The accompanying notes are an integral part of these unaudited consolidated financial statements.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Apptigo International, Inc. and its wholly-owned
subsidiary (“collectively “Apptigo” or the “Company”) designs, develops, markets and intends to sell
software applications. The Company intends to sell its products worldwide through online stores.
Basis of Presentation
The accompanying unaudited
consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of
the information and footnotes required by accounting principles generally accepted in the United States of America for complete
consolidated financial statements. These unaudited consolidated financial statements and related notes should be read in conjunction
with the Company's Form 10-K for the fiscal year ended December 31, 2015. In the opinion of management, these unaudited consolidated
financial statements reflect all adjustments that are of a normal recurring nature and which are necessary to present fairly the
financial position of the Company as of March 31, 2016, and the results of operations and cash flows for the three months ended
March 31, 2016 and 2015. The results of operations for the three months ended March 31, 2016 are not necessarily indicative of
the results that may be expected for the entire fiscal year. Certain prior period amounts have been reclassified to conform to
current period presentation.
The Company’s
fiscal year ends on December 31.
Nature of Business Operations
The Company was originally incorporated under
the laws of the State of Nevada on October 23, 2012 under the name of “Balius Corp.” (“Inception”). Effective
April 15, 2014, we acquired Apptigo Inc., a Nevada corporation incorporated on October 31, 2012 (“Apptigo”). Under
the terms of the Agreement and Plan of Reorganization Agreement, dated April 14, 2014 by and between the Company, its principal
shareholder, Apptigo, and its shareholders, Apptigo agreed to exchange all of the outstanding common and preferred shares of Apptigo
for common and preferred shares of the Company. The closing of the acquisition transaction was completed effective April 15, 2014.
At closing of the acquisition transaction,
Apptigo became the Company’s wholly-owned subsidiary and the Company became Apptigo’s parent. Thereafter, the principal
shareholder of the Company cancelled 10,000,000 shares of the Company’s common stock owned by him. As a result of the closing
of the acquisition transaction, the Company had 8,250,000 shares of common stock outstanding and 145,000 Series A Preferred Shares
outstanding, which preferred shares are convertible into 4,550,000 common shares.
Following the acquisition transaction, the
Company filed Amended and Restated Articles of Incorporation to change its name to “Apptigo International, Inc.,” increased
the number of authorized common shares, authorized preferred shares, and approved a 3.5-for-1 forward split of the outstanding
shares (the “Forward Split”), including the shares issued at the closing of the acquisition transaction. The Forward
Split was effective at the opening of business on April 30, 2014. The effect of the Forward Split has been applied retroactively.
Also, in connection with the acquisition transaction, the Company filed a Certificate of Designations, Preferences and Rights for
its Series A Convertible Preferred Stock.
Going Concern
The accompanying financial statements have
been prepared contemplating a continuation of the Company as a going concern. The Company has reported a net income of $4,325,224
and an operating loss of $244,364 for the three months ended March 31, 2016. The Company has a net negative working capital of
$4,816,740 as of March 31, 2016. These conditions raise substantial doubt about the Company’s ability to continue as a going
concern.
The accompanying financial statements have
been prepared assuming the Company will continue as a going concern. The Company’s ability to obtain additional financing
depends on the success of its growth strategy and its future performance, each of which is subject to general economic, financial,
competitive, legislative, regulatory, and other factors beyond the Company's control.
Net Income (Loss) per Share
Basic income (loss) per share is computed using
the weighted average number of common shares outstanding during the year. Diluted income (loss) per share reflects the potential
dilution that could occur if potentially dilutive securities were exercised or converted to common stock. The dilutive effect of
options and warrants and their equivalent is computed by application of the treasury stock method and the effect of convertible
securities by the “if converted” method. During 2015, all common stock equivalents were excluded as they would have
been anti-dilutive. For the three months ended March 31, 2016, the dilutive effect of the outstanding warrants was 789,543,296
shares and the dilutive effect of the outstanding convertible debt was 13,516,934,841 shares and a reduction to net income of $5,093,954.
