--01-31
lbsr
LIBERTY STAR URANIUM & METALS CORP.
2015-04-30
0001172178
No
Smaller Reporting Company
No
10-Q
false
1179474020
Yes
2016
Q1
0001172178
2015-06-18
0001172178
2015-02-01
2015-04-30
0001172178
2015-04-30
0001172178
2015-01-31
0001172178
2014-02-01
2014-04-30
0001172178
2014-01-31
0001172178
2014-04-30
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<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
<b>NOTE 1 – Interim financial statement disclosure</b>
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The condensed consolidated financial statements included herein have been prepared by Liberty Star Uranium & Metals Corp. without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and should be read in conjunction with our annual report on Form 10-K for the year ended January 31, 2015 as filed with the SEC under the Securities and Exchange Act of 1934 (the “Exchange Act”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, as permitted by the SEC, although we believe the disclosures which are made are adequate to make the information presented not misleading. The condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to present fairly our financial position at April 30, 2015 and the results of our operations and cash flows for the periods presented.</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Interim results are subject to significant seasonal variations and the results of operations for the three months ended April 30, 2015 are not necessarily indicative of the results to be expected for the full year.</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Certain amounts in the prior-year financial statements have been reclassified for comparative purposes to conform with the presentation in the current-year financial statements</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
<b>NOTE 2– Going concern</b>
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The Company has incurred losses from operations, and requires additional funds for further exploratory activity and to maintain its claims prior to attaining a revenue generating status. There are no assurances that a commercially viable mineral deposit exists on any of our properties. In addition, the Company may not find sufficient ore reserves to be commercially mined. As such, there is substantial doubt about the Company’s ability to continue as a going concern.</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Management is working to secure additional funds through the exercise of stock warrants already outstanding, equity financings, debt financings or joint venture agreements. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
<b>NOTE 3 – Summary of Significant Accounting Policies</b>
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
<b>
<i>Fair</i>
</b>
<b>
<i>Value</i>
</b>
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
ASC 820 Fair Value Measurements and Disclosures (“ASC
820
”), defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements. It defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; and model-driven valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be obtained from, or corroborated by, third-party pricing services.</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Level 3: Unobservable inputs to measure fair value of assets and liabilities for which there is little, if any market activity at the measurement date, using reasonable inputs and assumptions based upon the best information at the time, to the extent that inputs are available without undue cost and effort.</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">As of April 30, 2015 the significant inputs to the Company’s derivative liability calculation were Level 3 inputs.</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The following schedule summarizes the valuation of financial instruments at fair value in the balance sheets as of April 30, 2015 and January 31, 2015:</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="100%">
<tr valign="top">
<td align="left"> </td>
<td align="left" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%"> </td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" colspan="7" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid">Fair value measurements at reporting date using:</td>
<td align="center" style="BORDER-BOTTOM: #000000 1px solid" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left"> </td>
<td align="left" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%"> </td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">Quoted prices in</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%"> </td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">Significant</td>
<td align="center" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left"> </td>
<td align="left" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%"> </td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">active markets for</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">Significant other</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">unobservable</td>
<td align="center" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left"> </td>
<td align="left" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%"> </td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">identical liabilities</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">observable inputs</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">inputs</td>
<td align="center" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" style="BORDER-BOTTOM: #000000 1px solid">Description</td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">Fair Value</td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">(Level 1)</td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">(Level 2)</td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">(Level 3)</td>
<td align="center" style="BORDER-BOTTOM: #000000 1px solid" width="2%"> </td>
</tr>
<tr>
<td> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Warrant and convertible note derivative liability at April 30, 2015</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
161,512
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
161,512
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Warrant and convertible note derivative liability at January 31, 2015</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
216,705
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
216,705
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
</table>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Our financial instruments consist of cash and cash equivalents, accounts payable, accrued liabilities, convertible notes payable, notes payable, and warrant liability. It is management’s opinion that we are not exposed to significant interest, currency or credit risks arising from these financial instruments. With the exception of the warrant liability, the fair value of these financial instruments approximates their carrying values based on their short maturities or for long-term debt based on borrowing rates currently available to us for loans with similar terms and maturities. Gains and losses recognized on changes in estimated fair value of the derivative liability are reported in other income (expense) as gain (loss) on change in fair value.</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
<b>
<i>Fair</i>
</b>
<b>
<i>Value</i>
</b>
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
ASC 820 Fair Value Measurements and Disclosures (“ASC
820
”), defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements. It defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; and model-driven valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be obtained from, or corroborated by, third-party pricing services.</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Level 3: Unobservable inputs to measure fair value of assets and liabilities for which there is little, if any market activity at the measurement date, using reasonable inputs and assumptions based upon the best information at the time, to the extent that inputs are available without undue cost and effort.</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">As of April 30, 2015 the significant inputs to the Company’s derivative liability calculation were Level 3 inputs.</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The following schedule summarizes the valuation of financial instruments at fair value in the balance sheets as of April 30, 2015 and January 31, 2015:</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="100%">
<tr valign="top">
<td align="left"> </td>
<td align="left" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%"> </td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" colspan="7" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid">Fair value measurements at reporting date using:</td>
<td align="center" style="BORDER-BOTTOM: #000000 1px solid" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left"> </td>
<td align="left" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%"> </td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">Quoted prices in</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%"> </td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">Significant</td>
<td align="center" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left"> </td>
<td align="left" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%"> </td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">active markets for</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">Significant other</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">unobservable</td>
<td align="center" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left"> </td>
<td align="left" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%"> </td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">identical liabilities</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">observable inputs</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">inputs</td>
<td align="center" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" style="BORDER-BOTTOM: #000000 1px solid">Description</td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">Fair Value</td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">(Level 1)</td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">(Level 2)</td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">(Level 3)</td>
<td align="center" style="BORDER-BOTTOM: #000000 1px solid" width="2%"> </td>
</tr>
<tr>
<td> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Warrant and convertible note derivative liability at April 30, 2015</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
161,512
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
161,512
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Warrant and convertible note derivative liability at January 31, 2015</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
216,705
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
216,705
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
</table>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Our financial instruments consist of cash and cash equivalents, accounts payable, accrued liabilities, convertible notes payable, notes payable, and warrant liability. It is management’s opinion that we are not exposed to significant interest, currency or credit risks arising from these financial instruments. With the exception of the warrant liability, the fair value of these financial instruments approximates their carrying values based on their short maturities or for long-term debt based on borrowing rates currently available to us for loans with similar terms and maturities. Gains and losses recognized on changes in estimated fair value of the derivative liability are reported in other income (expense) as gain (loss) on change in fair value.</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="100%">
<tr valign="top">
<td align="left"> </td>
<td align="left" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%"> </td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" colspan="7" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid">Fair value measurements at reporting date using:</td>
<td align="center" style="BORDER-BOTTOM: #000000 1px solid" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left"> </td>
<td align="left" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%"> </td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">Quoted prices in</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%"> </td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">Significant</td>
<td align="center" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left"> </td>
<td align="left" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%"> </td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">active markets for</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">Significant other</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">unobservable</td>
<td align="center" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left"> </td>
<td align="left" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%"> </td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">identical liabilities</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">observable inputs</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">inputs</td>
<td align="center" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" style="BORDER-BOTTOM: #000000 1px solid">Description</td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">Fair Value</td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">(Level 1)</td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">(Level 2)</td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">(Level 3)</td>
<td align="center" style="BORDER-BOTTOM: #000000 1px solid" width="2%"> </td>
</tr>
<tr>
<td> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Warrant and convertible note derivative liability at April 30, 2015</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
161,512
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
161,512
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Warrant and convertible note derivative liability at January 31, 2015</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
216,705
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
216,705
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
</table>
161512
0
0
161512
216705
0
0
216705
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
<b>NOTE 4 – Related party transactions</b>
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
<i>We entered into the following transactions with related parties during the three months ended April 30, 2015:</i>
We rented an office from Jim Briscoe, our Chairman of the Board, CEO and CFO, on a month-to-month basis for $522
per month. The total rent payments were $4,698
for the three months ended April 30, 2015. No amount was due as of April 30, 2015.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
At April 30, 2015 we had a balance of accrued unpaid wages of $405,359
to Jim Briscoe, our Chairman of the Board, CEO, CFO and President. Additionally, we had a balance of accrued unpaid wages of $15,625
to a former President.
