5. NOTES PAYABLE

6 Months Ended

Dec. 31, 2015

Notes Payable [Abstract]

5. NOTES PAYABLE

Convertible Notes Payable

In accounting for its convertible notes payable, proceeds from the sale of a convertible debt instrument with Common Stock purchase warrants are allocated to the two elements based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance. The portions of the proceeds allocated to the warrants are accounted for as paid-in capital with an offset to debt discount. The remainder of the proceeds are allocated to the debt instrument portion of the transaction as prescribed by ASC 470-25-20.  The Company then calculates the effective conversion price of the note based on the relative fair value allocated to the debt instrument to determine the fair value of any beneficial conversion feature (“BCF”) associated with the convertible note in accordance with ASC 470-20-30.  The BCF is recorded to additional paid-in capital with an offset to debt discount.  Both the debt discount related to the issuance of warrants and related to a BCF is amortized over the life of the note.

Convertible Notes Payable – Related Parties

Convertible notes payable due to related parties consisted of the following as of December 31, 2015 and June 30, 2015, respectively:

	December 31,			June 30,
	2015			2015
Various term notes with total face value of $3,925,000 issued from February 2010 to April 2013, interest rates range from 10% to 15%, net of unamortized discount of $0 as of December 31, 2015 and June 30, 2015.		$	3,925,000		$	3,925,000
Total convertible notes payable – related parties			3,925,000			3,925,000
Less current portion			3,925,000			3,925,000
Convertible notes payable – related parties, long-term		$	-		$	-

The notes were amended on June 30, 2014 to extend the maturity date to September 30, 2014, amended again on September 30, 2014 to December 31, 2014, amended again on December 31, 2014 to June 30, 2015, amended again on June 30, 2015 to August 31, 2015, amended again on September 30, 2015 to October 15, 2015, amendedand again on November 10, 2015 to November 30, 2015, and again on February 15, 2016 to March 16, 2016. The Company evaluated amendment under ASC 470-50, "Debt - Modification and Extinguishment", and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt.

Convertible Notes Payable - Non-Related Parties

Convertible notes payable due to non-related parties consisted of the following as of December 31, 2015 and June 30, 2015, respectively:

	December 31,		June 30,
	2015		2015
$15,000 face value, issued in October 2011, interest rate of 10%, matures in June 2012, net of unamortized discount of $0 and $0 as of December 31, 2015 and June 30, 2015, respectively.	$	15,000	$	15,000
$50,000 face value, issued in August 2012, interest rate of 10%, matures in February 2013, net of unamortized discount of $0 and $0 as of December 31, 2015 and June 30, 2015, respectively.		50,000		50,000
$10,000 face value, issued in September 2012, interest rate of 10%, matures in March 2013, net of unamortized discount of $0 and $0 as of December 31, 2015 and June 30, 2015, respectively.		10,000		10,000
$50,000 face value of which $17,500 was paid, $9,600 was converted, and $22,900 was forgiven.		-		40,400
$30,000 face value of which $30,000 was forgiven.		-		30,000
$20,000 face value of which $20,000 was forgiven.		-		20,000
$30,000 face value of which $30,000 was converted.		-		30,000
$15,000 face value of which $15,000 was converted.		-		15,000
$20,000 face value, issued in June 2014, interest rate of 6%, matures December 2014, net unamortized discount of $0 and $0 as of December 31, 2015 and June 30, 2015, respectively.		20,000		20,000
$20,000 face value of which $20,000 was converted.		-		20,000
$25,000 face value of which $25,000 was converted.		-		25,000

$10,000 face value of which $10,000 was converted.		-		10,000
$7,000 face value, issued in July 2014, interest rate of 6%, matures October 2014, net unamortized discount of $0 and $0 as of December 31, 2015 and June 30, 2015, respectively.		7,000		7,000
$5,000 face value of which $5,000 was converted.		-		5,000
$100,000 face value of which $100,000 was converted.		-		100,000
$100,000 face value of which $100,000 was converted.		-		100,000
$40,000 face value of which $40,000 was converted.		-		40,000
$35,000 face value of which $35,000 was converted.		-		35,000
$100,000 face value, issued in October 2015, interest rate of 6%, matures February 2016.		100,000		-
$600,000 face value, issued in November 2015, interest rate of 0%, an OID of $100,000, matures May 2016, net unamortized discount of $77,473 of December 31, 2015.		522,527		-
Total convertible notes payable – non-related parties		724,527		572,400
Less current portion		724,527		572,400
Convertible notes payable – non-related parties, long-term	$	-	$	-

On November 28, 2012, the Company issued a convertible note to a related party for $50,000 that matures in November 28, 2013, of which $9,600 was converted in the previous period. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share. On August 3, 2015, the company settled the debt for $17,500 and recorded a gain on settlement of debt of $22,900 for the remaining principal and $9,670 for the accrued interest.