Fair Value of Financial Instruments
The Company adopted the FASB standard related
to fair value measurement at inception. The standard defines fair value, establishes a framework for measuring fair value and expands
disclosure of fair value measurements. The standard applies under other accounting pronouncements that require or permit fair value
measurements and, accordingly, does not require any new fair value measurements. The standard clarifies that fair value is an exit
price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that
market participants would use in pricing an asset or liability. The recorded values of long-term debt approximate their fair values,
as interest approximates market rates. As a basis for considering such assumptions, the standard established a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value as follows.
·
|
Level 1: Observable inputs such as quoted prices in active markets;
|
|
|
·
|
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
|
|
|
·
|
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
The application of the three levels of the
fair value hierarchy under Topic 820-10-35 to our assets and liabilities are described below as of March 31, 2016 and December
31, 2015:
|
|
Fair Value Measurements
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
March 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
3,478,975
|
|
|
|
3,478,975
|
|
Total
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
3,478,975
|
|
|
|
3,478,975
|
|
December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
8,746,651
|
|
|
|
8,746,651
|
|
Total
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
8,746,651
|
|
|
|
8,746,651
|
|
Derivative liability as of March 31, 2016 is
$3,478,975, compared to $8,746,651 as of December 31, 2015.
The table below presents the change in the
fair value of the derivative liabilities during the three months ended March 31, 2016:
Fair value as of December 31, 2015
|
|
$
|
8,746,651
|
|
Additions recognized as derivative expense
|
|
|
–
|
|
Additions recognized as debt discounts
|
|
|
–
|
|
Resolution upon conversion of debt
|
|
|
(138,172
|
)
|
Change in fair value
|
|
|
(5,129,504
|
)
|
Fair value as of March 31, 2016
|
|
$
|
3,478,975
|
|
2. CONVERTIBLE DEBENTURES
On November 21, 2014, the Company entered into
a 10% Secured Convertible Debenture. The debenture carries a term of 15 months. The debenture was issued in the amount of $225,000.
The Company has received one tranche from this convertible note in the amount of $60,000, which included $5,000 in fees and an
OID of $5,000. The debenture has a conversion feature at a share price of the lower of $0.25 or 70% of the average of the three
lowest closing prices in a 20 day period prior to the conversion. During the year ended, December 31, 2015 the lender converted
$90,288 of the convertible note and accrued interest of $4,178 in exchange for 29,002,687 shares of common stock.
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Convertible debenture
|
|
$
|
60,000
|
|
|
$
|
60,000
|
|
Additional amount due to true-up feature
|
|
|
56,201
|
|
|
|
56,201
|
|
Conversion of debt to common stock
|
|
|
(108,476
|
)
|
|
|
(90,288
|
)
|
Original issue discount
|
|
|
|
|
|
|
(137
|
)
|
Discount – warrant
|
|
|
|
|
|
|
(2,345
|
)
|
Discount – derivative
|
|
|
|
|
|
|
(19,026
|
)
|
Convertible debenture, net of unamortized discount
|
|
$
|
7,725
|
|
|
$
|
4,405
|
|
On December 2, 2014, the Company entered into
a 7% Secured Convertible Debenture. The debenture carries a three year term. The debenture was issued in the amount of $200,000.
As of December 31, 2014 the Company had received $100,000, with the remaining $100,000 received on January 7, 2015. The conversion
price of the outstanding balance is the lower of $0.15 or 60% of the 30 day trading average.
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Convertible debenture
|
|
$
|
200,000
|
|
|
$
|
100,000
|
|
Additional amount received
|
|
|
|
|
|
|
100,000
|
|
Discount – derivative
|
|
|
(57,618
|
)
|
|
|
(66,226
|
)
|
Convertible debenture, net of unamortized discount
|
|
$
|
142,382
|
|
|
$
|
133,774
|
|
On February 9, 2015, the Company executed a
$59,000 Convertible Promissory Note. The note has an 8% interest rate and a term of nine months. The conversion price for the amount
to be converted of 58% of the average of the three lowest trading price for the previous 10 days at date of conversion. During
the year ended December 31, 2015, the lender converted $30,340 of the convertible debt for 33,949,803 shares of common stock. There
was an additional interest accrued as a default on the note in the amount of $29,500.
