7. NOTES PAYABLE

12 Months Ended

Jun. 30, 2019

Notes Payable [Abstract]

7. NOTES PAYABLE

Convertible Notes Payable

In accounting for its convertible notes payable where derivative accounting does not apply, 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 June 30, 2019 and 2018, respectively:

	June 30,		June 30,
	2019		2018
$30,000 face value, issued in August 2016, interest rate of 0% and is convertible into shares of the Company’s Common stock at $0.40 per share, matured June 30, 2019, a gain on extinguishment of debt was recorded totaling $3,818 in the prior period net unamortized discount of $0 as of June 30, 2019 and 2018, respectively.	$	30,000	$	30,000
Various term notes with total face value of $89,500 issued from September 2017 to February 2018, interest rates of 0% and are convertible into shares of the Company’s common stock at $0.10 per share, matured from January 2019 to June 30, 2019, net unamortized discount of $0 and  $4,422 as of June 30, 2019 and 2018, respectively. The note is currently in default.		89,500		85,078
Total convertible notes payable – related parties		119,500		115,078
Less current portion		119,500		115,078
Convertible notes payable – related parties, long-term	$	-	$	-

During the year ended June 30, 2019, four notes were amended to extend the maturity dates. The Company evaluated the amendments under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that three of the extensions 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. One extension resulted in significant and consequential changes to the economic substance, however the effect was not material.

Convertible Notes Payable – Non-Related Parties

Convertible notes payable due to non-related parties consisted of the following as of June 30, 2019 and 2018, respectively:

	June 30,		June 30,
	2019		2018
Various term notes with total face value of $2,049,000, issued from July 2014 to March 2018, interest rates from 0% to 10% and are convertible into shares of the Company’s common stock from $0.10 to $0.40 per share, matured from October 2018 to June 2019, net unamortized discount of $0 and $132,256  as of June 30, 2019 and 2018, respectively. The notes are currently in default.	$	2,049,000	$	1,916,744
Two Term notes with total face value of $373,000, issued in February 2017, interest rates of 10% and are convertible into shares of the Company’s common stock at lesser of 40% of the average three lowest closing bids twenty (20) days prior to the conversion date or $0.40 per share, matured June 2018, with additional extension fees of $81,000 added to principal. A total of $187,403 has been converted and 80,000 has been paid. The note is currently in default.		186,597		177,848
$265,000 face value, issued in May 2017, interest rate of 10% and is convertible into shares of the Company’s common stock at the lesser of $0.31 or 60% of the lowest closing bids twenty-five (25) days prior to the conversion date, matured February 2018, of which $116,328 was converted. The note is currently in default.		104,845		200,412

Two term notes with total face value of $131,000 face value, issued on July 2017 and August 2017, interest rates of 12% and are convertible into shares of the Company’s common stock at 61% of the lowest two trading prices during the fifteen (15) trading day period ending to the date of conversion, matured May 2018 and June 2018, of which $72,000 was converted. The note is currently in default.	59,000	59,000
$115,000 face value, issued in November 2017, interest rate of 10% and is convertible into shares of the Company’s common stock at 57.5% of the lowest closing bids thirty (30) days prior to the conversion per share, matured August 2018, net unamortized discount of $0 and $50,584 as of June 30, 2019 and 2018, respectively. The note is currently in default.	115,000	64,416
$100,000 face value, issued in November 2017, interest rate of 10% and is convertible into shares of the Company’s common stock at 57.5% of the lowest closing bids twenty (20) days prior to the conversion per share, matured November 2018, net unamortized discount of $0 and $39,452 as of June 30, 2019 and 2018, respectively, $100,000 was transferred to a new note.	-	60,548
$53,000 face value, issued in November 2017, interest rate of 12% and is convertible into shares of the Company’s common stock at 61% of the lowest closing bids fifteen (15) days prior to the conversion per share, matured July 2018, net unamortized discount of $0 and $4,649 as of June 30, 2019 and 2018, respectively, $53,000 was converted.	-	13,821
$115,000 face value, issued in January 2018, interest rate of 10% and is convertible into shares of the Company’s common stock at the lesser of $0.12 and 57.5% of the lowest trading price during the prior thirty (30) days, matured October 2018, net unamortized discount of $0 and $42,967 as of June 30, 2019 and 2018, respectively. The note is currently in default.	115,000	72,033
$75,075 face value, issued in February 2018, interest rate of 12% and is convertible into shares of the Company’s common stock at 55% of the lowest sales price for common stock on principal market during the twenty-five (25) consecutive trading days including the immediately preceding the conversion date, matured November 2018, net unamortized discount of $0 as of June 30, 2019 and 2018, of which $75,075 was transferred to two new notes.	-	75,075
$26,000 face value, issued from an assignment in March 2018, interest rate of 12% and is convertible into shares of the Company’s common stock at 60% the lowest trading price during the previous twenty (20) days to the date of conversion, matured October 2018, net unamortized discount of $0 as of June 30, 2019 and 2018, of which $26,000 has been paid.	-	26,000
$150,000 face value, issued in April 2018, interest rate of 10% and is convertible into shares of the Company’s common stock at the lesser of $0.05 or 57.5% of the lowest closing bids twenty (20) days prior to the conversion date, matured January 2019, net unamortized discount of $0 and $105,818 as of June 30, 2019 and 2018, respectively. The note is currently in default.	160,000	44,182