On February 13, 2013, the Company issued a convertible note to a related party for $30,000 that matures in November 28, 2013. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share. On August 3, 2015, the company settled the debt and recorded a gain on settlement of debt of $30,000 for the remaining principal and $12,707 for the accrued interest.

On April 24, 2013, the Company issued a convertible note to a related party for $20,000 that matures in October 24, 2013. The note bears an interest rate of 10% per annum and is convertible after 180 days into shares of the Company’s Common Stock at $0.10 per share. On August 3, 2015, the company settled the debt and recorded a gain on settlement of debt of $20,000 for the remaining principal and $170 for the accrued interest.

On March 6, 2014, the Company issued a convertible note to an unrelated individual for $30,000 that matures on September 6, 2014. The note bears no interest rate and is convertible into shares of the Company’s Common stock at $0.10 per share. On September 30, 2015, the note holder elected to convert the entire note of $30,000.

On June 19, 2014, the Company issued a convertible note to an unrelated individual for $15,000 that matures on December 18, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share. On September 30, 2015, the note holder elected to convert the entire note of $15,000 and $1,154 in accrued interest.

On June 19, 2014, the Company issued a convertible note to an unrelated individual for $20,000 that matures on December 19, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share. On September 30, 2015, the note holder elected to convert the entire note of $20,000 and $1,538 in accrued interest.

On July 10, 2014, the Company issued a convertible note to an unrelated individual for $10,000 that matures on October 10, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share. On July 29, 2015, the note holder elected to convert the entire note of $10,000 and $633 in accrued interest.

On July 18, 2014, the Company issued a convertible note to an unrelated individual for $5,000 that matures on October 18, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share. On July 30, 2015, the note holder elected to convert the entire note of $5,000 and $312 in accrued interest.

On October 6, 2014, the Company issued a convertible note to an unrelated individual for $40,000 that matured on January 6, 2015. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.20 per share. The company valued a BCF related to the note valued at $40,000. On September 30, 2015, the note holder elected to convert the entire note of $40,000 and $2,361 in accrued interest.

On September 11, 2014, the Company issued a convertible note to an unrelated individual for $100,000 that matured on December 11, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.20 per share. On October 7, 2015, the note holder elected to convert the entire note of $100,000 and $6,427 in accrued interest.

On June 30, 2014, the Company issued a convertible note to an unrelated individual for $25,000 that matured on September 30, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.10 per share. On October 8, 2015, the note holder elected to convert the entire note of $25,000 and $3,185 in accrued interest.

On November 24, 2014, the Company issued a convertible note to an unrelated individual for $35,000 that matured on May 24, 2015. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.35 per share. On October 8, 2015, the note holder elected to convert the entire note of $35,000 and $1,829 in accrued interest.

On October 27, 2015, the Company issued a convertible note to an unrelated individual for $100,000 that matures on February 27, 2016. The note bears 6% per annum and in convertible into shares of the Company’s Common stock at $0.50 per share. Additionally, the Company granted 50,000 warrants in conjunction with this note (see Note 8 – Stock Purchase Options and Warrants).

On September 19, 2014, the Company issued a convertible note to an unrelated individual for $100,000 that matured on December 19, 2014. The note bears interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.20 per share. On November 16, 2015, the note holder elected to convert the entire note of $100,000 and $6,953 in accrued interest.

On November 20, 2015, the Company issued a convertible note to an unrelated company for $600,000 that matures on May 20, 2016. The note bears 0% interest and had an original issue discount (OID) of $100,000. This note is not convertible unless there is a default event, so no BCF was valued. As of December 31, 2015 the balance of unamortized OID was $77,473.

Notes Payable – Related Parties

Notes payable due to related parties consisted of the following as of December 31, 2015 and June 30, 2015, respectively:

	December 31,		June 30,
	2015		2015
Various term notes with total face value of $610,000 issued from April 11 to January 2014, interest rates range from 0% to 15%, net of unamortized discount of $0 as of June 30, 2015 and June 30, 2014, respectively, of which $35,000 has been paid.	$	575,000	$	575,000
Face value of $50,000, issued in December 2014, matures in January 2015, note bears interest at 0%.		50,000		50,000
Total notes payable – related parties		625,000		625,000
Less current portion		625,000		625,000
Notes payable - related parties, long term	$	-	$	-

Notes Payable – Non-Related Parties

Notes payable due to non-related parties consisted of the following as of December 31, 2015 and June 30, 2015, respectively:

	December 31,		June 30,
	2015		2015
Various term notes with total face value of $40,488 due upon demand, interest rates range from 0% to 14%.	$	40,488	$	40,488
Total note payable – non-related parties		40,488		40,488
Less current portion		40,488		40,488
Notes payable – non-related parties, long-term	$	-	$	-