture capital lender.
On
April 15, 2015 the Company issued 2,233,220 shares for the conversion and reduction of $800 of debt and $60 of accrued interest
held by a venture capital lender. This conversion extinguished the Company’s note payable with this venture capital lender.
On
April 28, 2015 the Company issued 23,910,945 shares for the conversion and reduction of $6,500 of debt and $76 of accrued interest
held by a venture capital lender. On May 11, 2015 the Company issued 29,511,745 for the conversion and reduction of $8,000 of
debt held plus $116 of accrued interest by a venture capital lender. On May 21, 2015 the Company issued 33,734,545 shares for
the conversion and reduction of $7,300 of debt plus $122 of accrued interest held by a venture capital lender. On May 28, 2015
the Company issued 21,752,272 shares for the conversion and reduction of $4,700 of debt plus $86 of accrued interest held by a
venture capital lender. These conversions extinguished the Company’s note payable with this venture capital lender.
On
May 21, 2015 the Company issued 3,221,125 shares for the conversion and reduction of $773 of accrued interest held by a venture
capital lender. These conversions extinguished the Company’s note payable with this venture capital lender.
On
June 16, 2015 the Company issued 4,978,000 shares for the conversion and reduction of $896 of accrued interest held by a venture
capital lender. These conversions extinguished the Company’s note payable with this venture capital lender.
On
June 5, 2015 the Company issued 31,313,318 shares for the conversion and reduction of $6,500 of debt and $389 of accrued interest
held by a venture capital lender. On June 19, 2015 the Company issued 48,474,848 shares for the conversioin and reduction of $7,525
of debt and $473 of accrued interest held by a venture capital lender. On June 30, 2015 the Company issued 48,262,000 shares for
the conversion and reduction of $7,475 of debt and $488 of accrued interest held by a venture capital lender.
On
July 17 2015 the Company issued 24,296,409 shares for the conversion and reduction of $5,000 of debt and $345 of accrued interest
held by a venture capital lender. This conversion extinguished the Company’s note payable with this venture capital lender.
During
the year ended December 31, 2015 the total number of shares of common stock issued in exchange for settlement of debt was 730,695,009
and the value of the total stock issued in exchange for settlement of debt was $199,761.
9.
CONVERTIBLE DEBT
JMJ
Financial
On
March 31, 2015, the Company revalued the derivative value of the JMJ Note 1 using the weighted-average Black-Scholes option pricing
model with the following assumptions: (i) dividend yield of 0%; (ii) expected volatility of 361.17%; (iii) risk free rate of 0.26%,
(iv) expected term of 1 year, (v) market value share price of $0.0009, and (vi) per share conversion price of $0.00042. The Company
determined the derivative value to be $3,263 as of March 31, 2015, which represents a decrease in the change in fair value of
the derivative liability in the amount of $3,076 as compared to the derivative value on December 31, 2014. Accordingly, the Company
recorded a non-cash decrease in the change in fair value of the derivative liability of $3,076 while also decreasing the derivative
liability by the same amount.
On
June 16, 2015 the Investor/Lender exercised its right to convert the balance of $896 of accrued and unpaid interest of the JMJ
Note 1 into 4,978,000 common shares. The Company has determined that the conversion feature is considered an embedded conversion
feature and thereby creates a derivative liability for the Company. On the date of conversion, the Company calculated the value
of the derivative liability using the weighted-average Black-Scholes option pricing model, which approximates the Monte Carlo
and other binomial valuation techniques, with the following assumptions: (i) dividend yield of 0%; (ii) expected volatility of
330.75%; (iii) risk free rate of 0.11%, (iv) expected term of 1 year, (v) market value share price of $0.0005, and (vi) per share
conversion price of $0.00018. This conversion produced an increase in additional paid in capital of $2,193 and a decrease in the
derivative liability by the same amount. There was also a decrease in the change in fair value of the derivative liability of
$493 while producing a decrease in the derivative liability by the same amount.
The
JMJ Note 1 was fully converted into common stock as of June 16, 2015.
On
March 4, 2015 the Investor/Lender exercised its right to convert $6,678 of the JMJ Note 2 into 15,900,000 common shares. The Company
has determined that the conversion feature is considered an embedded conversion feature and thereby creates a derivative liability
for the Company. On the date of conversion, the Company calculated the value of the derivative liability using the weighted-average
Black-Scholes option pricing model, which approximates the Monte Carlo and other binomial valuation techniques, with the following
assumptions: (i) dividend yield of 0%; (ii) expected volatility of 312.66%; (iii) risk free rate of 0.01%, (iv) expected term
of 1year, (v) market value share price of $0.0013, and (vi) per share conversion price of $0.00042. This conversion produced an
increase in additional paid in capital of $15,472 and a decrease in the derivative liability by the same amount. There was also
a decrease in the change in fair value of the derivative liability of $61,360 producing a decrease in the derivative liability
by the same amount.
On
March 25, 2015 the Investor/Lender exercised its right to convert $6,679 of the JMJ Note 2 into 15,902,000 common shares. The
Company has determined that the conversion feature is considered an embedded conversion feature and thereby creates a derivative
liability for the Company. On the date of conversion, the Company calculated the value of the derivative liability using the weighted-average
Black-Scholes option pricing model, which approximates the Monte Carlo and other binomial valuation techniques, with the following
assumptions: (i) dividend yield of 0%; (ii) expected volatility of 275.87%; (iii) risk free rate of 0.02%, (iv) expected term
of 1year, (v) market value share price of $0.0011, and (vi) per share conversion price of $0.00042. This conversion produced an
increase in additional paid in capital of $11,608 and a decrease in the derivative liability by the same amount. There was also
a decrease in the change in fair value of the derivative liability of $24,950 producing a decrease in the derivative liability
by the same amount.