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Convertible debenture
|
|
$
|
59,000
|
|
|
$
|
59,000
|
|
Conversion of debt to common stock
|
|
|
(35,920
|
)
|
|
|
(30,340
|
)
|
Convertible debenture, net of unamortized discount
|
|
$
|
23,080
|
|
|
$
|
28,660
|
|
On March 4, 2015, the Company executed a $50,000
Convertible Promissory Note. The note has a 12% interest rate and a term of six months. Conversion of the note is based on a comparison
between the lesser of two variable conversion prices. The conversion price of the outstanding balance is the lower of 55% of the
lowest trading price for the previous 20 days at date of conversion or 55% of the lowest trading price for the previous 20 days
before the effective date of the note. During the year ended December 31, 2015, the Company converted $8,204 of the convertible
debt for 21,394,225 shares of common stock.
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Convertible debenture
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
Conversion of debt to common stock
|
|
|
(19,979
|
)
|
|
|
(8,204
|
)
|
Convertible debenture, net of unamortized discount
|
|
$
|
30,021
|
|
|
$
|
41,796
|
|
On March 25, 2015, the Company executed and
sold a $250,000 Convertible Promissory Note. The note has a one-time 12% interest rate and a term of one year. The Company received
$25,000 along with an original issue discount of $2,778 upon closing of the transaction. The conversion price of the outstanding
balance is the lower of $0.087 or 60% of the lowest trading price for the previous 25 days prior to conversion. During the year
ended December 31, 2015, the Company converted $7,814 of the convertible debt for 12,021,000 share of common stock.
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Convertible debenture
|
|
$
|
27,778
|
|
|
$
|
27,778
|
|
Conversion of debt to common stock
|
|
|
(27,054
|
)
|
|
|
(7,814
|
)
|
Original issue discount
|
|
|
(36
|
)
|
|
|
(1,229
|
)
|
Discount – derivative
|
|
|
(445
|
)
|
|
|
(15,390
|
)
|
Convertible debenture, net of unamortized discount
|
|
$
|
243
|
|
|
$
|
3,345
|
|
On May 20, 2015, the Company executed a $31,500
Convertible Promissory Note. The note has an 8% interest rate and a term of one year. The Company received $30,000 upon closing
of the transaction with $1,500 paid to the lender for legal fees. The conversion price of the outstanding balance is the 55% of
the lowest trading price for the previous 18 days at date of conversion.
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Convertible debenture
|
|
$
|
31,500
|
|
|
$
|
31,500
|
|
Conversion of debt to common stock
|
|
|
(4,725
|
)
|
|
|
–
|
|
Discount
|
|
|
(174
|
)
|
|
|
(578
|
)
|
Discount – derivative
|
|
|
(3,483
|
)
|
|
|
(11,557
|
)
|
Convertible debenture, net of unamortized discount
|
|
$
|
23,118
|
|
|
$
|
19,365
|
|
On May 21, 2015, the Company executed a $55,000
Convertible Promissory Note. The note has a 10% interest rate and a term of nine months. The Company received $49,250 upon closing
of the transaction with $5,750 paid to the lender for legal and service fees. The conversion price of the outstanding balance is
50% of the average of the two lowest trading price for the previous 25 days at date of conversion.
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Convertible debenture
|
|
$
|
55,000
|
|
|
$
|
55,000
|
|
Conversions
|
|
|
(1,707
|
)
|
|
|
–
|
|
Discount
|
|
|
–
|
|
|
|
(1,083
|
)
|
Conversion of debt to common stock
|
|
|
–
|
|
|
|
(9,279
|
)
|
Convertible debenture, net of unamortized discount
|
|
$
|
53,293
|
|
|
$
|
44,638
|
|
On May 22, 2015, the Company executed a $55,000
Convertible Promissory Note. The note has an 8% interest rate and a term of one year. The note includes an original issue discount
of $5,000 and the Company paid $5,000 in legal fees to the lender upon execution of this loan. The conversion price of the outstanding
balance is 50% of the average of the three lowest trading price for the previous 20 days at date of conversion.
