5. NOTES PAYABLE

9 Months Ended

Mar. 31, 2016

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 March 31, 2016 and June 30, 2015, respectively:

	March 31,			June 30,
	2016			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 March 31, 2016 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 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 March 31, 2016 and June 30, 2015, respectively:

			March 31,				June 30,
			2016				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 March 31, 2016 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 March 31, 2016 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 March 31, 2016 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 March 31, 2016 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 March 31, 2016 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 $27,473 of March 31, 2016.		572,527				-
$100,000 face value, issued in February 2016, interest rate of 10%, matures February 2017, net unamortized discount of $4,177 of March 31, 2016.		95,823				-
$15,000 face value, issued in February 2016, interest rate of 10%, matures February 2017, net unamortized discount of $640 of March 31, 2016.		14,360				-
$25,000 face value, issued in February 2016, interest rate of 10%, matures February 2017, net unamortized discount of $4,681 of March 31, 2016.		20,319				-
$10,000 face value, issued in February 2016, interest rate of 10%, matures February 2017, net unamortized discount of $1,913 of March 31, 2016.		8,087				-
$100,000 face value, issued in March 2016, interest rate of 10%, matures March 2017, net unamortized discount of $18,775 of March 31, 2016.		81,225				-
$10,000 face value, issued in March 2016, interest rate of 10%, matures March 2017, net unamortized discount of $445 of March 31, 2016.		9,555				-
Total convertible notes payable – non-related parties		1,003,896				572,400
Less current portion		1,003,896				572,400
Convertible notes payable – non-related parties, long-term	$	-			$	-

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 March 31, 2016 the balance of unamortized OID was $27,473.

On February 15, 2016, the Company issued a convertible note to an unrelated individual for $100,000 that matures on February 15, 2017. The note bears interest rate of 10% per annum and is convertible into shares of the Company’s Common stock at $0.50 per share. The company valued a debt discount related to the 10,000 shares of common stock issued with the note at a relative fair value of $3,475.

On February 15, 2016, the Company issued a convertible note to an unrelated individual for $25,000 that matures on February 15, 2017. The note bears interest rate of 10% per annum and is convertible into shares of the Company’s Common stock at $0.40 per share. The company valued a debt discount related to the 2,500 shares of common stock issued with the note at a relative fair value of $869.

On February 15, 2016, the Company issued a convertible note to an unrelated individual for $15,000 that matures on February 15, 2017. The note bears interest rate of 10% per annum and is convertible into shares of the Company’s Common stock at $0.50 per share. The company valued a debt discount related to the 1,500 shares of common stock issued with the note at a relative fair value of $521..

On February 22, 2016, the Company issued a convertible note to an unrelated individual for $10,000 that matures on February 22, 2017. The note bears interest rate of 10% per annum and is convertible into shares of the Company’s Common stock at $0.40 per share. The company valued a BCF related to the note valued at $618 and debt discount related to the 1,000 shares of common stock issued with the note at a relative fair value of $393..

On March 7, 2016, the Company issued a convertible note to an unrelated individual for $100,000 that matures on March 7, 2017. The note bears interest rate of 10% per annum and is convertible into shares of the Company’s Common stock at $0.40 per share.

The company valued a BCF related to the note valued at $24,269 and debt discount related to the 10,000 shares of common stock issued with the note at a relative fair value of $4,569.

On March 7, 2016, the Company issued a convertible note to an unrelated individual for $10,000 that matures on March 7, 2017. The note bears interest rate of 10% per annum and is convertible into shares of the Company’s Common stock at $0.50 per share. The company valued a debt discount related to the 1,000 shares of common stock issued with the note at a relative fair value of $457.

Notes Payable – Related Parties

Notes payable due to related parties consisted of the following as of March 31, 2016 and June 30, 2015, respectively:

	March 31,		June 30,
	2016		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 March 31, 2016 and June 30, 2015, respectively:

	March 31,		June 30,
	2016		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	$	-	$	-