On
March 31, 2015, the Company revalued the derivative value of the $26,643 JMJ Note 2 using the weighted-average Black-Scholes option
pricing model with the following assumptions: (i) dividend yield of 0%; (ii) expected volatility of 286.81%; (iii) risk free rate
of 0.05%, (iv) expected term of 1 year, (v) market value share price of $0.0009, and (vi) per share conversion price of $0.00042.
The Company determined the derivative value to be $46,964 as of March 31, 2015, which represents a decrease in the change in fair
value of the derivative in the amount of $16,335 as compared to the derivative value on March 25, 2015. Accordingly, the Company
recorded a non-cash decrease in fair value of the derivative liability of $16,335 while also decreasing the derivative liability
by the same amount. In addition, the Company recorded an amortization of debt discount of $4,925 and a reduction of debt discounts
of the same amount.
On
April 6, 2015 the Investor/Lender exercised its right to convert $10,332 of the JMJ Note 2 into 24,600,000 common shares. The
Company has determined that the conversion feature is considered an embedded conversion feature and thereby creates a derivative
liability for the Company. On the date of conversion, the Company calculated the value of the derivative liability using the weighted-average
Black-Scholes option pricing model, which approximates the Monte Carlo and other binomial valuation techniques, with the following
assumptions: (i) dividend yield of 0%; (ii) expected volatility of 272.33%; (iii) risk free rate of 0.03%, (iv) expected term
of 1year, (v) market value share price of $0.0009, and (vi) per share conversion price of $0.00042. This conversion produced an
increase in additional paid in capital of $14,900 and a decrease in the derivative liability by the same amount. There was also
a change in fair value of the derivative liability of $5,560 producing an increase in the derivative liability by the same amount.
On
April 27, 2015 the Investor/Lender exercised its right to convert $8,190 of the JMJ Note 2 into 27,300,000 common shares. The
Company has determined that the conversion feature is considered an embedded conversion feature and thereby creates a derivative
liability for the Company. On the date of conversion, the Company calculated the value of the derivative liability using the weighted-average
Black-Scholes option pricing model, which approximates the Monte Carlo and other binomial valuation techniques, with the following
assumptions: (i) dividend yield of 0%; (ii) expected volatility of 346.63%; (iii) risk free rate of 0.02%, (iv) expected term
of 1year, (v) market value share price of $0.001, and (vi) per share conversion price of $0.0003. This conversion produced an
increase in additional paid in capital of $21,230 and a decrease in the derivative liability by the same amount. There was also
a change in fair value of the derivative liability of $30,004 producing an increase in the derivative liability by the same amount.
On
May 7, 2015 the Investor/Lender exercised its right to convert $9,480 of accrued and unpaid interest of the JMJ Note 2 into 31,600,000
common shares. The Company has determined that the conversion feature is considered an embedded conversion feature and thereby
creates a derivative liability for the Company. On the date of conversion, the Company calculated the value of the derivative
liability using the weighted-average Black-Scholes option pricing model, which approximates the Monte Carlo and other binomial
valuation techniques, with the following assumptions: (i) dividend yield of 0%; (ii) expected volatility of 336.62%; (iii) risk
free rate of 0.01%, (iv) expected term of 1year, (v) market value share price of $0.0006, and (vi) per share conversion price
of $0.0003. This conversion produced an increase in additional paid in capital of $12,397 and a decrease in the derivative liability
by the same amount. There was also a change in fair value of the derivative liability of $10,577 producing an increase in the
derivative liability by the same amount.
On
May 21, 2015 the Investor/Lender exercised its right to convert the balance of the loan amount of $8,121 of the JMJ Note 2 plus
$298 of accrued and unpaid interest into 35,078,875 common shares. The Company has determined that the conversion feature is considered
an embedded conversion feature and thereby creates a derivative liability for the Company. On the date of conversion, the Company
calculated the value of the derivative liability using the weighted-average Black-Scholes option pricing model, which approximates
the Monte Carlo and other binomial valuation techniques, with the following assumptions: (i) dividend yield of 0%; (ii) expected
volatility of 416.87%; (iii) risk free rate of 0.02%, (iv) expected term of 1year, (v) market value share price of $0.0008, and
(vi) per share conversion price of $0.00024. This conversion produced an increase in additional paid in capital of $21,586 and
a decrease in the derivative liability by the same amount. There was also a change in fair value of the derivative liability of
$10,577 producing an increase in the derivative liability by the same amount. In addition, the Company recorded an amortization
of debt discount of $27,798 and a reduction of debt discounts of the same amount.
LG
Capital Funding, LLC
On
January 6, 2015 the Investor/Lender exercised its right to convert $5,000 plus $265 of accrued and unpaid interest of the LG Note
1 into 13,675,870 common shares. The Company has determined that the conversion feature is considered an embedded conversion feature
and thereby creates a derivative liability for the Company. On the date of conversion, the Company calculated the value of the
derivative liability using the weighted-average Black-Scholes option pricing model, which approximates the Monte Carlo and other
binomial valuation techniques, with the following assumptions: (i) dividend yield of 0%; (ii) expected volatility of 396.56%;
(iii) risk free rate of 0.03%, (iv) expected term of 1 year, (v) market value share price of $0.0008, and (vi) per share conversion
price of $0.00039. This conversion produced an increase in additional paid in capital of $9,085 and a decrease in the derivative
liability by the same amount. There was also a decrease in the change in fair value of the derivative liability of $24,743 producing
a decrease in the derivative liability by the same amount.