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Convertible debenture
|
|
$
|
55,000
|
|
|
$
|
55,000
|
|
Conversions
|
|
|
(1,063
|
)
|
|
|
–
|
|
Original issue discount
|
|
|
(1,393
|
)
|
|
|
(1,954
|
)
|
Discount
|
|
|
–
|
|
|
|
(1,953
|
)
|
Conversion of debt to common stock
|
|
|
(6,270
|
)
|
|
|
(17,582
|
)
|
Convertible debenture, net of unamortized discount
|
|
$
|
46,274
|
|
|
$
|
33,511
|
|
On June 3, 2015, the Company executed a $43,500
Convertible Promissory Note. The note has an 8% interest rate and a term of nine months. As consideration for entering into this
transaction, the Company granted 543,750 warrants to the lender. See Note 5. The conversion price of the outstanding balance is
51% of the average of the three lowest trading price for the previous 15 days at date of conversion.
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Convertible debenture
|
|
$
|
43,500
|
|
|
$
|
43,500
|
|
Discount – warrants
|
|
|
–
|
|
|
|
(9,072
|
)
|
Discount - derivative
|
|
|
–
|
|
|
|
(1,172
|
)
|
Convertible debenture, net of unamortized discount
|
|
$
|
43,500
|
|
|
$
|
33,256
|
|
On August 10, 2015, the Company executed a
$809,235 Convertible Debenture with a related party in exchange for 145,000 shares of Preferred Stock held by the related party
lender. The note has a 10% interest rate and a term of one year. The conversion price of the outstanding balance is 45% of the
lowest trading price for the previous 10 days at date of conversion.
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Convertible debenture
|
|
$
|
809,205
|
|
|
$
|
809,205
|
|
Discount - derivative
|
|
|
(278,802
|
)
|
|
|
(485,070
|
)
|
Convertible debenture, net of unamortized discount
|
|
$
|
530,403
|
|
|
$
|
324,135
|
|
On August 10, 2015, the Company entered into
a $50,000 Convertible Debenture with a related party. The note has a 10% interest rate and a term of one year. Additionally, the
Company entered into three additional notes, each for principal of $50,000, consisting of two notes in September and one in October,
with the same party and under the same terms as the note on August 10, 2015. The conversion price of the outstanding balance is
40% of the lowest trading price for the previous 10 days at date of conversion. A portion of the proceeds were used to repay in
full the note dated December 18, 2014.
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Convertible debenture
|
|
$
|
200,000
|
|
|
$
|
200,000
|
|
Repayments
|
|
|
(100,000
|
)
|
|
|
–
|
|
Discount - derivative
|
|
|
(51,032
|
)
|
|
|
(140,084
|
)
|
Convertible debenture, net of unamortized discount
|
|
$
|
48,968
|
|
|
$
|
59,916
|
|
On November 18, 2015, the Company entered into
a 10% Secured Convertible Debenture. The debenture carries a one year term. The debenture was issued in the amount of $200,000.
The conversion price of the outstanding balance is 50% of the lowest closing price in a 10 day period prior to conversion.
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Convertible debenture
|
|
$
|
200,000
|
|
|
$
|
200,000
|
|
Discount - derivative
|
|
|
(126,575
|
)
|
|
|
(176,438
|
)
|
Convertible debenture, net of unamortized discount
|
|
$
|
73,425
|
|
|
$
|
23,562
|
|
On November 25, 2015, the Company executed
a $300,000 Convertible Debenture. The note has a 10% interest rate and a term of one year. The conversion price of the outstanding
balance is 50% of the lowest trading price for the previous 10 days at date of conversion.
