Notes to
Financial Statements
March 31,
2014
Note
1 - Organization and Description of Business
Rapid
Fire Marketing, Inc. (the “Company” or “RFMK”) was incorporated under the laws of the state of Delaware
in 1989 as G.D.E. Search Corporation. In 2001, the Company changed its name to N-Vision Technology. In July 2007, the Company changed
its name to Rapid Fire Marketing, Inc.
The
Company is a developer and reseller of herbal vaporizers. The core strategy is to maximize revenues in the rapidly expanding vaporizer
industry. The Company currently sells the CANNAcig and Cumulus personal vapor inhalers. Beginning in February of 2013, the Company
began developing a dry herbal vaporizer. The dry herbal vaporizer was still in development and testing as of the end of March
31, 2014 and is expected to be available by mid 2014.
.
Note
2 - Summary of Significant Accounting Policies
The
financial statements included herein, presented in accordance with United States generally accepted accounting principles and
stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.
These
statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary
for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in
conjunction with the financial statements and notes thereto for the Company for the year ended December 31, 2013 included in the
Company’s Annual Report on Form 10-K. The financial statements for the three months ended March 31, 2014 are not necessarily
indicative of the results expected for the year ending December 31, 2014.
Management's
Plans
The
Company has limited working capital, has incurred losses in each of the past two years, and has not yet received material revenues
from sales of products or services. These factors create substantial doubt about the Company’s ability to continue as a
going concern. The financial statements do not include any adjustment that might be necessary if the Company is unable to continue
as a going concern.
The
ability of the Company to continue as a going concern is dependent on the Company generating cash from the sale of its common
stock and/or obtaining debt financing and attaining future profitable operations. During the three months ended March 31, 2014,
the Company funded operations through the receipt of $100,000 in convertible notes payable, $250,000 in connection with Series
A2 Notes related to Series A2 Convertible Preferred stock and $50,495 in connection with the sale of Series C Convertible Preferred
Stock. Management’s plans include selling its equity securities and obtaining debt financing to fund its capital requirement
and ongoing operations; however, there can be no assurance the Company will be successful in these efforts.
The
financial statements have been prepared on a going concern basis which contemplates the realization of assets and the settlement
of liabilities in the normal course of business. The financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets and liabilities that might result from the outcome
of this uncertainty.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Inventory
Inventory
consists of two finished products, the CANNAcig Vapor Inhaler and the Cumulus Vapor Inhaler, which are valued at the lower of
cost or market valuation under the first-in, first-out method of costing.
Revenue
Recognition
The
Company generates revenue from the product sales of the CANNAcig Vapor Inhaler and the Cumulus Vapor Inhaler product sales of
Bionic cigarettes revenue is recognized when the purchase is complete and shipment has occurred.
Fair
Value of Financial Instruments
The
Company follows Accounting Standards Codification ("ASC") 825 Fair Value Measurements and Disclosures, except
as it applies to the nonfinancial assets and nonfinancial liabilities subject to ASC 825. ASC 825 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 a liability. As a basis for considering such assumptions, ASC 825 establishes
a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
Level
1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level
2 - Include other inputs that are directly or indirectly observable in the marketplace.
Level
3 - Unobservable inputs which are supported by little or no market activity.
Fair-value
estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March
31, 2014 and December 31, 2013. The respective carrying value of certain on-balance-sheet financial instruments approximated their
fair values. These financial instruments include cash, prepaids, accounts payable, accrued liabilities, and convertible notes
payable. Fair values for these items were assumed to approximate carrying values because of their short term nature or because
they are payable on demand. As of March 31, 2014, the Company's derivative liabilities were considered Level 2. See Note 3 for
discussion regarding the determination of the fair market value.
Earnings
(loss) Per Share
Basic
earnings (loss) per share are computed by dividing the net income (loss) by the weighted-average number of shares of common stock
and common stock equivalents (primarily outstanding shares of preferred stock, options and warrants). Common stock equivalents
represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes the dilutive effect of the exercise of outstanding
options and warrants at either the beginning of the respective period presented or the date of issuance, whichever is later. As
of March 31, 2014, the Company's dilutive securities consisted of convertible notes payable and Series A1, Series A2 and Series
C preferred stock. The conversion of such would be anti-dilutive to the loss per share. If the holders of the convertible notes
payable, Series A1 Preferred Stock, Series A2 Preferred Stock and Series C Preferred Stock all converted, the Company would be
in excess of their authorized shares.