</p>
522
4698
405359
15625
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
<b>NOTE 5 – Warrants</b>
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
As of April 30, 2015, there were
59,238,750
whole share purchase warrants outstanding and exercisable. The warrants have a weighted average remaining life of
1.20
years and a weighted average exercise price of $0.020
per whole warrant for one common share. The warrants had an aggregate intrinsic value of $0
as of April 30, 2015.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Warrants issued in private placement outstanding at April 30, 2015 is as follows:</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="100%">
<tr valign="top">
<td align="left"> </td>
<td align="left" width="1%"> </td>
<td align="center" nowrap="nowrap" width="17%"> </td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="17%">Weighted</td>
<td align="left" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left"> </td>
<td align="left" width="1%"> </td>
<td align="center" nowrap="nowrap" width="17%">Number of whole share</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="17%">average exercise</td>
<td align="left" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="17%">purchase warrants</td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="17%">price per share</td>
<td align="left" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Outstanding, January 31, 2015</td>
<td align="left" bgcolor="#e6efff" width="1%"> </td>
<td align="right" bgcolor="#e6efff" width="17%">
59,566,708
</td>
<td align="left" bgcolor="#e6efff" width="2%"> </td>
<td align="left" bgcolor="#e6efff" width="1%">$</td>
<td align="right" bgcolor="#e6efff" width="17%">
0.024
</td>
<td align="left" bgcolor="#e6efff" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left">Issued</td>
<td align="left" width="1%"> </td>
<td align="right" width="17%">
5,882,353
</td>
<td align="left" width="2%"> </td>
<td align="left" width="1%"> </td>
<td align="right" width="17%">
0.005
</td>
<td align="left" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Expired</td>
<td align="left" bgcolor="#e6efff" width="1%"> </td>
<td align="right" bgcolor="#e6efff" width="17%">
(6,210,311
</td>
<td align="left" bgcolor="#e6efff" width="2%">)</td>
<td align="left" bgcolor="#e6efff" width="1%"> </td>
<td align="right" bgcolor="#e6efff" width="17%">
0.041
</td>
<td align="left" bgcolor="#e6efff" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left">Exercised</td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="17%">
-
</td>
<td align="left" width="2%"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="17%">
-
</td>
<td align="left" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Outstanding, April 30, 2015</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" width="17%">
59,238,750
</td>
<td align="left" bgcolor="#e6efff" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" width="17%">
0.020
</td>
<td align="left" bgcolor="#e6efff" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left">Exercisable, April 30, 2015</td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" width="1%"> </td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" width="17%">
59,238,750
</td>
<td align="left" width="2%"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" width="17%">
0.020
</td>
<td align="left" width="2%"> </td>
</tr>
</table>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
During the three months ended April 30, 2015, the Company issued
5,882,353
warrants to an investor at an exercise price of $0.0048
with a three year term. The warrants were issued with common stock and there is no additional accounting for these investor warrants that were issued.
</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="100%">
<tr valign="top">
<td align="left"> </td>
<td align="left" width="1%"> </td>
<td align="center" nowrap="nowrap" width="17%"> </td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="17%">Weighted</td>
<td align="left" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left"> </td>
<td align="left" width="1%"> </td>
<td align="center" nowrap="nowrap" width="17%">Number of whole share</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="17%">average exercise</td>
<td align="left" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="17%">purchase warrants</td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="17%">price per share</td>
<td align="left" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Outstanding, January 31, 2015</td>
<td align="left" bgcolor="#e6efff" width="1%"> </td>
<td align="right" bgcolor="#e6efff" width="17%">
59,566,708
</td>
<td align="left" bgcolor="#e6efff" width="2%"> </td>
<td align="left" bgcolor="#e6efff" width="1%">$</td>
<td align="right" bgcolor="#e6efff" width="17%">
0.024
</td>
<td align="left" bgcolor="#e6efff" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left">Issued</td>
<td align="left" width="1%"> </td>
<td align="right" width="17%">
5,882,353
</td>
<td align="left" width="2%"> </td>
<td align="left" width="1%"> </td>
<td align="right" width="17%">
0.005
</td>
<td align="left" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Expired</td>
<td align="left" bgcolor="#e6efff" width="1%"> </td>
<td align="right" bgcolor="#e6efff" width="17%">
(6,210,311
</td>
<td align="left" bgcolor="#e6efff" width="2%">)</td>
<td align="left" bgcolor="#e6efff" width="1%"> </td>
<td align="right" bgcolor="#e6efff" width="17%">
0.041
</td>
<td align="left" bgcolor="#e6efff" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left">Exercised</td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="17%">
-
</td>
<td align="left" width="2%"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="17%">
-
</td>
<td align="left" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Outstanding, April 30, 2015</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" width="17%">
59,238,750
</td>
<td align="left" bgcolor="#e6efff" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" width="17%">
0.020
</td>
<td align="left" bgcolor="#e6efff" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left">Exercisable, April 30, 2015</td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" width="1%"> </td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" width="17%">
59,238,750
</td>
<td align="left" width="2%"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 3px double" width="1%">$</td>
<td align="right" style="BORDER-BOTTOM: #000000 3px double" width="17%">
0.020
</td>
<td align="left" width="2%"> </td>
</tr>
</table>
59566708
0.024
5882353
0.005
-6210311
0.041
0
0
59238750
0.020
59238750
0.020
59238750
1.2
0.020
0
5882353