On
February 18, 2015 the Investor/Lender exercised its right to convert $2,800 plus $175 of accrued and unpaid interest of the LG
Note 1 into 7,727,012 common shares. The Company has determined that the conversion feature is considered an embedded conversion
feature and thereby creates a derivative liability for the Company. On the date of conversion, the Company calculated the value
of the derivative liability using the weighted-average Black-Scholes option pricing model, which approximates the Monte Carlo
and other binomial valuation techniques, with the following assumptions: (i) dividend yield of 0%; (ii) expected volatility of
309.01%; (iii) risk free rate of 0.02%, (iv) expected term of 1 year, (v) market value share price of $0.0009, and (vi) per share
conversion price of $0.00039. This conversion produced an increase in additional paid in capital of $4957 and a decrease in the
derivative liability by the same amount. There was also a decrease in the change in fair value of the derivative liability of
$789 producing a decrease in the derivative liability by the same amount.
On
March 4, 2015 the Investor/Lender exercised its right to convert $2,000 plus $131 of accrued and unpaid interest of the LG Note
1 into 5,535,246 common shares. The Company has determined that the conversion feature is considered an embedded conversion feature
and thereby creates a derivative liability for the Company. On the date of conversion, the Company calculated the value of the
derivative liability using the weighted-average Black-Scholes option pricing model, which approximates the Monte Carlo and other
binomial valuation techniques, with the following assumptions: (i) dividend yield of 0%; (ii) expected volatility of 312.66%;
(iii) risk free rate of 0.01%, (iv) expected term of 1 year, (v) market value share price of $0.0013, and (vi) per share conversion
price of $0.00039. This conversion produced an increase in additional paid in capital of $5,501 and a decrease in the derivative
liability by the same amount. There was also an increase in the change in fair value of the derivative liability of $16,946 producing
an increase in the derivative liability by the same amount.
On
March 10, 2015 the Investor/Lender exercised its right to convert $7,600 plus $508 of accrued and unpaid interest of the LG Note
1 into 18,427,386 common shares. The Company has determined that the conversion feature is considered an embedded conversion feature
and thereby creates a derivative liability for the Company. On the date of conversion, the Company calculated the value of the
derivative liability using the weighted-average Black-Scholes option pricing model, which approximates the Monte Carlo and other
binomial valuation techniques, with the following assumptions: (i) dividend yield of 0%; (ii) expected volatility of 286.71%;
(iii) risk free rate of 0.02%, (iv) expected term of 1 year, (v) market value share price of $0.0025, and (vi) per share conversion
price of $0.00044. This conversion produced an increase in additional paid in capital of $38,530 and a decrease in the derivative
liability by the same amount. There was also an increase in the change in fair value of the derivative liability of $35,507 producing
an increase in the derivative liability by the same amount.
On
March 23, 2015 the Investor/Lender exercised its right to convert $7,800 of the LG Note 1 into 17,727,273 common shares. The Company
has determined that the conversion feature is considered an embedded conversion feature and thereby creates a derivative liability
for the Company. On the date of conversion, the Company calculated the value of the derivative liability using the weighted-average
Black-Scholes option pricing model, which approximates the Monte Carlo and other binomial valuation techniques, with the following
assumptions: (i) dividend yield of 0%; (ii) expected volatility of 281.34%; (iii) risk free rate of 0.02%, (iv) expected term
of 1 year, (v) market value share price of $0.0011, and (vi) per share conversion price of $0.00044. This conversion produced
an increase in additional paid in capital of $12,810 and a decrease in the derivative liability by the same amount. There was
also a decrease in the change in fair value of the derivative liability of $24,330 producing a decrease in the derivative liability
by the same amount.
On
March 31, 2015, the Company revalued the derivative value of the LG Note 1 using the weighted-average Black-Scholes option pricing
model with the following assumptions: (i) dividend yield of 0%; (ii) expected volatility of 286.81%; (iii) risk free rate of 0.05%,
(iv) expected term of 1 year, (v) market value share price of $0.0009, and (vi) per share conversion price of $0.0005. The Company
determined the derivative value to be $802 as of March 31, 2015, which represents a change in the fair value of the derivative
in the amount of $512 as compared to the derivative value on March 23, 2015. Accordingly, the Company recorded a decrease in the
change in fair value of the derivative liability of $512 while also decreasing the derivative liability from $12,810 to $802 as
of March 31, 2015. In addition, the Company recorded an amortization of debt discount of $20,757 and a reduction of debt discounts
of the same amount.
On
April 15, 2015 the Investor/Lender exercised its right to convert the balance of the loan amount of $800 of the LG Note 1 plus
$60 of accrued and unpaid interest of the Note into 2,233,220 common shares. The Company has determined that the conversion feature
is considered an embedded conversion feature and thereby creates a derivative liability for the Company. On the date of conversion,
the Company calculated the value of the derivative liability using the weighted-average Black-Scholes option pricing model, which
approximates the Monte Carlo and other binomial valuation techniques, with the following assumptions: (i) dividend yield of 0%;
(ii) expected volatility of 266.43%; (iii) risk free rate of 0.02%, (iv) expected term of 1year, (v) market value share price
of $0.0011, and (vi) per share conversion price of $0.00039. This conversion produced an increase in additional paid in capital
of $1,620 and a decrease in the derivative liability by the same amount. There was also a change in fair value of the derivative
liability of $818 producing an increase in the derivative liability by the same amount.
The
LG Note 1 was fully converted into common stock as of April 15, 2015.
On
March 31, 2015, the Company revalued the derivative value of the LG Note 2 using the weighted-average Black-Scholes option pricing
model with the following assumptions: (i) dividend yield of 0%; (ii) expected volatility of 286.82%; (iii) risk free rate of 0.03%,
(iv) expected term of 1 year, (v) market value share price of $0.0009, and (vi) per share conversion price of $0.0005. The Company
determined the derivative value to be $36,098 as of March 31, 2015, which represents a change in the fair value of the derivative
in the amount of $16,363 as compared to the derivative value on March 3, 2015. Accordingly, the Company recorded a decrease in
the change in fair value of the derivative liability of $16,363 while also decreasing the derivative liability from $52,461 to
$36,098 as of March 31, 2015. In addition, the Company recorded an amortization of debt discount of $4,011 and a reduction of
debt discounts of the same amount.