Note
3 - Convertible Notes Payable and Derivative Liabilities
As
of January 28, 2014, the Company had incurred amounts of $82,500 owed to Pyrenees Investments, LLC for service rendered. On
January 28, 2014, the indebtedness was sold to Iconic Holdings, LLC, a third party. In connection with this sale, the Company
issued a $82,500 convertible note to the third party. The convertible note incurs interest at 10% per annum and is
due January 24, 2015. If a default is called by the lender after failure to repay principal or interest when due, among other
default provisions including untimely filings with the SEC, a default interest rate of 20% per annum is triggered and retrospectively
applied from the note’s inception date on the unpaid amount, and in addition the principal balance is increased by
150% of the face amount of the note deemed in default. At any time the note may be converted into shares of common stock, at the
lower of $0.0006 or 50% discount off the lowest trading price for the Company’s common stock within the twenty (20) days
preceding the conversion. The Company recorded a discount totaling $82,500 related to the beneficial conversion feature embedded
in the note upon issuance. See below for discussion of derivative liabilities related to the conversion feature due to the absence
of a conversion floor. In connection with this agreement, the Company reserved 250,000,000 shares of its common stock with the
transfer agent.
In
February 2014, the Company borrowed $100,000 as evidenced by a convertible note issued to Iconic Holdings as part of a total note
agreement of $165,000, including a $15,000 on issuance discount, which was entered into on January 28, 2014. The Company has yet
to receive the remaining $50,000 in proceeds in which an additional $5,000 of an issuance discount will be recorded. The
convertible note incurs interest at 10% per annum and is due January 28, 2015. If a default is called by the lender after failure
to repay principal or interest when due, among other default provisions including untimely filings with the SEC, a default interest
rate of 20% per annum is triggered and retrospectively applied from the note’s inception date on the unpaid amount,
and in addition the principal balance is increased by 150% of the face amount of the note deemed in default. At any time the note
may be converted into common stock, at the lower of $0.0006 or 50% discount off the lowest trading price for the Company’s
common stock within the twenty (20) days preceding the conversion. The Company recorded a discount totaling $110,000, which included
$10,000 for the on issuance discount, related to the beneficial conversion feature embedded in the note upon issuance. See below
for discussion of derivative liabilities related to the conversion feature due to the absence of a conversion floor. In connection
with this agreement, the Company reserved 250,000,000 shares of its common stock with the transfer agent.
Derivative
Liabilities
The
Company calculated the derivative liability using the Black-Scholes pricing model for each note upon inception and recorded the
fair market value of the derivative liability as a discount to the note. When a derivative liability associated with a convertible
note is in excess of the face value of the convertible note, the excess of fair value of derivative is charged to the statement
of operations.
During
the three months ended March 31, 2014, the Company issued convertible debt with principal amounts of $192,500. At the inception
of these notes, they were fully discounted due to value of the associated derivative liabilities. Aggregate remaining discounts
on convertible notes to be accreted over the life of each respective note using the straight line method are $168,482 as of March
31, 2014. For the three months ended March 31, 2014, interest expense from accretion of the discount was $24,018.
Aggregate
derivative liabilities associated with remaining convertible notes were $1,864,458 as of March 31, 2014. Based on this revaluation
at quarter end and the revaluation of derivative liabilities measured during the period immediately before extinguishment of associated
convertible notes, the Company recognized a loss related to the day one value of the derivative liabilities of $996,962 and a
loss in the change of fair value of derivative liability of $674,996 during the three months ended March 31, 2014.