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Convertible debenture
|
|
$
|
300,000
|
|
|
$
|
300,000
|
|
Discount - derivative
|
|
|
(195,616
|
)
|
|
|
(270,411
|
)
|
Convertible debenture, net of unamortized discount
|
|
$
|
104,384
|
|
|
$
|
29,589
|
|
3. DERIVATIVE LIABILITIES
Due to the variable conversion prices in the
convertible notes described above, the Company treats the convertible debenture and outstanding warrants as derivative liabilities
in accordance with the provisions of ASC 815 “Derivatives and Hedging” (ASC 815). ASC 815 applies to any freestanding
financial instruments or embedded features that have the characteristics of a derivative and to any freestanding financial instruments
that potentially settle in an entity’s own common stock.
The Company assesses the fair value of the
convertible debentures and warrants using the Black Scholes pricing model and records a derivative liability for the value. The
Company then assesses the fair value quarterly based on the Black Scholes Model and increases or decreases the liability to the
new value, and records a corresponding gain or loss. The Company uses expected volatility based primarily on historical volatility
using weekly pricing observations for recent periods that correspond to the expected life of the instruments. The risk-free interest
rate is based on U.S. Treasury securities rates.
The following table describes the significant
assumptions used in the Black Scholes pricing model:
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Risk-free interest rate at grant date
|
|
|
.21 - .87 %
|
|
|
|
.08 - .65%
|
|
Expected stock price volatility
|
|
|
307 - 527%
|
|
|
|
218 - 465%
|
|
Expected dividend payout
|
|
|
–
|
|
|
|
–
|
|
Expected option in life-years
|
|
|
.1 - 3.7
|
|
|
|
.1 - .65
|
|
The table below presents the change in the
fair value of the derivative liabilities during the three months ended March 31, 2016:
Fair value as of December 31, 2015
|
|
$
|
8,746,651
|
|
Additions recognized as derivative expense
|
|
|
|
|
Additions recognized as debt discounts
|
|
|
|
|
Resolution upon conversion of debt
|
|
|
(138,172
|
)
|
Change in fair value
|
|
|
(5,129,504
|
)
|
Fair value as of March 31, 2016
|
|
$
|
3,478,975
|
|
4. WARRANTS AND OPTIONS
As of March 31, 2016, these warrants include
the following:
Warrants granted on November 21, 2014 in connection
with the 12% convertible debenture, the right to purchase up to 282,575 shares of the Company’s common stock with an original
exercise price of $0.0005. The warrants carry a provision for the adjustment based on the terms of the contract, wherein the number
of warrants is adjusted to equal $30,000. As a result of this provision, the lender has the right to purchase up to 428,571,429
shares of the Company’s common stock as of March 31, 2016. A derivative liability on the fair value of the warrants as of
March 31, 2016 amounted to $42,847. Fair value was determined using the following variables:
|
|
Grant Date
|
|
|
March 31, 2016
|
|
Risk-free interest rate at grant date
|
|
|
1.63%
|
|
|
|
0.73%
|
|
Expected stock price volatility
|
|
|
139%
|
|
|
|
377%
|
|
Expected dividend payout
|
|
|
–
|
|
|
|
–
|
|
Expected option in life-years
|
|
|
5
|
|
|
|
2.21
|
|
The following table summarizes the warrant activity during the three
months ended March 31, 2016:
|
|
Number of
Warrants
|
|
|
Weighted-Average
Price Per Share
|
|
Outstanding at December 31, 2015
|
|
|
129,115,179
|
|
|
$
|
.0001
|
|
Granted
|
|
|
–
|
|
|
|
|
|
Adjusted for variable conversion
|
|
|
300,000,000
|
|
|
|
–
|
|
Canceled or expired
|
|
|
–
|
|
|
|
–
|
|
Outstanding at March 31, 2016
|
|
|
429,115,179
|
|
|
$
|
.0006
|
|
On June 17, 2014, the Company granted 550,000
options to six employees for services. As of March 31, 2015, an additional 20,000 options have been vested for a total of 410,000
options vested. No options have been exercised and 140,000 options have been canceled due to termination of service contracts.
Stock based compensation for the three months ended March 31, 2016 and 2015, amounted to $2,247 and $0, respectively.