On
April 28, 2015 the Investor/Lender exercised its right to convert $6,500 of the LG Note 2 plus $76 of accrued and unpaid interest
of the Note into 23,910,945 common shares. The Company has determined that the conversion feature is considered an embedded conversion
feature and thereby creates a derivative liability for the Company. On the date of conversion, the Company calculated the value
of the derivative liability using the weighted-average Black-Scholes option pricing model, which approximates the Monte Carlo
and other binomial valuation techniques, with the following assumptions: (i) dividend yield of 0%; (ii) expected volatility of
374.08%; (iii) risk free rate of 0.09%, (iv) expected term of 1year, (v) market value share price of $0.0008, and (vi) per share
conversion price of $0.00028. This conversion produced an increase in additional paid in capital of $16,330 and a decrease in
the derivative liability by the same amount. There was also a change in fair value of the derivative liability of $29,900 producing
an increase in the derivative liability by the same amount.
On
May 11, 2015 the Investor/Lender exercised its right to convert of $8,000 of the LG Note 2 plus $116 of accrued and unpaid interest
of the Note into 29,511,745 common shares. The Company has determined that the conversion feature is considered an embedded conversion
feature and thereby creates a derivative liability for the Company. On the date of conversion, the Company calculated the value
of the derivative liability using the weighted-average Black-Scholes option pricing model, which approximates the Monte Carlo
and other binomial valuation techniques, with the following assumptions: (i) dividend yield of 0%; (ii) expected volatility of
374.08%; (iii) risk free rate of 0.09%, (iv) expected term of 1 year, (v) market value share price of $0.0006, and (vi) per share
conversion price of $0.00028. This conversion produced an increase in additional paid in capital of $14,338 and a decrease in
the derivative liability by the same amount. There was also a change in fair value of the derivative liability of $16,368 producing
an increase in the derivative liability by the same amount.
On May 21, 2015 the
Investor/Lender exercised its right to convert $7,300 plus $122 of accrued and unpaid interest of the LG Note 2 into 33,734,545
common shares. The Company has determined that the conversion feature is considered an embedded conversion feature and thereby
creates a derivative liability for the Company. On the date of conversion, the Company calculated the value of the derivative
liability using the weighted-average Black-Scholes option pricing model, which approximates the Monte Carlo and other bino
mial
valuation techniques, with the following assumptions: (i) dividend yield of 0%; (ii) expected volatility of 416.87%; (iii) risk
free rate of 0.02%, (iv) expected term of 1year, (v) market value share price of $0.0008, and (vi) per share conversion price
of $0.00024. This conversion produced an increase in additional paid in capital of $21,586 and a decrease in the derivative liability
by the same amount. There was also a change in fair value of the derivative liability of $10,577 producing an increase in the
derivative liability by the same amount.
On
May 28, 2015 the Investor/Lender exercised its right to convert the balance of the loan amount of $4,700 of the LG Note 2 plus
$86 of accrued and unpaid interest of the Note into 21,752,272 common shares. The Company has determined that the conversion feature
is considered an embedded conversion feature and thereby creates a derivative liability for the Company. On the date of conversion,
the Company calculated the value of the derivative liability using the weighted-average Black-Scholes option pricing model, which
approximates the Monte Carlo and other binomial valuation techniques, with the following assumptions: (i) dividend yield of 0%;
(ii) expected volatility of 312.66%; (iii) risk free rate of 0.01%, (iv) expected term of 1year, (v) market value share price
of $0.0006, and (vi) per share conversion price of $0.00022. This conversion produced an increase in additional paid in capital
of $10,038 and a decrease in the derivative liability by the same amount. There was also a decrease in the change in fair value
of the derivative liability of $4,528 producing a decrease in the derivative liability by the same amount. In addition, the Company
recorded an amortization of debt discount of $13,035 and a reduction of debt discounts of the same amount.
The
LG Note 2 was fully converted into common stock as of May 28, 2015.
On
June 5, 2015 the Investor/Lender exercised its right to convert $6,500 plus $389 of accrued and unpaid interest of the LG Note
3 into 31,313,318 common shares. The Company has determined that the conversion feature is considered an embedded conversion feature
and thereby creates a derivative liability for the Company. On the date of conversion, the Company calculated the value of the
derivative liability using the weighted-average Black-Scholes option pricing model, which approximates the Monte Carlo and other
binomial valuation techniques, with the following assumptions: (i) dividend yield of 0%; (ii) expected volatility of 354.31%;
(iii) risk free rate of 0.03%, (iv) exp
ected term of 1year, (v) market value share price of $0.0005, and (vi) per share
conversion price of $0.00022. This conversion produced an increase in additional paid in capital of $11,946 and a decrease in
the derivative liability by the same amount. There was also a change in fair value of the derivative liability of $2,210 producing
an increase in the derivative liability by the same amount.
On
June 19, 2015 the Investor/Lender exercised its right to convert of $7,525 plus $473 of accrued and unpaid interest of the LG
Note 3 into 48,474,848 common shares. The Company has determined that the conversion feature is considered an embedded conversion
feature and thereby creates a derivative liability for the Company. On the date of conversion, the Company calculated the value
of the derivative liability using the weighted-average Black-Scholes option pricing model, which approximates the Monte Carlo
and other binomial valuation techniques, with the following assumptions: (i) dividend yield of 0%; (ii) expected volatility of
362.43%; (iii) risk free rate of 0.01%, (iv) expected term of 1year, (v) market value share price of $0.0005, and (vi) per share
conversion price of $0.000165. This conversion produced an increase in additional paid in capital of $23,698 and a decrease in
the derivative liability by the same amount. There was also a change in fair value of the derivative liability of $25,980 producing
an increase in the derivative liability by the same amount.