The
following are the weighted average variable used in determining the fair market value of the Company's derivative liabilities:
Date
|
|
January 28, 2014
|
|
|
February 28, 2014
|
|
|
March 31, 2014
|
|
Closing stock price of common stock
|
|
$
|
0.0017
|
|
|
$
|
0.0017
|
|
|
$
|
0.0060
|
|
Conversion price
|
|
$
|
0.0002
|
|
|
$
|
0.0006
|
|
|
$
|
0.0006
|
|
Expected life in years
|
|
|
1.00
|
|
|
|
1.00
|
|
|
|
0.84
|
|
Risk free rate
|
|
|
0.11
|
%
|
|
|
0.11
|
%
|
|
|
0.11
|
%
|
Expected annual volatility
|
|
|
294.70
|
%
|
|
|
301.70
|
%
|
|
|
340.50
|
%
|
Dividend percentage
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Note
4 - Subscriptions Receivables
As
of March 31, 2014, the Company held 17 notes receivable (the “Series A2 Notes”) from Ironridge Global IV, Ltd totaling
$850,000 related to the sale of Series A2 Convertible Preferred Stock (see below for rights and preferences). The principal balance
outstanding under the Series A2 Notes bears interest at the rate of 1.0% per annum. The entire unpaid principal balance, interest
and any other charges due and payable under these Series A2 Notes will become due and payable 29 months from the date of issuance
(September 21, 2012) and is recorded as a reduction to Stockholders' Equity on the accompanying balance sheet. The Series A2 Notes
shall be deemed not due and payable should the Company not have either 1) a registration statement on file and effective with
the SEC covering the underlying common shares issuable as a result of the preferred shares, or 2) that the underlying common shares
are eligible for trading under the then current Rule 144 as promulgated by the Securities of Act of 1933, as amended. The Company
is also required to maintain adequate coverage of authorized shares, and must have the ability to issue common shares to the holder
of the preferred shares in electronic format. Other customary events of default also apply. As of March 31, 2014, approximately
$850,000 of the Series A2 Notes balance remained unpaid. During the three months ended March 31, 2014, the Company received $250,000
in proceeds related to the payment of the Series A2 Notes and recorded interest income of $2,453. In addition, subscription receivables
includes $16,000 in excess common stock in which was issued to the holders of Series A2 Notes which needs to be remitted by the
holder.
On March 27, 2014, the Company entered
into an agreement with the same party discussed above for the issuance of 100 notes receivable (the “Series C Notes”)
from one issuer totaling $5,000,000 related to the sale of Series C Convertible Preferred Stock (see below for rights and preferences).
The principal balance outstanding under the Series C Notes bears interest at the rate of 1.0% per annum. The entire unpaid principal
balance, interest and any other charges due and payable under these Series C Notes will become due and payable 82 weeks from the
date of issuance and is recorded as a reduction to Stockholders' Equity on the accompanying balance sheet. The Series C Notes
deemed not due and payable should the Company not have either 1) a registration statement on file and effective with the SEC covering
the underlying common shares issuable as a result of the preferred shares, or 2) that the underlying common shares are eligible
for trading under the then current Rule 144 as promulgated by the Securities of Act of 1933, as amended. The Company is also required
to maintain adequate coverage of authorized shares, and must have the ability to issue common shares to the holder of the preferred
shares in electronic format. Other customary events of default also apply. As of March 31, 2014, $4,949,505 of the Series C Notes
balance remained unpaid. During the three months ended March 31, 2014, the Company received $50,495 in proceeds related to the
payment on the Series C Notes. Additional, proceeds are dependent upon the Company maintaining sufficient authorized shares.
Note
5 - Stockholders’ Equity
Preferred
Stock
Series
A1 Preferred Stock
On
September 6, 2011, the Company filed a Certificate of Designation of Series A1 Convertible Preferred Stock ("Series
A1") with the Secretary of State of Nevada. Pursuant to the Series A1 Certificate of Designation, the Company designated
25,000,000 shares of its blank check preferred stock as Series A1 Preferred Stock. The Series A1 Preferred Stock ranks senior
to the common stock (the "Junior Stock"). The Series A1 Preferred Stock can be converted at anytime into 30 shares
of common stock. In the event of a liquidation, the Series A1 Preferred Stock will be entitled to a liquidation at the same as
common stock. The Series A1 Preferred Stock has no voting rights.