0.0048
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
<b>NOTE 6 – Derivative Liabilities</b>
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The embedded conversion feature in the convertible debt instruments that the Company issued beginning in August 2013 (See Note 7), and became convertible beginning in February 2014, qualified it as a derivative instrument since the number of shares issuable under the note is indeterminate based on guidance in FASB ASC 815, Derivatives and Hedging. This convertible note tainted all other equity linked instruments including outstanding warrants and fixed rate convertible debt on the date that the instrument became convertible.</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The valuation of the derivative liability of the warrants was determined through the use of a Monte Carlo options model that values the liability of the warrants based on a risk-neutral valuation where the price of the option is its discounted expected value. The technique applied generates a large number of possible (but random) price paths for the underlying common stock via simulation, and then calculates the associated exercise value (i.e. “payoff”) of the option for each path. These payoffs are then averaged and discounted to a current valuation date resulting in the fair value of the option.</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The valuation of the derivative liability attached to the convertible debt was arrived at through the use of a Monte Carlo model that values the derivative liability within the notes. The technique applied generates a large number of possible (but random) price paths for the underlying (or underlyings) via simulation, and then calculates the associated payment value (cash, stock, or warrants) of the derivative features. The price of the underlying common stock is modeled such that it follows a geometric Brownian motion with constant drift, and elastic volatility (increasing as stock price decreases). The stock price is determined by a random sampling from a normal distribution. Since the underlying random process is the same, for enough price paths, the value of the derivative is derived from path dependent scenarios and outcomes. The features in the notes that were analyzed and incorporated into the model included the conversion features with the reset provisions, the call/redemption/prepayment options, and the default provisions. Based on these features, there are six primary events that can occur; payments are made in cash; payments are made with stock; the note holder converts upon receiving a redemption notice; the note holder converts the note; the issuer redeems the note; or the Company defaults on the note. The model simulates the underlying economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms that would be in effect at the time (i.e. stock price, conversion price, etc.). Probabilities were assigned to each variable such as redemption likelihood, default likelihood, and timing and pricing of reset events over the remaining term of the notes based on management projections. This led to a cash flow simulation over the life of the note. A discounted cash flow for each simulation was completed, and it was compared to the discounted cash flow of the note without the embedded features, thus determining a value for the derivative liability.</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Key inputs and assumptions used to value the convertible notes and warrants upon issuance or tainting and also as of April 30, 2015:</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="100%">
<tr valign="top">
<td> </td>
<td align="left">•</td>
<td align="left" width="90%">
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;margin:inherit;">
The stock projections are based on the historical volatilities for each date. These ranged in the
112
-
117% range. The stock price projection was modeled such that it follows a geometric Brownian motion with constant drift and a constant volatility, starting with the market stock price at each valuation date;
</p>
</td>
</tr>
<tr valign="top">
<td> </td>
<td align="left">•</td>
<td align="left" width="90%">
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;margin:inherit;">An event of default would not occur during the remaining term of the note;</p>
</td>
</tr>
<tr valign="top">
<td> </td>
<td align="left">•</td>
<td align="left" width="90%">
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;margin:inherit;">
Conversion of the notes to stock would be completed monthly after any holding period and would be limited based on:
5% of the last
6
months average trading volume and the ownership limit identified in the contract assuming the underlying number of common shares increases at
1% per month. The effective discount was determined based on the historical trading history of the Company based on the specific pricing mechanism in each note;
</p>
</td>
</tr>
<tr valign="top">
<td> </td>
<td align="left">•</td>
<td align="left" width="90%">
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;margin:inherit;">The Company would not have funds available to redeem the notes during the remaining term of the convertible notes;</p>
</td>
</tr>
<tr valign="top">
<td> </td>
<td align="left">•</td>
<td align="left" width="90%">
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;margin:inherit;">Discount rates were based on risk free rates in effect based on the remaining term and date of each valuation and instrument.</p>
</td>
</tr>
<tr valign="top">
<td> </td>
<td align="left">•</td>
<td align="left" width="90%">
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;margin:inherit;">The holder would exercise the warrant at maturity if the stock price was above the exercise price;</p>
</td>
</tr>
<tr valign="top">
<td> </td>
<td align="left">•</td>
<td align="left" width="90%">
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;margin:inherit;">
The Holder would exercise the warrant after any holding period prior to maturity at target prices starting at
2
times the exercise price for the Warrants or higher subject to monthly limits of:
5% of the last
6
months average trading volume increasing by
1% per month and the ownership limit identified in the contract assuming the underlying number of common shares increases at
1% per month.
</p>
</td>
</tr>
<tr valign="top">
<td> </td>
<td align="left">•</td>
<td align="left" width="90%">
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;margin:inherit;">
For the warrants with reset features, the Company assumed it would issue equity linked instruments in the quarters ended 4/30/15 through 10/31/15 at
70% of market.