On
June 30, 2015 the Investor/Lender exercised its right to convert $7,475 plus $488 of accrued and unpaid interest of the LG Note
3 into 48,262,000 common shares. The Company has determined that the conversion feature is considered an embedded conversion feature
and thereby creates a derivative liability for the Company. On the date of conversion, the Company calculated the value of the
derivative liability using the weighted-average Black-Scholes option pricing model, which approximates the Monte Carlo and other
binomial valuation techniques, with the following assumptions: (i) dividend yield of 0%; (ii) expected volatility of 362.43%;
(iii) risk free rate of 0.01%, (iv) expected term of 1year, (v) market value share price of $0.0006, and (vi) per share conversion
price of $0.000165. This conversion produced an increase in additional paid in capital of $22,983 and a decrease in the derivative
liability by the same amount. There was also a decrease in the change in fair value of the derivative liability of $4,251 producing
a decrease in the derivative liability by the same amount. In addition, the Company recorded an amortization of debt discount
of $21,500 and a reduction of debt discounts of the same amount.
As
of June 30, 2015 the outstanding balance is $5.000 with $5,000 of unamortized debt discount and derivative liabilities of $10,179.
On
July 17, 2015 the Investor/Lender exercised its right to convert the balance of the loan amount of $5,000 of the LG Note 3 plus
$345 of accrued and unpaid interest of the Note into 24,296,409 common shares. The Company has determined that the conversion
feature is considered an embedded conversion feature and thereby creates a derivative liability for the Company. On the date of
conversion, the Company calculated the value of the derivative liability using the weighted-average Black-Scholes option pricing
model, which approximates the Monte Carlo and other binomial valuation techniques, with the following assumptions: (i) dividend
yield of 0%; (ii) expected volatility of 271.66%; (iii) risk free rate of 0.03%, (iv) expected term of 1year, (v) market value
share price of $0.0005, and (vi) per share conversion price of $0.00022. This conversion produced an increase in additional paid
in capital of $7,661 and a decrease in the derivative liability by the same amount. There was also a decrease in the change in
fair value of the derivative liability of $2,518 producing a decrease in the derivative liability by the same amount. In addition,
the Company recorded an amortization of debt discount of $5,000 and a reduction of debt discounts of the same amount.
The
LG Note 3 was fully converted into common stock as of July 17, 2015.
Tonaquint,
Inc.
On
March 20, 2015 the Investor/Lender exercised its right to convert $10,000 of the Tonaquint Note into 25,974,026 common shares.
The Company has determined that the conversion feature is considered an embedded conversion feature and thereby creates a derivative
liability for the Company. On the date of conversion, the Company calculated the value of the derivative liability using the weighted-average
Black-Scholes option pricing model, which approximates the Monte Carlo and other binomial valuation techniques, with the following
assumptions: (i) dividend yield of 0%; (ii) expected volatility of 361.79%; (iii) risk free rate of 0.11%, (iv) expected term
of 1 year, (v) market value share price of $0.0014, and (vi) per share conversion price of $0.00039. This conversion produced
an increase in additional paid in capital of $32,828 and a decrease in the derivative liability by the same amount. There was
also a change in fair value of the derivative liability of $38,582 producing an increase in the derivative liability by the same
amount.
On
March 31, 2015, the Company revalued the derivative value of the $49,000 Tonaquint Note using the weighted-average Black-Scholes
option pricing model with the following assumptions: (i) dividend yield of 0%; (ii) expected volatility of 314.24%; (iii) risk
free rate of 0.14%, (iv) expected term of 1 year, (v) market value share price of $0.0009, and (vi) per share conversion price
of $0.00048. The Company determined the derivative value to be $73,476 as of March 31, 2015, which represents a change in the
fair value of the derivative in the amount of $87,381 as compared to the derivative value on March 20, 2015. Accordingly, the
Company recorded a non-cash decrease in the change in fair value of the derivative of $87,381 while also decreasing the derivative
liability by the same amount. In addition, the Company recorded an amortization of debt discount of $12,329 and a reduction of
debt discounts of the same amount.
On
April 6, 2015 the Investor/Lender exercised its right to convert $10,500 of the Tonaquint Note into 27,272,727 common shares.
The Company has determined that the conversion feature is considered an embedded conversion feature and thereby creates a derivative
liability for the Company. On the date of conversion, the Company calculated the value of the derivative liability using the weighted-average
Black-Scholes option pricing model, which approximates the Monte Carlo and other binomial valuation techniques, with the following
assumptions: (i) dividend yield of 0%; (ii) expected volatility of 299.43%; (iii) risk free rate of 0.10%, (iv) expected term
of 1 year, (v) market value share price of $0.0009, and (vi) per share conversion price of $0.000385. This conversion produced
an increase in additional paid in capital of $19,755 and a decrease in the derivative liability by the same amount. There was
also a change in fair value of the derivative liability of $32,036 producing an increase in the derivative liability by the same
amount.
On
April 27, 2015 the Investor/Lender exercised its right to convert $9,750 of the Tonaquint Note into 35,454,545 common shares.
The Company has determined that the conversion feature is considered an embedded conversion feature and thereby creates a derivative
liability for the Company. On the date of conversion, the Company calculated the value of the derivative liability using the weighted-average
Black-Scholes option pricing model, which approximates the Monte Carlo and other binomial valuation techniques, with the following
assumptions: (i) dividend yield of 0%; (ii) expected volatility of 325.44%, (iii) risk free rate of 0.10%, (iv) expected term
of 1 year, (v) market value share price of $0.001, and (vi) per share conversion price of $0.000275. This conversion produced
an increase in additional paid in capital of $30,347 and a decrease in the derivative liability by the same amount. There was
also a change in fair value of the derivative liability of $56,110 producing an increase in the derivative liability by the same
amount.