Series
A2 Preferred Stock
On
October 5, 2012, the Company filed a Certificate of Designation of Series A2 Convertible Preferred Stock ("Series A2")
with the Secretary of State of Nevada. Pursuant to the Series A2 Certificate of Designation, the Company designated 300 shares
of its blank check preferred stock as Series A2. The Series A2 ranks senior to the common stock
and any subsequently created series of preferred stock that does not expressly rank pari passu with or senior to the Series A2 (the "Junior Stock"). The Series A2 can be converted at anytime and has a fixed conversion
price of $0.00225 per common share. The Series A2 is entitled to minimum six years worth of dividends accruing
at a rate of 8.5% per annum potentially increasing to 18% per annum under certain circumstances such as a significant decrease
in the price of the Company's common stock. Dividends are payable in cash or in shares of common stock valued at 85.0% of the
closing market price of the Company's common stock for any trading day following the issuance date of the Series A2. In the event
of a liquidation, the Series A2 will be entitled to a payment of the stated value of $10,000 per share plus any
accrued but unpaid dividends prior to any payments being made in respect of the Junior Stock. The holders of Series A2 does not have voting rights, except for shares in which have already been converted into shares of common stock.
On
January 8, 2014, the holder converted 10 Series A2 shares into 44,444,444 shares of common stock. In addition, under the terms
of the Series A2 the holder was entitled to immediate payment of dividends on the $100,000 stated value of the Series A2 at an
annual dividend rate of 18% rate, which is an increase over the stated 8.5% due to adjustments related to the decrease in the
fair market value of the Company's common stock, for a period of six years resulting in dividends payable of $108,000. The holder
elected to convert the dividends to common stock based upon 85% of the closing market price as disclosed above resulting in a
conversion price of $0.00017 with 635,294,118 common shares being issued. On the date of conversion, the fair market value of
the dividend shares issued was $1,334,118 based upon the closing market price of the Company's common stock. Thus, the Company
recorded additional expense of $1,334,118 in connection with the dividend shares issued.
On
February 11, 2014, the holder converted 15 Series A2 shares into 66,666,666 shares of common stock. In addition, under the terms
of the Series A2 the holder was entitled to immediate payment of dividends on the $150,000 stated value of the Series A2 at an
annual dividend rate of 18% rate, which is an increase over the stated 8.5% due to adjustments related to the decrease in the
fair market value of the Company's common stock, for a period of six years resulting in dividends payable of $162,000. The holder
elected to convert the dividends to common stock based upon 85% of the closing market price as disclosed above resulting in a
conversion price of $0.00017 with 952,941,176 common shares to be issued. On the date of conversion, the fair market value of
the dividend shares issued was $3,144,706 based upon the closing market price of the Company's common stock. Thus, the Company
recorded additional expense of $3,144,706 in connection with the dividend shares issued. As of March 31, 2014, the Company has
recorded within stockholders' equity "Shares to Be Issued" of $3,211,373 as the 1,019,607,842 common shares have not
been delivered due to the 9.99% ownership limitation placed on the shareholders. Subsequent to quarter end the Company has issued
155,000,000 common shares in connection with this conversion.
Series
B Preferred Stock
On
February 28, 2013, the Company filed a Certificate of Designation of Series B Convertible Preferred Stock ("Series B")
with the Secretary of State of Nevada. Pursuant to the Series B Certificate of Designation, the Company designated 16,000,000
shares of its blank check preferred stock as Series B. The Series B ranks senior to the common
stock and any subsequently created series of preferred stock that does not expressly rank pari passu with or senior to the Series
B (the "Junior Stock"). The Series B cannot be converted into any other securities and
does not receive dividends. Each share of Series B shall have voting rights equal to that of 2,000 shares of common stock. In
the event of a liquidation, the Series B will be entitled to net assets on a pro rata basis.
On
March 1, 2013, the Company issued its Chief Executive Officer 16,000,000 shares of Series B Preferred Stock. The Company valued
the Series B at its par value resulting in a current period expense of $16,000. The only rights the holder under the Series B
has relates to voting control of the Company, which prior to the issuance the Chief Executive Officer, was the only officer and
Board of Director member and already could make significant decisions. Although, the Series B was issued during the year ended
December 31, 2013, it was not accounted for until the three months ended March 31, 2014. The effect on the prior years' financial
statements is deemed insignificant and thus the amounts have not been restated.