</p>
</td>
</tr>
</table>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
Using the results from the model, the Company recorded a derivative liability of $5,927
for newly granted warrants and a derivative liability of $467,691
for the fair value of the convertible feature included in the Company’s convertible debt instruments for the three months ended April 30, 2015. The derivative liability recorded for the convertible feature created a debt discount of $331,323
which is being amortized over the remaining term of the note using the effective interest rate method and is classified as convertible debt on the balance sheet. Interest expense related to the amortization of this debt discount for the three months ended April 30, 2015, was $10,436. Additionally, $269,502
of debt discount was charged to interest expense as a result of the conversion of a portion of the underlying debt instrument. The remaining unamortized debt discount related to the derivative liability was $78,243
as of April 30, 2015. The Company recorded the change in the fair value of the derivative liability as a gain of $73,510
to reflect the value of the derivative liability for warrants and convertible notes as $161,512
as of April 30, 2015. The Company also recorded a reclassification from derivative liability to equity of $455,301
for the conversions of a portion of the Company’s convertible notes.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The following table sets forth a reconciliation of changes in the fair value of the Company’s derivative liability:</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="100%">
<tr valign="top">
<td align="left"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" colspan="4" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid">Three months ended April 30,</td>
<td align="right" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">2015</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">2014</td>
<td align="left" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Beginning balance</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
216,705
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
46,985
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left">Total (gains) losses</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
(73,510
</td>
<td align="left" valign="bottom" width="2%">)</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
(274,631
</td>
<td align="left" valign="bottom" width="2%">)</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Settlements</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(455,301
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(94,131
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
</tr>
<tr valign="top">
<td align="left">Additions</td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
473,618
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
605,175
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Ending balance</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
161,512
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
283,398
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Change in unrealized gains (losses) included in earnings relating to derivatives still held as of April 30, 2015 and 2013</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(73,510
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(274,631
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
</tr>
</table>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="100%">
<tr valign="top">
<td align="left"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" colspan="4" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid">Three months ended April 30,</td>
<td align="right" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">2015</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">2014</td>
<td align="left" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Beginning balance</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
216,705
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
46,985
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left">Total (gains) losses</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
(73,510
</td>
<td align="left" valign="bottom" width="2%">)</td>
<td align="left" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%">
(274,631
</td>
<td align="left" valign="bottom" width="2%">)</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Settlements</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(455,301
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(94,131
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
</tr>
<tr valign="top">
<td align="left">Additions</td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
473,618
</td>
<td align="left" valign="bottom" width="2%"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
605,175
</td>
<td align="left" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Ending balance</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
161,512
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
283,398
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Change in unrealized gains (losses) included in earnings relating to derivatives still held as of April 30, 2015 and 2013</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(73,510
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(274,631
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
</tr>
</table>
216705
46985
-73510
-274631
-455301
-94131
473618
605175
161512
283398
-73510
-274631
112
1.17
0.05
6
0.01
2
0.05
6
0.01
0.01
0.70
5927
467691
331323
10436
269502
78243
73510
161512
455301
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
<b>NOTE 7 – Convertible promissory notes</b>
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Following is a summary of convertible promissory notes:</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="100%">
<tr valign="top">
<td align="left"> </td>
<td align="left" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">January 31,</td>
<td align="left" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">2015</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">2015</td>
<td align="left" width="2%"> </td>
</tr>
<tr>
<td> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">
12% convertible note payable issued August 2013, $38,784
due September 2015 and $55,500
due February 2016
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
94,284
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
144,519
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td align="left"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Convertible note payable issued November 2013, due November 2015</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
22,500
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
147,500
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td align="left"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">
12% convertible note payable issued August 2014, due August 2015
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
157,792
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td align="left"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">
10% convertible note payable issued October 2014, due October 2015