The following table summarizes the option activity
through March 31, 2016:
|
|
Number of
Options
|
|
|
Option Price
Per Share
|
|
Outstanding at December 31, 2015
|
|
|
410,000
|
|
|
$
|
1.00
|
|
Granted
|
|
|
|
|
|
|
–
|
|
Canceled or expired
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2016
|
|
|
410,000
|
|
|
$
|
1.00
|
|
5. EQUITY
Common Stock
The Company was formed in the state of Nevada
on October 31, 2012. The Company had authorized capital of 75,000 shares of common stock with a par value of $0.01. On April 17,
2014, the Company filed Amended and Restated Articles of Incorporation with the state of Nevada, increasing its authorized shares
from 75,000,000 to 100,000,000 shares of common stock.
On April 14, 2014, the Company, entered into
an a reverse acquisition transaction with Apptigo Inc., a Nevada corporation incorporated on October 31, 2012, and its shareholders,
pursuant to an Agreement and Plan of Reorganization Agreement, dated April 14, 2014 between the Company, its principal shareholder,
and Apptigo and its shareholders. Under the terms of the Agreement the shareholders of Apptigo agreed to exchange all of the outstanding
common and preferred shares of Apptigo for common and preferred shares of the Company. The closing of the Transaction was completed
effective April 15, 2014 (the “
Closing Date
”).
A 3.5-for-1 forward stock split of the Company’s
outstanding common shares became effective at the open of business on April 30, 2014. As a result of the forward stock split, the
number of outstanding shares of common stock was increased from 8,250,000 to 29,225,000, and the 145,000 outstanding shares of
Series A Convertible Preferred Stock will be convertible into 15,925,000 rather than 4,550,000 in the event of conversion.
On October 6, 2015, the Company filed with
the Secretary of State of the State of Nevada an Amendment to Articles of Incorporation to increase the authorized shares of Common
Stock of the Company. The Amendment authorizes the Company to issue 2,000,000,000 shares of Common Stock, par value $0.001 per
share, and 10,000,000 shares of Preferred Stock. The Preferred Stock may be issued in one or more series, each series to be appropriately
designated by a distinguishing letter or title, prior to the issuance of any shares thereof.
On January 6, 2016, the Company filed with
the Secretary of State of the State of Nevada an Amendment to Articles of Incorporation to increase the authorized shares of Common
Stock of the Company. The Amendment authorizes the Company to issue 5,000,000,000 shares of Common Stock, par value $0.001 per
share, and 10,000,000 shares of Preferred Stock. The Preferred Stock may be issued in one or more series, each series to be appropriately
designated by a distinguishing letter or title, prior to the issuance of any shares thereof.
2016
During the three months ended March 31, 2016,
the Company issued 1,109,940,894 shares of common stock for the conversion of debt in the amount of $70,502, consisting of principal
of $62,278 and accrued interest of $8,224.
6. RELATED PARTY TRANSACTIONS
Between August and October 2015, the Company
entered into four separate 10% Secured Convertible Debentures with a related party. During the three months ended March 31, 2016,
the Company repaid two of these notes in full (see Note 2).
The Company entered into an Exchange Agreement
on August 10, 2015. Under the terms of the Exchange Agreement the Holder, who was the owner of a 145,000 shares of the Company’s
Series A Convertible Preferred stock, exchanged the Preferred Shares for a 10% Convertible Debenture in the amount of $809,205.
See Note 2.
The remaining balance on these notes, net of
unamortized discount, is $579,371 as of March 31, 2016.
7. SUBSEQUENT EVENTS
During April 2016, the Company entered into
a 10% Secured Convertible Debenture in the amount of $30,000 with a related party. The term of the note is 6 months. The conversion
price of the outstanding balance is 40% of the lowest trading price for the previous 10 days at date of conversion.
On May 18, 2016, the Company entered into a 10% Secured Convertible
Debenture in the amount of $2,500 with a related party. The term of the note is 6 months. The conversion price of the outstanding
balance is 20% of the lowest trading price for the previous 10 days at date of conversion
On May 16, 2016, the Company issued 61,847,450
shares of common stock for the conversion of debt in the amount of $1,237 consisting of accrued interest in the amount of $1,237.