Series
C Preferred Stock
On
March 27, 2014, the Company filed a Certificate of Designation of Series C Convertible Preferred Stock ("Series
C") with the Secretary of State of Nevada. Pursuant to the Series C Certificate of Designation, the Company designated
5,000 shares of its blank check preferred stock as Series C. The Series C ranks senior to the common stock and any
subsequently created series of preferred stock that does not expressly rank pari passu with or senior to the Series C (the
"Junior Stock") and pari passu in rights to dividends and liquidation to the Series A2 and junior to all existing
and future indebtedness of the Company. The Series C can be converted at anytime and has a fixed conversion
price of $0.01 per common share. The Series C is entitled to minimum six years worth of dividends accruing at
a rate of 8.5% per annum potentially increasing to 18% per annum under certain circumstances such as a significant
decrease in the price of the Company's common stock. Dividends are payable in cash or in shares of common stock valued at
85.0% of the closing market price of the Company's common stock for any trading day following the issuance date of the Series
C. In the event of a liquidation, the Series C will be entitled to a payment of the Stated Value of $10,000
per share plus any accrued but unpaid dividends prior to any payments being made in respect of the Junior Stock. The holders
of Series C do not have voting rights, except for shares in which have already been converted into shares of
common stock. During the three months ended March 31, 2014, the Company issued 5,000 shares of Series C for a subscription
receivable of $5.0 Million, see Note 4 for additional information.
Common
Stock
During
the three months ended March 31, 2014, the Company issued 1,754,386 shares of common stock valued at $4,737 based upon the closing
market price of the Company's common stock on the date of the agreement to a third party for the rights to future royalties related
to Global Specialty Products, Inc.'s MicroRoasters brand. In addition, the Company amortized $30,000 of deferred compensation
related to common stock granted during the year ended December 31, 2013 which is being expensed over the service period. As of
March 31, 2014, the Company had $50,000 of amortization remaining which will be expensed during the year ending December 31, 2014.
On
January 27, 2014, the Company entered into a settlement with the prior management whereby prior management agreed to return 60,000,000
shares of the Company’s common stock previously issued to them for services rendered. In return, the Company has agreed
to release prior management from any claims related to all costs deemed of a non-business nature. The Company accounted for the
shares at their par value of $60,000 reducing common stock by that amount with the reclass to additional paid in capital. Upon
return, the common stock was cancelled by the transfer agent and reflected in our calculation of weighted average shares for the
three months ended March 31, 2014 as of the date of the agreement
During
the three months ended March 31, 2013, the Company issued 90,000,000 shares of common stock in connection with the conversion
of 3,000,000 shares of Series A1 with a carrying value of $3,000 held by the former Chief Executive Officer. In
addition, the Company amortized $20,000 of deferred compensation related to common stock granted for advisory services during
the year ended December 31, 2013 which are expensed over the service period.
Ironridge
Global IV, Ltd.
On
September 19, 2012, the Supreme Court of the State of California for the County of Los Angeles Central District (the “Court”),
entered an order (the “Order”) approving, among other things, the fairness of the terms and conditions of an exchange
pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”), in accordance with
a stipulation of settlement (the “Settlement Agreement”) between the Company, and Ironridge Global IV, Ltd. (“Ironridge”), in the matter entitled Ironridge Global
IV, Ltd. v. Rapid Fire Marketing, Inc., Case No. BC 490059 (the “Action”). Ironridge commenced the Action against
the Company to recover an aggregate of $643,133 of past-due accounts payable of the Company, plus fees and costs (the “Claim”).