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
58,285
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
108,136
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td align="left"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">
10% convertible note payable issued December 2014, due December 2016
</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
162,649
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
106,697
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td align="left"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
337,718
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
664,644
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td align="left"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Less debt discount</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(92,953
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(41,928
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
</tr>
<tr>
<td align="left"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Less current portion of convertible notes</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
(82,116
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
(516,019
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
</tr>
<tr>
<td align="left"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Long-term convertible notes payable</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
162,649
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
106,697
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
</table>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">We issued convertible promissory notes in private placements of our securities to institutional investors pursuant to exemptions from registration set out in Rule 506 of Regulation D under the Securities Act of 1933.</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
On July 15, 2010 we issued a secured convertible promissory note bearing interest at a rate of
10% per annum compounded monthly (the “2010 Convertible Note”) to Northern Dynasty Minerals Ltd (“Northern Dynasty”). During the year ended January 31, 2012 the agreement with Northern Dynasty was amended to issue additional secured convertible promissory notes totaling $730,174
to reimburse Northern Dynasty for assessment work, rental fees, cash in lieu of assessment work and filing fees on the mineral claims that was paid in fiscal 2011 and fiscal 2012 because we could not come to an agreement on the earn-in option and joint venture agreement with Northern Dynasty.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
As part of the transaction noted above, Northern Dynasty could earn a
60% interest in our Big Chunk project in Alaska (the “Joint Venture Claims”) by spending $10,000,000
on those properties over six years. The borrowings from Northern Dynasty could be applied as part of Northern Dynasty’s earn-in requirements. Northern Dynasty’s minimum annual expenditures under the earn-in would be the minimum level necessary to keep the Joint Venture Claims in good standing. Northern Dynasty could elect to abandon the earn-in at any time on
30
days’ notice, so long as sufficient annual labor was performed, or a cash payment in lieu of labor was made, in order to fulfill the annual labor requirements for the Joint Venture Claims for a minimum of
12
months after termination of the earn-in. No such notice by Northern Dynasty was received.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
On November 14, 2012, we signed a loan settlement agreement with Northern Dynasty which would have discharged the $3,730,174
principal balance and $1,592,769
of accrued interest for the 2010 Convertible Note and would have terminated Northern Dynasty’s earn-in rights. In exchange for the settlement, we initiated the transfer of 199 Alaska mining claims to Northern Dynasty’s subsidiary, U5 Resources. However, MBGS, LLC filed liens against the claims before the transfer could be completed. In March 2014 Liberty Star and Big Chunk entered into a settlement agreement with MBGS, LLC, following a resolution conference conducted in Anchorage, Alaska whereby all Northern Dynasty claims recorded by MBGS, LLC were released. As a result of the settlement agreement with MBGS, LLC, the Company completed its loan settlement agreement with Northern Dynasty and discharged the principal balance and accrued interest for the 2010 Convertible Note and terminated Northern Dynasty’s earn-in-rights. A gain of $5,322,943
for the settlement of the Northern Dynasty debt and accrued interest was recorded in other income in April 2014. As of April 30, 2014, we had no principal or interest outstanding for the 2010 Convertible Note.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
In August 2013, we entered into a promissory note (the “August 2013 Note”) for a principal sum of $555,000
plus accrued and unpaid interest and any other fees. The consideration is up to $500,000, which would produce an original issue discount of $55,000
if all the consideration is received. The lender paid $150,000
upon closing pursuant to the terms of the August 2013 Note. The August 2013 Note has a maturity of one year from the delivery of each payment. The August 2013 Note may be convertible into shares of common stock of our company at any time from
180
days after the date of each payment of consideration, at a conversion price which is
70% of the average of the three lowest closing prices in the
20
trading days previous to the conversion. We may repay the August 2013 Note at any time on or before
90
days from the effective date of the August 2013 Note with an interest rate of
0%, after which we may not make any further payments on the August 2013 Note prior to the maturity date without written approval from the lender. If we elect not to repay the August 2013 Note on or before
90
days from the effective date of the August 2013 Note, a one-time interest charge of
12% will be applied to the principal sum. We elected not to pay the $150,000
portion of the August 2013 Note within
90
days from the effective date. After the $150,000
portion of the August 2013 Note became convertible, the note holder elected to convert the principal and interest totaling $186,480
into
17,937,915
shares of the company’s common stock during the months of February through May of 2014. On December 9, 2013, we received additional consideration of $75,000
pursuant to the terms of the August 2013 Note. We elected not to pay the $75,000
portion of the August 2013 Note within
90
days from the effective date. In June, July and August 2014, the note holder converted principal and interest totaling $93,240
into
9,983,507
shares of the Company’s common stock. On June 24, 2014 and September 3, 2014, we received additional consideration of $75,000
and $75,000, respectively, pursuant to the terms of the August 2013 Note. In December 2014 and January 2015, the note holder converted principal and interest totaling $41,961
into
5,900,000
shares of the Company’s common stock. On February 25, 2015, we received additional consideration of $50,000
pursuant to the terms of the August 2013 Note. During the three months ended April 30, 2015, the note holder converted principal and interest totaling $105,733