Two term notes with total face value of $415,000 face value, issued from an assignment in April 2018 of $370,000 in principal and an OID of $45,000, interest rates of 10% and are convertible into shares of the Company’s common stock at a rate of 55% of the average trading price for the prior three (3) trading days, matured April 2019, net unamortized discount of $0 and $48,000 as of June 30, 2019 and 2018, respectively, of which $223,198 has been converted. The notes are currently in default.	191,802	143,802
Various term notes with total face value of $502,504, issued from May 2018 to June 2018, interest rates of 12% and are convertible into shares of the Company’s common stock at 61% of the lowest two trading prices during the fifteen (15) trading day period ending to the date of conversion, matured from October 2018 to June 2019, net unamortized discount of $0 and $388,579 as of June 30, 2019 and 2018, of which $69,898 has been converted and $164,499 has been paid. The note is currently in default.	268,137	89,925
$15,651 face value, issued in June 2018, interest rate of 12% and is convertible into shares of the Company’s common stock at 60% of the lowest trading price during the previous twenty (20) days to the date of conversion, matured June 30, 2019. The note is currently in default.	15,651	15,651
$120,000 face value, issued in July 2018 for prepaid services, interest rate of 15% and is convertible into shares of the Company’s common stock at 70% of the lowest closing price during the twenty (20) days prior to the conversion per share, matures July 2019. The note is currently in default.	120,000	-
$39,759 face value, issued from an assignment in August 2018, interest rate of 12% and is convertible into shares of the Company’s common stock at 55% of the lowest sales price for common stock on principal market during the twenty-five (25) consecutive trading days including the immediately preceding the conversion date, matured November 2018, net unamortized discount of $0 as of June 30, 2019. The note is currently in default.	39,759	-
$23,000 face value, issued in August 2018 of $20,000 in principal and an OID of $3,000, interest rate of 12% and is convertible into shares of the Company’s common stock at 55% of the average of the three (3) lowest closing price during the 25 days prior to the conversion per share, matures August 2019, net unamortized discount of $3,214 as of June 30, 2019.	19,786	-
Various term notes total value of $1,115,646 face value, issued from August 2018 to December 2018, of which $995,500 in principal and an OID of $160,146, interest rates of 10% and are convertible into shares of the Company’s common stock at equal the lesser of $0.12 and 70% of the lowest trading price for the common stock during the thirty (30) trading day period ending on the latest complete trading day prior to the conversion date, matures from August 2019 to December 2019, net unamortized discount of $273,843 as of June 30, 2019.	838,053	-
Two term notes total value of $64,850, issued in August 2018, of which $61,850 in principal and an OID of $3,000, interest rate of 12% and is convertible into shares of the Company’s common stock at 61% of the lowest trading price for the prior fifteen (15) trading days including the immediately preceding the conversion date, matures August 2019, net unamortized discount of $6,998 as of June 30, 2019.	57,852	-

$89,000 face value, issued in March 2019 of $80,000 in principal and an OID of $9,000, interest rate of 10% and is convertible into shares of the Company’s common stock at 58% of the lowest trading price for the common stock during the twenty-five (25) trading day period ending on the latest complete trading day prior to the conversion date, matures March 2020, net unamortized discount of $65,899 as of June 30, 2019.		23,101		-
Various term notes with total value of $562,500, issued from March 2019 to June 2019, of which $535,500 in principal and an OID of $27,000, interest rates of 12% and are convertible into shares of the Company’s common stock at 58% of the lowest trading price for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date, matures from March 2020 and June 2020, net unamortized discount of $509,344 as of June 30, 2019.		53,156		-
Two term notes with total value of $154,000, issued in April 2019 and June 2019,of which $143,000 in principal and an OID of $11,000, interest rates of 12% and is convertible into shares of the Company’s common stock at 60% of the lowest trading price for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date, matures April 2020, net unamortized discount of $134,435 as of June 30, 2019.		19,565		-
$38,500 face value, issued in April 2019 of $31,500 in principal and an OID of $7,000, interest rate of 12% and is convertible into shares of the Company’s common stock at the lesser of 55% of the lowest trading price for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the issuance date or 55% of the lowest trading price for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date, matures February 2020, net unamortized discount of $30,967 as of June 30, 2019.		7,533		-
Total convertible notes payable – non-related parties		4,443,837		2,959,457
Less current portion		4,443,837		2,959,456
Convertible notes payable – non-related parties, long-term	$	-	$	-

During the year ended June 30, 2019, ten convertible notes were amended to extend the maturity dates. The Company evaluated the amendments under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that nine of the extensions 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. One extension resulted in significant and consequential changes to the economic substance, however the effect was not material.

