2014

In 2014, the Company issued its convertible notes in the aggregate of $280,390 for total 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%, are unsecured, will mature in one year after issuance and are convertible to 584,147 shares of common stock at a conversion price of $0.48 per share. Furthermore, each of the investors in the offering 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 a price of $0.48, and is exercisable immediately upon issuance and will expire one (1) year from the date of issuance.

The aggregate relative fair value of the warrants issued in the 2014 offerings were valued at $24,826 using the Black-Scholes Option Pricing model with the following average assumptions: risk-free interest rate of 0.17%; dividend yield of 0%; volatility rate of 64% based upon the Company’s historical stock price; and an expected life of one year (statutory term). The Company also determined that the notes contained a beneficial conversion feature of $94,845 since the market price of the Company’s common stock were higher than the conversion price of the notes when they were issued.  The value of the 2014 Offering Warrants, the beneficial conversion feature and the original issue discount in the aggregate of $145,161 was considered as debt discount and is being amortized as interest over the term of the notes or in full upon the conversion of the corresponding notes.

During the year ended December 31, 2014, the Company converted $35,750 of these notes to 74,480 shares of common stock and amortized to interest expense $39,619 of the corresponding note discount. As of December 31, 2014 the balance due to this note was $244,640 and unamortized note discount of $105,542 or a net balance of $139,098.

2011 and 2012

In 2011 and 2012, the Company issued its convertible notes in the aggregate of $8,302,153 and warrants to purchase a total of 32,355,232 shares of common stock.

The value of the 2011 and 2012 offering warrants, the beneficial conversion feature of the convertible notes, and the original issue discount in the aggregate of $8,302,153 was considered as debt discount to be amortized over the term of the notes or in full upon the conversion of the corresponding notes.

During the year ended December 31, 2012, the Company amortized to interest expense $3,620,092 of the note discount. These notes were all converted to shares of common stock and there was no balance due to these notes as of December 31, 2012.