into
30,800,000
shares of the Company’s common stock. As of April 30, 2015, we had $94,284
of principal and interest outstanding for the August 2013 Note.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
On November 18, 2013, we entered into a securities purchase agreement (the “November 2013 Note”), whereby we agreed to issue a convertible note to one lender in the principal amount of $250,000. The proceeds from the note were $225,000, which created an original issue discount of $25,000. The note was payable in full on November 18, 2014 and bears no interest except in an event of default. The lender may, at its option, after the 183rd day (after May 20, 2014) following the closing date, convert the principal amount or any portion of such principal amount of the note into shares of common stock of our company at the price equal to the lesser of (a)
100% of the volume weighted average price (VWAP), as reported on the closing date (November 18, 2013), and (b)
70% of the average of the
5
day VWAP immediately prior to the day of conversion. On November 13, 2014, we entered into an Assignment of Promissory Note & Acknowledgment, whereby we consented to an assignment of the note to another lender, pursuant to which $250,000
remains owing by the Company. The maturity date of the November 2013 Note was extended to November 18, 2015. From November 2014 through January 2015, the new noteholder converted principal of $102,500
into
11,792,944
shares of the Company’s common stock. During the three months ended April 30, 2015, the new noteholder converted principal of $125,001
into
29,248,823
shares of the Company’s common stock. As of April 30, 2015, we had $22,500
of principal and interest outstanding for the November 2013 Note.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
In August 2014, we received $150,000
pursuant to the terms of a convertible promissory note (the “August 2014 Note”) dated August 26, 2014. The Note bears interest at
12%, is due on August 26, 2015, and is convertible after
180
days at a
45% discount to the average of the daily VWAP prices for the previous
10
trading days before the date of conversion During the three months ended April 30, 2015, the new noteholder converted principal of $160,834
into
56,676,739
shares of the Company’s common stock. As of April 30, 2015, we had $0
of principal and interest outstanding for this Note.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
On October 14, 2014, we entered into a securities purchase agreement, whereby we agreed to issue a convertible note (the “October 2014 Note”) to one lender in the principal amount of $105,000. The Note is payable in full on October 14, 2015, bears interest at the rate of
10% per annum, and includes a $5,000
original issuance discount. The Note may be convertible into shares of common stock of our company at any time from
180
days after the execution date of the Note at a price per share of
40% discount to the average of the daily VWAP for the previous five trading days before the date of conversion. During the three months ended April 30, 2015, the note holder converted principal and interest totaling $52,320
into
26,000,000
share of the Company’s common stock. As of April 30, 2015, we had $58,285
of principal and interest outstanding for this Note.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
On December 3, 2014, we entered into a note purchase agreement, whereby we agreed to issue a convertible note (the “December 2014 Note”) to lender in the principal amount of $210,000, with a $10,000
original issuance discount. The initial purchase price was $105,000
of consideration of which $100,000
was received our company and $5,000
was retained through the original issue discount. An additional $50,000
was received on February 27, 2015 with a $2,500
original issue discount. The Note bears interest at
10%, is due on December 3, 2016, and is convertible after six months of advance of funds at a
37.5% discount to the average of the daily VWAP prices for the previous
5
trading days before the date of conversion. As of April 30, 2015, we had of $162,649
principal and interest outstanding for this Note.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
During the three months ended April 30, 2015 and 2014, the Company recorded debt discounts of $331,323
and $114,954, respectively, due to the derivative liabilities, and original issue debt discounts of $8,000
and $2,250, respectively, due to the convertible notes. The Company recorded amortization of these discounts of $424,666
and $113,218
for the three months ended April 30, 2015 and 2014, respectively.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
In November of 2013, the Company recorded $45,663
of deferred financing costs, of which $15,500
was paid in cash and $30,163
paid with common stock, related to the November 18, 2013 convertible note. The Company recorded amortization of these deferred financing costs of $0
and $11,416
for the three months ended April 30, 2015 and 2014, respectively.
</p>
<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="100%">
<tr valign="top">
<td align="left"> </td>
<td align="left" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">April 30,</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" width="1%"> </td>
<td align="center" nowrap="nowrap" width="12%">January 31,</td>
<td align="left" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left"> </td>
<td align="left" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">2015</td>
<td align="center" nowrap="nowrap" width="2%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="1%"> </td>
<td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="12%">2015</td>
<td align="left" width="2%"> </td>
</tr>
<tr>
<td> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
<td valign="bottom" width="1%"> </td>
<td valign="bottom" width="12%"> </td>
<td valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">
12% convertible note payable issued August 2013, $38,784
due September 2015 and $55,500
due February 2016
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
94,284
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
144,519
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td align="left"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Convertible note payable issued November 2013, due November 2015</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
22,500
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
147,500
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td align="left"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">
12% convertible note payable issued August 2014, due August 2015
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
-
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
157,792
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td align="left"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">
10% convertible note payable issued October 2014, due October 2015
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
58,285
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
108,136
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td align="left"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">
