CONVERTIBLE DEBT

12 Months Ended

Dec. 31, 2014

NOTE 5 - CONVERTIBLE DEBT

On various dates from November 27, 2013 through September 3, 2014, the Company issued convertible promissory notes totaling $934,081.Of this amount, $53,000 was recorded during the year ended December 31, 2013, and $881,081 was recorded during the year ended December 31, 2014. At the time of issuance, the notes were evaluated and were determined to contain embedded conversion options that are required to bifurcated and reported at fair value and original issue discounts. As a result, a discount on convertible promissory notes was recorded, net of discount amortization for the year ended December 31, 2014 amounted to $126,963.


Description		12/31/2014		12/31/2013
18 convertible promissory notes in amounts ranging from $25,000 to $113,654, with maturity dates ranging from 2014 to August 2016, bearing interest ranging from 0% to 12% per annum, convertible into common stock at variable conversion prices ranging from 25% of the lowest price in the prior 20 trading days to 60% of the lowest price in the prior 25 trading days.	$	934,081	$	53,000
Conversions		(398,241)		-
Unamortized portion of discount		(126,963)		(46,399)
Net	$	408,877	$	6,601

Debt Issue Costs

During the year ended December 31, 2014 and 2013, the Company paid debt issue costs totaling $22,250 and $4,000, which includes non-cash additions of $5,000 during the year ended December 31, 2014 and fees paid through the issuance of common stock in the amount of $1,000 during the year ended December 31, 2013, respectively.

The following is a summary of the Company’s debt issue costs:


	Year ended		Year ended
	December 31, 2014		December 31, 2013

Debt issue costs	$	26,250	$	4,000
Accumulated amortization of debt issue costs		(22,278)		(878)
Debt issue costs - net	$	3,972	$	3,122

Debt Discount

During the year ended December 31, 2014 and the year ended December 31, 2013, the Company recorded debt discounts totaling $730,956 and $53,000, respectively.

The debt discount recorded pertains to convertible debt that contains embedded conversion options that are required to bifurcated and reported at fair value and original issue discounts.

The Company amortized $650,392 and $6,601 during the year ended December 31, 2014 and 2013, respectively, to amortization of debt discount expense.


	As of		As of
	December 31, 2014		December 31, 2013

Debt discount	$	783,956	$	53,000
Accumulated amortization of debt discount		(656,993)		(6,601)
Debt discount - net	$	126,963	$	46,399

Derivative Liabilities

The Company identified conversion features embedded within this convertible debt. The Company has determined that the features associated with the embedded conversion option should be accounted for at fair value as a derivative liability.

As a result of the application of ASC No. 815, the fair value of the conversion feature is summarized as follow:


Derivative liability - December 31, 2012	$	-
Fair value at the commitment date for convertible instruments		144,346
Change in fair value of embedded derivative liability		(54,974)
Derivative liability - December 31, 2013		89,372

Add Fair value at the commitment date for convertible notes issued during 2014		1,902,462
Reclassification of derivative liability associated with convertible debt that ceased being a derivative liability to additional paid in capital		(1,033,652)
Fair value mark to market adjustment for convertible debt		(408,997)
	$	549,185

The Company recorded the debt discount to the extent of the gross proceeds raised, and expensed immediately the remaining value of the derivative as it exceeded the gross proceeds of the note. The Company recorded a derivative expenses for the year ended December 31, 2014 and 2013 of 1,226,180and 91,346, respectively.

The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of December 31, 2014:


Assumption	Commitment Date	Remeasurement Date

Expected dividends:	0%	0%
Expected volatility:	352.71% - 415.16%	28.23% - 744.33%
Expected term (years):	0.5 - 2 years	0.0082 - 1.57 years
Risk free interest rate:	0.09% - .13%	0.03% - 0.25%

The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of December 31, 2013:


Assumption	Commitment Date	Remeasurement Date
Expected dividends:	0%	0%
Expected volatility:	391%	371%
Expected term (years):	0.75	0.65
Risk free interest rate:	0.13%	0.13%

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References+ Details

EHOUSE GLOBAL, INC. 10-K/A