Forbearance Agreements

In connection with the 22 Convertible Notes with four lenders dated from February 23, 2017 through December 7, 2018, with a remaining principal and accrued interest balance as of April 19, 2019 totaling $2,403,251 (“the Outstanding Notes”), the Company entered into a Forbearance Agreement, dated as of May 16, 2019 (the “Forbearance Agreement”), pursuant to which the lenders agreed to refrain and forbear from exercising and enforcing its remedies under the Outstanding Notes until September 13, 2019. The lenders agreed to forebear from exercising certain default rights with respect to the Notes for a period of 120 days from May 16, 2019 in exchange for the for monthly payments, with the first month totaling of $87,505, of which $54,003 applied to principal, $4,599 applied to accrued interest of the most recently funded note, and $28,903 as additional forbearance fee accounted as interest. The remaining three-monthly payments in the amount of $77,605, of which $54,003 applied to principal, $4,599 applied to accrued interest of the most recently funded note, and $19,003 as additional forbearance fee accounted as interest. At the end of the 120-day period the Company had an option to extend and additional 120 days. In connection with the Forbearance Agreement, on May 16, 2019, the Company issued a three-year common stock purchase warrant to purchase 4,523,805 shares of the Company’s Common Stock, exercisable at a price of $0.05 per share.

During the year ended June 30, 2019, various holders of the notes above converted $410,795 of principal, $74,501 of accrued interest, and $1,500 of conversion fees into 50,583,250 shares of common stock.

During the year ended June 30, 2019, the Company made cash payment of $210,249 toward principal various notes discussed above.

Notes Payable – Related Parties

Notes payable due to related parties consisted of the following as of June 30, 2019 and 2018:

	June 30,		June 30,
	2019		2018
$5,000 face value, issued in November 2016, interest rate of 0%, which is due on demand.	$	5,000	$	5,000
Various term notes with total face value of $213,000, issued from February 2017 to April 2019, interest rates of 0%, matured June 30, 2019. The notes are currently in default.		213,000		71,000
$12,000 face value, issued in June 2019, interest rate of 0%, matures June 2020.		12,000		-
Total notes payable – related parties		230,000		76,000
Less current portion		230,000		76,000
Notes payable - related parties, long term	$	-	$	-

During the year ended June 30, 2019, three notes were amended to extend the maturity dates. The Company evaluated the amendments under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that two of the extensions 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. One extension resulted in significant and consequential changes to the economic substance, however the effect was not material.

From July 23, 2018 through June 4, 2019, the Company issued notes to a related party for a total of $154,000 that all mature from June 30, 2019 to February 14, 2019. The notes bear 0% interest per annum. The Company evaluated the notes for imputed interest and found it to be immaterial.

Notes Payable – Non-Related Parties

Notes payable due to non-related parties consisted of the following as of June 30, 2019 and 2018:

	June 30,		June 30,
	2019		2018
Various term notes with a total face value of $252,250 issued from August 2017 to June 2019, of which $250,000 in principal and an OID of $2,250, interest rate of 0%, matured from December 2018 to July 2019 net of unamortized discount of $992 and$0 as of June 30, 2019 and 2018, respectfully. A total of $41,500 has been paid on principal. The notes are currently in default.	$	209,758	$	52,000
Two term notes with a total face value of $102,000 issued from August 2017 to March 2018, interest rate of 10%, matured from December 2018 through February 2019 net of unamortized discount of $0 and $4,901 as of June 30, 2019 and 2018, respectively. The note is currently in default.		102,000		97,099
Two term notes with total face value of $107,000, issued in September 2017 and March 2019, interest rate of 8% per month, matured September 2018 and April 2019 net of unamortized discount of $0 as of June 30, 2019 and 2018. The notes are currently in default.		107,000		81,000
$225,000 face value, issued in March 2018, interest rate of 30%, matured March 2019 net of unamortized discount of $0 and $62,512 as of June 30, 2019 and 2018, respectively. The note is currently in default.		225,000		162,488
$260,000 face value, issued in June 2018, an additional $21,000 was added to principal by the noteholder, interest rate of 0%, matured December 2018 net of unamortized discount of $0 and $9,677 as of June 30, 2019 and 2018, respectively, of which $31,000 has been paid. The note is currently in default.		250,000		250,323
$160,000 face value, issued in November 2018, interest rate of 5% per month, matured February 2019 net of unamortized discount of $0 as of June 30, 2019. The note is currently in default.		160,000		-
Total note payable – non-related parties		1,053,758		642,910
Less current portion		1,053,758		642,910
Notes payable – non-related parties, long-term	$	-	$	-

During the year ended June 30, 2019, five notes were amended to extend the maturity date. The Company paid $72,500 and issued 100,000 one-year warrants with a conversion price of $.03 per share of common stock as additional consideration to extend three of the notes. The Company evaluated the amendment under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extensions 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.