On
May 6, 2015 the Investor/Lender exercised its right to convert $10,134 of the Tonaquint Note into 36,850,000 common shares. The
Company has determined that the conversion feature is considered an embedded conversion feature and thereby creates a derivative
liability for the Company. On the date of conversion, the Company calculated the value of the derivative liability using the weighted-average
Black-Scholes option pricing model, which approximates the Monte Carlo and other binomial valuation techniques, with the following
assumptions: (i) dividend yield of 0%; (ii) expected volatility of 331.74%, (iii) risk free rate of 0.08%, (iv) expected term
of 1 year, (v) market value share price of $0.0006, and (vi) per share conversion price of $0.000275. This conversion produced
an increase in additional paid in capital of $17,630 and a decrease in the derivative liability by the same amount. There was
also a decrease in the change in fair value of the derivative liability of $49,186 producing a decrease in the derivative liability
by the same amount.
On
May 14, 2015 the Investor/Lender exercised its right to convert $8,092 of the Tonaquint Note into 36,780,000 common shares. The
Company has determined that the conversion feature is considered an embedded conversion feature and thereby creates a derivative
liability for the Company. On the date of conversion, the Company calculated the value of the derivative liability using the weighted-average
Black-Scholes option pricing model, which approximates the Monte Carlo and other binomial valuation techniques, with the following
assumptions: (i) dividend yield of 0%; (ii) expected volatility of 318.49%, (iii) risk free rate of 0.08%, (iv) expected term
of 1 year, (v) market value share price of $0.0005, and (vi) per share conversion price of $0.00022. This conversion produced
an increase in additional paid in capital of $14,370 and a decrease in the derivative liability by the same amount. There was
also a change in fair value of the derivative liability of $932 producing an increase in the derivative liability by the same
amount.
On
May 22, 2015 the Investor/Lender exercised its right to convert $10,839 of the Tonaquint Note into 49,269,100 common shares. The
Company has determined that the conversion feature is considered an embedded conversion feature and thereby creates a derivative
liability for the Company. On the date of conversion, the Company calculated the value of the derivative liability using the weighted-average
Black-Scholes option pricing model, which approximates the Monte Carlo and other binomial valuation techniques, with the following
assumptions: (i) dividend yield of 0%; (ii) expected volatility of 328.57%, (iii) risk free rate of 0.08%, (iv) expected term
of 1 year, (v) market value share price of $0.0006, and (vi) per share conversion price of $0.00022. This conversion produced
an increase in additional paid in capital of $23,791 and a decrease in the derivative liability by the same amount. There was
also a change in fair value of the derivative liability of $7,374 producing an increase in the derivative liability by the same
amount.
On
June 4, 2015 the Investor/Lender exercised its right to convert the balance of the loan amount of $6,765 of the Tonaquint Note
into 30,752,045 common shares. The Company has determined that the conversion feature is considered an embedded conversion feature
and thereby creates a derivative liability for the Company. On the date of conversion, the Company calculated the value of the
derivative liability using the weighted-average Black-Scholes option pricing model, which approximates the Monte Carlo and other
binomial valuation techniques, with the following assumptions: (i) dividend yield of 0%; (ii) expected volatility of 337.37%,
(iii) risk free rate of 0.02%, (iv) expected term of 1 year, (v) market value share price of $0.0005, and (vi) per share conversion
price of $0.00022. This conversion produced an increase in additional paid in capital of $11,872 and a decrease in the derivative
liability by the same amount. There was also a decrease in the change in fair value of the derivative liability of $2,977 producing
a decrease in the derivative liability by the same amount. In addition, the Company recorded an amortization of debt discount
of $19,452 and a reduction of debt discounts of the same amount.
The
Tonaquint Note was fully converted into common stock as of June 4, 2015.
The
total amount of derivative liabilities at December 31, 2015 and December 31, 2014 was $-0- and $407,735, respectively.
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|
|
|
|
Derivative
|
|
|
|
|
|
Derivative
|
|
|
|
|
|
Note:
|
|
12/31/2014
|
|
|
Initial
|
|
|
Liabilities
|
|
|
3/31/2015
|
|
|
Initial
|
|
|
Liabilities
|
|
|
6/30/2015
|
|
|
Initial
|
|
|
Liabilities
|
|
|
9/30/2015
|
|
|
Liabilities
|
|
|
12/31/2015
|
|
|
JMJ#1
|
|
|
6,339
|
|
|
|
-
|
|
|
|
(3,076
|
)
|
|
|
3,263
|
|
|
|
-
|
|
|
|
(3,263
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
JMJ#2
|
|
|
176,689
|
|
|
|
-
|
|
|
|
(129,725
|
)
|
|
|
46,964
|
|
|
|
-
|
|
|
|
(46,964
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
LGCapital#1
|
|
|
69,604
|
|
|
|
-
|
|
|
|
(68,802
|
)
|
|
|
802
|
|
|
|
-
|
|
|
|
(802
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
LGCapital#2
|
|
|
-
|
|
|
|
52,461
|
|
|
|
(16,363
|
)
|
|
|
36,098
|
|
|
|
-
|
|
|
|
(36,098
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
LGCapital#3
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
44,416
|
|
|
|
(34,237
|
)
|
|
|
10,179
|
|
|
|
-
|
|
|
|
(10,179
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Tonaquint
|
|
|
155,103
|
|
|
|
-
|
|
|
|
(81,627
|
)
|
|
|
73,476
|
|
|
|
-
|
|
|
|
(73,476
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Total
|
|
|
407,735
|
|
|
|
52,461
|
|
|
|
(299,593
|
)
|
|
|
160,603
|
|
|
|
44,416
|
|
|
|
(194,840
|
)
|
|
|
10,179
|
|
|
|
-
|
|
|
|
(10,179
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
The
total derivative liability balance at December 31, 2015 and 2014 was $-0- and $407,735, respectively. The total note payable balance
at December 31, 2015 and 2014 was $-0- and $151,500, respectively and the unamortized debt discounts balance at December 31, 2015
and 2014 was $-0- and $85,260, respectively. During the year ended December 31, 2015 the total amount of proceeds from notes payable
was $26,500 and the total amount of notes payable converted to common stock in exchange for settlement of debt was $454,267, and
also $13,601 of accrued interest was converted to common stock in exchange for settlement of debt. In addition, the derivative
expense at December 31, 2015 and 2014 was $43,877 and $668,584, respectively, and the change in fair value of derivatives at December
31, 2015 and 2014 was income of $50,345 and $159,406, respectively. The total amortization of the debt discount at December 31,
2015 and 2014 was $138,260 and $183,759, respectively.
