NOTE 9 – CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITY

On August 22, 2018, the Company issued a convertible promissory note ("Note 1") for $140,800. Note 1 was discounted at $128,000 and the Company received net proceeds of $125,000 after incurring $3,000 of debt issuance costs. The note bears an interest rate at 10% per annum, and principal and accrued interest is due on the maturity date of August 22, 2019. The conversion option price associated with the note has a 25% discount to the market price of the stock. The market price is based on the average of the two lowest trading prices during a ten day period prior to conversion. The note is convertible at any time. As a result of the variable feature associated with the conversion option, pursuant to ASC Topic 815, the Company bifurcated the conversion option, and utilized the Black Scholes valuation model to determine the fair value of the conversion option. At the issuance date, the Company recorded a derivative expense and derivative liability of $148,211. At the end of each reporting period, the Company revalued the derivative liability and recorded the change in this value as additional derivative expense. The Company recognized $78,180 and $58,503 as derivative expense for the three and six months ended June 30, 2019, respectively. During the six months ended June 30, 2019, the note holder elected to convert principle in the amount of $140,800 and accrued interest in the amount of $6,400 into the Company's common stock. This resulted in the issuance of 4,899,785 shares of the Company's common stock being issued to the note holder. As a result of the conversion, the derivative liability was extinguished at June 30, 2019 and was valued at $138,218 at December 31, 2018.

On October 8, 2018, the Company issued a convertible promissory note ("Note 2") for $58,300. Note 2 was discounted at $53,000 and the Company received net proceeds of $50,000 after incurring $3,000 of debt issuance costs. The note bears an interest rate at 10% per annum, and principal and accrued interest is due on the maturity date of October 8, 2019. The conversion option price associated with the note has a 25% discount to the market price of the stock. The market price is based on the average of the two lowest trading prices during a ten day period prior to conversion. The note is convertible at any time. As a result of the variable feature associated with the conversion option, pursuant to ASC Topic 815, the Company bifurcated the conversion option, and utilized the Black Scholes valuation model to determine the fair value of the conversion option. At the issuance date, the Company recorded a derivative expense and derivative liability of $57,272. At the end of each reporting period, the Company revalued the derivative liability and recorded the change in this value as additional derivative expense. The Company recognized $15,555 and $8,052 as derivative expense for the three and six months ended June 30, 2019, respectively. During June 2019, the note holder elected to convert principle in the amount of $27,000 into the Company's common stock. This resulted in the issuance of 1,353,155 shares of the Company's common stock being issued to the note holder. The derivative liability was valued at $32,134 and $58,300 at June 30, 2019 and December 31, 2018, respectively.

On June 13, 2019, the Company issued a convertible promissory note ("Note 3") for $93,500. Note 3 was discounted at $85,000 and the Company received net proceeds of $82,000 after incurring $3,000 of debt issuance costs. The note bears an interest rate at 10% per annum, and principal and accrued interest is due on the maturity date of June 13, 2020. The conversion option price associated with the note has a 25% discount to the market price of the stock. The market price is based on the average of the two lowest trading prices during a ten day period prior to conversion. The note is convertible at any time. As a result of the variable feature associated with the conversion option, pursuant to ASC Topic 815, the Company bifurcated the conversion option, and utilized the Black Scholes valuation model to determine the fair value of the conversion option. At the issuance date, the Company recorded a derivative expense and derivative liability of $151,264. At the end of each reporting period, the Company revalued the derivative liability and recorded the change in this value as additional derivative expense. The Company recognized $120,573 as derivative expense for the three and six months ended June 30, 2019. The derivative liability was valued at $120,573 at June 30, 2019.

Liability measured at fair value on a recurring basis by level within the fair value hierarchy as of June 30, 2019 and December 31, 2018 is as follows:

Fair Value Measurement at June 30, 2019 (1) Using

	Note 1				Note 2				Note 3
	Level 2		Total		Level 2		Total		Level 2		Total
Liability:
Derivative liability	$	-	$	-	$	32,134	$	32,134	$	120,573	$	120,573
Total liability	$	-	$	-	$	32,134	$	32,134	$	120,573	$	120,573

Fair Value Measurement at December 31, 2018 (1) Using

	Note 1 - Level 2		Note 2 - Level 2		Total
Liability:
Derivative liability	$	138,218	$	58,300	$	196,518
Total liability	$	138,218	$	58,300	$	196,518

(1) The Company did not have any assets or liabilities measured at fair value using Level 1 or 3 of the fair value hierarchy as of June 30, 2019 and December 31, 2018.

The Company’s derivative liabilities are classified within Level 2 of the fair value hierarchy. The Company utilizes the Black-Scholes valuation model to value the derivative liabilities utilizing observable inputs such as the Company’s common stock price, the conversion price of the conversion option, and expected volatility, which is based on historical volatility. The Black-Scholes valuation model employs the market approach in determining fair value.

The following is a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis during the six months ended June 30, 2019 and the year ended December 31, 2018:

	Note 1			Note 2			Note 3			Total
Balance at December 31, 2018	$	138,218		$	58,300		$	-		$	196,518
Variable conversion feature in convertible notes payable		-			-			151,264			151,264
Change in fair value		58,502			8,052			(30,691	)		35,862
Conversion of derivative liability to equity from note conversion		(196,719	)		(34,218	)		-			(230,938	)
Balance at June 30, 2019	$	-		$	32,134		$	120,573		$	152,707

During the six months ended June 30, 2019, the note holder elected to convert the principle amount of $140,800 and accrued interest of $6,400 of Note 1 and principle amount of $27,000 of Note 2 into the Company's common stock on the following dates, at the respective conversion prices, resulting in the following number of shares issued to the note holder:

Date of Conversion of Note 1	Amounts Converted		Conversion Price		Number of Shares Issued
Principle conversion
March 5, 2019	$	15,000	$	0.0945		158,730
March 19, 2019	$	15,000	$	0.0951		157,729
March 27, 2019	$	15,000	$	0.0795		188,679
April 23, 2019	$	12,000	$	0.0254		472,441
April 29, 2019	$	15,000	$	0.0254		590,551
May 8, 2019	$	15,000	$	0.0375		400,000
May 21, 2019	$	15,000	$	0.0263		570,342
May 30, 2019	$	12,000	$	0.0169		710,059
June 6, 2019	$	12,000	$	0.0169		710,059
June 11, 2019	$	14,800	$	0.0218		678,899
	$	140,800				4,637,490
Accrued interest conversion
June 18, 2019	$	6,400	$	0.0244		262,295
Total amount converted	$	147,200				4,899,785


Date of Conversion of Note 2	Amounts Converted		Conversion Price		Number of Shares Issued
Principle conversion
June 21, 2019	$	15,000	$	0.0206		728,155
June 25, 2019	$	12,000	$	0.0192		625,000
Total amount converted	$	27,000				1,353,155