In the fourth quarter of 2014, the Company issued convertible notes in the aggregate of $280,390 for cash consideration of $254,900, resulting in an original issue discount of $25,490. The notes do not bear any interest, however, the Company used an implied interest rate of 10%. The notes are unsecured, mature one year after issuance, and are convertible into 584,147 shares of common stock at a conversion price of $0.48 per share. The Company determined that the notes contained a beneficial conversion feature of $94,845 since the market price of the Company’s common stock was higher than the conversion price of the notes when issued.  

Investors in the convertible notes received, for no additional consideration, warrants to purchase a total of 146,037 shares of common stock. Each warrant is exercisable on a cash basis only at an exercise price of $0.48 per share, are exercisable immediately upon issuance, and expire one year from the date of issuance. The fair value of the warrants issued with the convertible notes was determined to be $24,826.

The fair value of the warrants, the beneficial conversion feature, and the original issue discount, aggregated $145,161 and is considered a debt discount. The debt discount is being amortized to interest expense over the term of the notes, or in full upon the conversion of a note. During the three months ended March 31, 2015, amortization of the note discount totaled $47,608. The unamortized note discount was $57,934 as of March 31, 2015.

During the three-month period ended March 31, 2015, the Company converted $52,800 of these notes into 110,000 shares of common stock. As of March 31, 2015 the balance due on these notes was $191,840. As of December 31, 2014 the balance due on these notes was $244,640.