10.
RELATED PARTY – PROMISSORY NOTE
The
Company obtained short-term cash flow from a related party in the form of three demand Notes Payable in the aggregate amount of
$10,000 which have been outstanding since the year ended December 31, 2012. Two notes were amended and extended during 2014, and
then again during the quarter ended December 31, 2015, changing the maturity date to two years from what was on amended notes.
The other note was extended during the quarter ended September 30, 2015, changing the maturity date to one year later than what
was on original note. The Notes bear an interest rate of 7% per annum and are unsecured.
|
Note
|
|
Principal
|
|
|
Rate
|
|
|
Accrued interest
|
|
|
Maturity
|
|
|
|
|
|
|
|
|
|
12/31/15
|
|
|
12/31/14
|
|
|
|
|
Promissory note 1
|
|
$
|
6,000
|
|
|
|
7
|
%
|
|
$
|
1,395
|
|
|
$
|
975
|
|
|
9/4/2016
|
|
Promissory note 2
|
|
$
|
2,000
|
|
|
|
7
|
%
|
|
$
|
454
|
|
|
$
|
314
|
|
|
10/1/2017
|
|
Promissory note 3
|
|
$
|
2,000
|
|
|
|
7
|
%
|
|
$
|
430
|
|
|
$
|
290
|
|
|
12/3/2017
|
|
Total
|
|
$
|
10,000
|
|
|
|
|
|
|
$
|
2,279
|
|
|
$
|
1,579
|
|
|
|
The
Company obtained short-term cash flow from a related party in the form of nine demand Notes Payable in the aggregate amount of
$70,953 during the period from 2012 through December 31, 2014. During the quarters ended December 31, 2015, September 30, 2015,
June 30, 2015 and March 31, 2015 the Company borrowed $53,000, $115,000 and $60,000 and $35,000, respectively, in the form of
twelve demand notes. The Company repaid the principle amount of $2,399 and $453 during the years ended December 31, 2015 and December
31, 2014, respectively. Notes 1 through 6 were amended and extended during 2014, changing the maturity date to one year later
than what was on original notes. Notes 1 and 6 were amended again during the quarter ended September 30, 2015, changing the maturity
date to one year later than what was on original notes. Notes 2, 3, 4, and 5 were amended during the quarter ended December 31,
2105, changing the maturity date to two years later than what was on original notes. The Notes bear an interest rate of 7% per
annum and are unsecured.
|
Note
|
|
Principal
|
|
|
Rate
|
|
|
Accrued interest
|
|
|
Maturity
|
|
|
|
|
|
|
|
|
|
12/31/15
|
|
|
12/31/14
|
|
|
|
|
Promissory note 1
|
|
$
|
5,000
|
|
|
|
7
|
%
|
|
$
|
1,171
|
|
|
$
|
821
|
|
|
7/25/2016
|
|
Promissory note 2
|
|
$
|
11,000
|
|
|
|
7
|
%
|
|
$
|
2,456
|
|
|
$
|
1,686
|
|
|
10/22/2017
|
|
Promissory note 3
|
|
$
|
15,000
|
|
|
|
7
|
%
|
|
$
|
3,254
|
|
|
$
|
2,203
|
|
|
11/24/2017
|
|
Promissory note 4
|
|
$
|
102
|
|
|
|
7
|
%
|
|
$
|
23
|
|
|
$
|
16
|
|
|
10/22/2017
|
|
Promissory note 5
|
|
$
|
879
|
|
|
|
7
|
%
|
|
$
|
191
|
|
|
$
|
129
|
|
|
11/24/2017
|
|
Promissory note 6
|
|
$
|
973
|
|
|
|
7
|
%
|
|
$
|
228
|
|
|
$
|
160
|
|
|
7/25/2016
|
|
Promissory note 7
|
|
$
|
22,147
|
|
|
|
7
|
%
|
|
$
|
2,750
|
|
|
$
|
1,148
|
|
|
5/4/2016
|
|
Promissory note 8
|
|
$
|
7,000
|
|
|
|
7
|
%
|
|
$
|
518
|
|
|
$
|
28
|
|
|
12/11/2016
|
|
Promissory note 9
|
|
$
|
6,000
|
|
|
|
7
|
%
|
|
$
|
432
|
|
|
$
|
12
|
|
|
12/22/2016
|
|
Promissory note 10
|
|
$
|
25,000
|
|
|
|
7
|
%
|
|
$
|
1,716
|
|
|
$
|
-
|
|
|
1/8/2017
|
|
Promissory note 11
|
|
$
|
35,000
|
|
|
|
7
|
%
|
|
$
|
2,215
|
|
|
$
|
-
|
|
|
2/5/2017
|
|
Promissory note 12
|
|
$
|
40,000
|
|
|
|
7
|
%
|
|
$
|
2,056
|
|
|
$
|
-
|
|
|
4/8/2017
|
|
Promissory note 13
|
|
$
|
30,000
|
|
|
|
7
|
%
|
|
$
|
1,387
|
|
|
$
|
-
|
|
|
5/5/2017
|
|
Promissory note 14
|
|
$
|
45,000
|
|
|
|
7
|
%
|
|
$
|
1,648
|
|
|
$
|
-
|
|
|
6/24/2017
|
|
Promissory note 15
|
|
$
|
25,000
|
|
|
|
7
|
%
|
|
$
|
753
|
|
|
$
|
-
|
|
|
7/28/2017
|
|
Promissory note 16
|
|
$
|
15,000
|
|
|
|
7
|
%
|
|
$
|
385
|
|
|
$
|
-
|
|
|
8/20/2017
|
|
Promissory note 17
|
|
$
|