10% convertible note payable issued December 2014, due December 2016
</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
162,649
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
106,697
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td align="left"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
337,718
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
664,644
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
<tr>
<td align="left"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Less debt discount</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(92,953
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" valign="bottom" width="12%">
(41,928
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
</tr>
<tr>
<td align="left"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Less current portion of convertible notes</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
(82,116
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="1%"> </td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" width="12%">
(516,019
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%">)</td>
</tr>
<tr>
<td align="left"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
<td align="right" valign="bottom" width="1%"> </td>
<td align="right" valign="bottom" width="12%"> </td>
<td align="right" valign="bottom" width="2%"> </td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#e6efff">Long-term convertible notes payable</td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
162,649
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
<td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="1%">$</td>
<td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 3px double" valign="bottom" width="12%">
106,697
</td>
<td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td>
</tr>
</table>
0.12
38784
55500
94284
144519
22500
147500
0.12
0
157792
0.10
58285
108136
0.10
162649
106697
337718
664644
-92953
-41928
-82116
-516019
162649
106697
0.10
730174
0.60
10000000
30
12
3730174
1592769
5322943
555000
500000
55000
150000
180
0.70
20
90
0.00
90
0.12
150000
90
150000
186480
17937915
75000
75000
90
93240
9983507
75000
75000
41961
5900000
50000
105733
30800000
94284
250000
225000
25000
1.00
0.70
5
250000
102500
11792944
125001
29248823
22500
150000
0.12
180
0.45
10
160834
56676739
0
105000
0.10
5000
180
0.40
52320
26000000
58285
210000
10000
105000
100000
5000
50000
2500
0.10
0.375
5
162649
331323
114954
8000
2250
424666
113218
45663
15500
30163
0
11416
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
<b>NOTE 8 – Stockholders’ deficit</b>
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Our common shares are all of the same class, are voting and entitle stockholders to receive dividends as defined. Upon liquidation or wind-up, stockholders are entitled to participate equally with respect to any distribution of net assets or any dividends that may be declared.</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
Between February 2014 and July 2014, pursuant to the investment agreement with KVM, KVM purchased
34,214,226
shares for $456,923, of which $55,673
is still owed to the Company and is reflected as a stock subscription receivable as of April 30, 2015.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
During the three months ending April 30, 2015, $105,733
of the August 2013 Note were converted into
30,800,000
shares of the Company’s common stock. The conversions occurred on multiple dates with conversion prices ranging from $0.00194
to $0.00574.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
During the three months ending April 30, 2015, $125,001
of the November 2013 Note were converted into
29,248,823
shares of the Company’s common stock. The conversions occurred on multiple dates with conversion prices ranging from
0.00274
to $0.00609
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
During the three months ending April 30, 2015, $160,834
of the August 2014 Note were converted into
56,676,739
shares of the Company’s common stock. The conversions occurred on multiple dates with conversion prices ranging from $0.00193
to $0.00416.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
During the three months ending April 30, 2015, $52,320
of the October 2014 Note were converted into
26,000,000
shares of the Company’s common stock. The conversions occurred on multiple dates with conversion prices ranging from $0.00192
to $0.00216.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
During the three months ended April 30, 2015, the Company issued
2,941,176
units to an investor for total proceeds of $10,000. Each unit consists of one share of the Company’s common stock and two warrants to purchase one share each of the Company’s common stock. The warrants have an exercise price of $0.0048
and have a three year term (see note 5).
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
At April 30, 2015 there were
863,500
non-qualified stock options outstanding with a weighted average exercise price of $0.316
per option; of those options
863,500
are exercisable. At April 30, 2015 there were
85,421,374
incentive stock options outstanding with a weighted average exercise price of $0.042
per option; of those options
84,010,886
are exercisable with a weighted average exercise price of $0.042.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
During the three months ended April 30, 2015 we recognized $2,808
of compensation expense related to incentive and non-qualified stock options previously granted to officers, employees and consultants.
</p>
34214226
456923
55673
105733
30800000
0.00194
0.00574
125001
29248823
0.00274
0.00609
160834
56676739
0.00193
0.00416
52320
26000000
0.00192
0.00216
2941176
10000
0.0048
863500
0.316
863500
85421374
0.042
84010886
0.042
2808
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
<b>NOTE 9 – Subsequent events</b>
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
In May of 2015, $38,784
of the August 2013 Note was converted into
31,715,187
shares of the Company’s common stock.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
In May and June of 2015, $43,046
of the November 2013 Note was converted into
31,366,247
shares of the Company’s common stock.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
In May and June of 2015, $53,901
of the October 2014 Note was converted into
48,878,264
shares of the Company’s common stock.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
In June, 2015, the Company issued
1,846,154
units to an investor for total proceeds of $3,000. Each unit consists of one share of the Company’s common stock and one warrant to purchase one share of the Company’s common stock. The warrants have an exercise price of $0.002275
and have a three year term.
</p>
<p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">
In June 2015, we received additional consideration of $30,000
with $1,500
of original issue discount under the terms of the December 2014 Note.  An Amendment to this Note was executed on June 9, 2015 to include this additional $31,500
of consideration under the Note.
</p>
38784
31715187
43046
31366247
53901
48878264
1846154
3000
0.002275
30000
1500
31500