Convertible Notes Payable

6 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Note 6 - Convertible Notes Payable

The carrying value of all convertible notes at March 31, 2018 and September 30, 2017 was comprised of:

	March 31,			September 30,
	2018			2017
Convertible notes payable	$	552,483		$	598,765
Unamortized original issue discount and debt discount		(102,283	)		(305,165	)
	$	450,200		$	293,600

Interest expense for the six months ended March 31, 2018 was $704,246 and includes $442,152 of amortization of debt discount and loan fees, origination interest of $220,000 and $19,706 of amortization of original issue discount. Interest expense for the six months ended March 31, 2017 amounted to $79,969.

During the years ended September 30, 2017 and 2016 and the six months ended March 31, 2018, we executed a series of Promissory Notes (the “Notes”) to seven unrelated entities. The Notes have initial terms of one year or less. The notes carry face interest rates of from 8% to 12% per annum. The Lenders have the rights, at any time and/or after 180 days at their election to convert all or part of the outstanding and unpaid principal and accrued interest into shares of our common stock. The conversion price is generally a range of between 50% and 58% of a two-day average of the lowest trading price in the 15 to 25 range of trading days prior the conversion. During the quarter ending March 31, 2018 two of the lenders have sued for payment, which terminates their conversion rights. Aggregate amounts claimed pursuant to the lawsuits amounted to $448,833 including certain penalties and interest. Amounts included in convertible notes payable for these lenders amounted to $321,516 after the write-off of unamortized loan discounts of $181,869. Additionally, the Company eliminated $467,529 of the derivative liability related to these loans. Negotiations for settlement of the suits is currently in process.

During the six months ended March 31, 2018 the Company’s lenders converted an aggregate of $356,044 of the face value of notes payable plus accrued interest into an aggregate of 1,488,485,818 shares of $.001 par value common stock.

We valued the derivative liability at the end of each accounting period and the difference in value is recognized as gain or loss. At March 31, 2018, we determined the valuation using the Black-Sholes valuation model with the following assumptions: dividend yield of zero, 0.01 to 0.75 years to maturity, risk free interest rate of 2.09% and annualized volatility of 144% to 456%. We recognized $1,208,062 of income for the change in value of the derivative for the six months ended March 31, 2018.