13,000
|
|
|
|
7
|
%
|
|
$
|
254
|
|
|
$
|
-
|
|
|
9/21/2017
|
|
Promissory note 18
|
|
$
|
5,000
|
|
|
|
7
|
%
|
|
$
|
88
|
|
|
$
|
-
|
|
|
10/13/2017
|
|
Promissory note 19
|
|
$
|
10,000
|
|
|
|
7
|
%
|
|
$
|
121
|
|
|
$
|
-
|
|
|
10/30/2017
|
|
Promissory note 20
|
|
$
|
3,000
|
|
|
|
7
|
%
|
|
$
|
10
|
|
|
$
|
-
|
|
|
12/15/2017
|
|
Promissory note 21
|
|
$
|
17,000
|
|
|
|
7
|
%
|
|
$
|
55
|
|
|
$
|
-
|
|
|
12/15/2017
|
|
Total
|
|
$
|
331,101
|
|
|
|
|
|
|
$
|
21,710
|
|
|
$
|
6,203
|
|
|
|
The
Company obtained short-term cash flow from a related party in the form of four demand Notes Payable in the aggregate amount of
$6,504 during the period from 2012 through March 31, 2013. Notes 1 and 2 were amended and extended during 2014, and then again
during the quarter ended December 31, 2015 changing the maturity date to two years from the amended maturity date. Notes 3 and
4 were amended and extended during the quarter ended March 31, 2015, changing the maturity date to one year later than what was
on original notes. The Notes bear an interest rate of 7% per annum and are unsecured.
|
Note
|
|
Principal
|
|
|
Rate
|
|
|
Accrued interest
|
|
|
Maturity
|
|
|
|
|
|
|
|
|
|
12/31/15
|
|
|
12/31/14
|
|
|
|
|
Promissory note 1
|
|
$
|
234
|
|
|
|
7
|
%
|
|
$
|
50
|
|
|
$
|
34
|
|
|
12/5/2017
|
|
Promissory note 2
|
|
$
|
170
|
|
|
|
7
|
%
|
|
$
|
37
|
|
|
$
|
25
|
|
|
11/18/2017
|
|
Promissory note 3
|
|
$
|
4,100
|
|
|
|
7
|
%
|
|
$
|
833
|
|
|
$
|
546
|
|
|
2/5/2016
|
|
Promissory note 4
|
|
$
|
2,000
|
|
|
|
7
|
%
|
|
$
|
405
|
|
|
$
|
265
|
|
|
2/7/2016
|
|
Total
|
|
$
|
6,504
|
|
|
|
|
|
|
$
|
1,325
|
|
|
$
|
870
|
|
|
|
The
Company obtained short-term cash flow from a related party in the form of two demand Notes Payable in the aggregate amount of
$18,000 during the year of 2013. Both notes were amended and extended during the quarter ended March 31, 2015, changing the maturity
date to one year later than what was on original note. The Notes bear an interest rate of 7% per annum and are unsecured.
|
Note
|
|
Principal
|
|
|
Rate
|
|
|
Accrued interest
|
|
|
Maturity
|
|
|
|
|
|
|
|
|
|
12/31/15
|
|
|
12/31/14
|
|
|
|
|
Promissory note 1
|
|
$
|
10,000
|
|
|
|
7
|
%
|
|
$
|
2,000
|
|
|
$
|
1,300
|
|
|
2/21/2016
|
|
Promissory note 2
|
|
$
|
8,000
|
|
|
|
7
|
%
|
|
$
|
1,562
|
|
|
$
|
1,002
|
|
|
3/18/2016
|
|
Total
|
|
$
|
18,000
|
|
|
|
|
|
|
$
|
3,562
|
|
|
$
|
2,302
|
|
|
|
The
Company obtained short-term cash flow from a related party in the form of one demand Note Payable in the aggregate amount of $6,000
during the year of 2014. The Note bears an interest rate of 7% per annum and is unsecured.
|
Note
|
|
Principal
|
|
|
Rate
|
|
|
Accrued interest
|
|
|
Maturity
|
|
|
|
|
|
|
|
|
|
12/31/15
|
|
|
12/31/14
|
|
|
|
|
Promissory note 1
|
|
$
|
6,000
|
|
|
|
7
|
%
|
|
$
|
590
|
|
|
$
|
170
|
|
|
8/6/2016
|
|
Total
|
|
$
|
6,000
|
|
|
|
|
|
|
$
|
590
|
|
|
$
|
170
|
|
|
|
During
the year ended December 31, 2015 the total amount of related party loan proceeds was $263,000. The total interest accrued on related
party loans at December 31, 2015 and December 31, 2014 was $29,467 and $11,124, respectively.
From
time to time, the Company advances amounts to stockholders, as well as receives payments from stockholders in the form of cash
and/or out-of-pocket expenditures for the benefit of the Company, which are business in nature. The balance of advances to stockholder
as of December 31, 2015 and December 31, 2014 was $11,321 and $11,321, respectively. Amounts accrued, but not yet paid as
due to related party at December 31, 2015 and December 31, 2014 was $25,000 and $33,425, respectively.
11.
COMMITMENTS AND CONTINGENCIES
Litigation
There
are no pending, threatened or actual legal proceedings in which the Company or any subsidiary is a party.
F-28