The Order provides for the full and final settlement of the Claim and the Action. The Settlement Agreement became effective and
binding upon the Company and Ironridge upon execution of the Order by the Court on September 19, 2012. The amounts due to Ironridge
had previously been recorded within accounts payable but were reclassed to common stock to be issued within stockholders' equity
upon settlement as the obligation was to be settled in shares of common stock. Upon issuance of common stock, the Company determines
the fair market value of the common shares issued based upon the closing market price of the Company's common stock. The fair
value of the common stock issued in excess of the reduction of the liability is recorded as a loss on common shares issued. During
the three months ended March 31, 2013, the Company issued 320,000,000 common shares valued at $406,999 relieving $190,959 in amounts
due to Ironridge and additional loss on common shares of $216,040. As of March 31, 2013, the Company's obligation to Ironridge
was $370,559 which was settled through the issuance of common stock through the remainder of 2013.
The issuance of common
stock to Ironridge pursuant to the terms of the Settlement Agreement approved by the Order is exempt from the registration requirements
of the Securities Act pursuant to Section 3(a)(10) thereof, as an issuance of securities in exchange for bona fide outstanding
claims, where the terms and conditions of such issuance are approved by a court after a hearing upon the fairness of such terms
and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear.
See Note 4 for discussion of additional transactions with Ironridge.
Equity Line of
Credit
On February 28,
2014, the Company, entered into an Equity Line of Credit (the “Equity Line of Credit”) with Iconic Holdings, LLC (“Iconic”).
Pursuant to the Equity Line of Credit, Iconic committed to purchase up to $2,000,000 of the Company’s common stock over
twenty-four months from the first day following the effectiveness of a registration statement, subject to certain conditions.
As soon as the Company
has an effective registration statement in place, the Company may draw on the facility from time to time, as and when it determines
appropriate in accordance with the terms and conditions of the related Equity Line of Credit. The Company has not yet filed a
registration statement registering the shares and therefore, it has not yet sold any shares under the Equity Line of Credit. The
purchase price will be 85% of the lowest trading price of the Company's common stock during the five (5) consecutive trading day
period beginning on the trading day immediately following the date of delivery of the applicable put notice. The maximum amount
that the Company is entitled to put in on any one notice shall be any amount up to the greater of 1) the average of the trading
dollar volume of the Company's common stock during the ten (10) trading days preceding the request or 2) $100,000. Iconic
is not obligated to purchase shares if its total number of shares beneficially held at that time would exceed 4.99% of the number
of shares of the Company’s outstanding common stock as determined in accordance with Rule 13d-1 of the Securities Exchange
Act of 1934, as amended. In addition, the Company is not permitted to draw on the facility unless there is an effective registration
statement to cover the resale of the shares, which it does not currently have in place.
Pursuant to the
terms of a Registration Rights Agreement between the Company and Iconic, the Company is obligated to file a registration statement
with the SEC to register the resale by Iconic of shares of the common stock underlying the Investment Agreement and it has not
yet done so.
In addition, under
the terms of the Equity Line of Credit the Company was required to issue Iconic 10% of the total commitment amount in restricted
common stock as a commitment fee. The Company issued 29,585,799 shares of common stock valued at $88,757 based upon the closing
market price of the Company's common stock on the date of the agreement. The Company recorded the value of such common stock as
a deferred offering cost on the accompanying balance sheet which will be offset against future proceeds received in connection
with Equity Line of Credit.
Note
6 - Related Party Transactions
On March 28, 2013,
the Company executed a 3% convertible note with a shareholder for $9,500 due within one year. The note is convertible into the
Company's common stock at a rate of $0.001 per share subject to various adjustments due to stock splits, change in control, etc.
As of March 31, 2014, the note was in default, however, a demand for payment has not been received.
On November
29, 2012, the Company executed a 3% convertible note with a shareholder for $14,000 due within one year. The note is
convertible into the Company's common stock at the lesser of $0.001 per share (subject to various adjustments due to stock
splits, change in control, etc) or a 20% discount to the current bid price on the date of conversion. As of March 31, 2014,
the note was in default, however, a demand for payment has not been received.
As of March 31,
2014, amounts due to our Chief Executive Officer for salary payable recorded within Accounts Payable on the accompanying balance
sheet were $36,500.
Note
7 - Subsequent Events
In accordance with
ASC 855-10, the Company has analyzed its operations subsequent to March 31, 2014 through the date these financial statements were
issued and has determined that it does not have any material subsequent events to disclose in these financial statements.