6. NOTES PAYABLE

9 Months Ended

Mar. 31, 2017

Notes Payable [Abstract]

6. 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, 2017 and June 30, 2016, respectively:

Convertible Notes Payable – Related Parties
	March 31,	June 30,
	2017	2016
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, 2017 and June 30, 2016.	$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, 2017 and June 30, 2016, respectively:

	March 31,	June 30,
	2017	2016
$15,000 face value, issued in October 2011, interest rate of 10% and a default rate of 15%, matures in June 2012, net of unamortized discount of $0 as of March 31, 2017 and June 30, 2016, respectively. The note is currently in default.	$15,000	$15,000
$50,000 face value of which $50,000 was converted.	-	50,000

$20,000 face value, issued in June 2014, interest rate of 6%, matures December 2014, net unamortized discount of $0 as of March 31, 2017 and June 30, 2016, respectively. The note is currently in default.	20,000	20,000
$7,000 face value, issued in July 2014, interest rate of 6%, matures October 2014, net unamortized discount of $0 as of March 31, 2017 and June 30, 2016, respectively. The note is currently in default.	7,000	7,000
$100,000 face value, issued in October 2015, interest rate of 6%, matures February 2017.	100,000	100,000
$600,000 face value, issued in November 2015, interest rate of 0%, an OID of $130,000, matures May 2017, net unamortized discount of $15,882 and $0 of March 31, 2017 and June 30, 2016, respectively.	414,118	600,000
$100,000 face value, issued in February 2016, interest rate of 10%, matures February 2017, net unamortized discount of $0 and $2,993 as of March 31, 2017 and June 30, 2016, respectively.	100,000	97,007
$15,000 face value, issued in February 2016, interest rate of 10%, matures February 2017, net unamortized discount of $0 and $462 as of March 31, 2017 and June 30, 2016, respectively.	15,000	14,538
$25,000 face value, issued in February 2016, interest rate of 10%, matures February 2017, net unamortized discount of $0 and $3,354 as of March 31, 2017 and June 30, 2016, respectively.	25,000	21,646
$10,000 face value, issued in February 2016, interest rate of 10%, matures February 2017, net unamortized discount of $0 and $1,382 as of March 31, 2017 and June 30, 2016, respectively.	10,000	8,618
$100,000 face value, issued in March 2016, interest rate of 10%, matures March 2017, net unamortized discount of $0 and $13,765 as of March 31, 2017 and June 30, 2016, respectively.	100,000	86,235
$10,000 face value, issued in March 2016, interest rate of 10%, matures March 2017, net unamortized discount of $0 and $462 and $326 as of March 31, 2017 and June 30, 2016, respectively.	10,000	9,674
$50,000 face value, issued in July 2016, interest rate of 0%, matures January 2017, a gain on extinguishment of debt was recorded totaling $5,418 net unamortized discount of $0 as of March 31, 2017.	50,000	-
$30,000 face value, issued in August 2016, interest rate of 0%, matures January 2017, net unamortized discount of $0 as of March 31, 2017.	15,000	-
$50,000 face value, issued in August 2016, interest rate of 0%, matures August 2017, a gain on extinguishment of debt was recorded totaling $5,418 as of March 31, 2017.	44,582	-
$30,000 face value, issued in August 2016, interest rate of 0%, matures January 2017, a gain on extinguishment of debt was recorded totalling$3,818 net unamortized discount of $0 as of March 31, 2017. The note is currently in default.	26,182	-
$1,000,000 face value, issued in September 2016, interest rate of 10%, matures December 2016, net unamortized discount of $0 as of March 31, 2017.	1,000,000	-
$149,000 face value, issued in February 2017, interest rate of 10%, matures September 23, 2017, net amortized discount of $123,698 as of March 31, 2017.	25,302	-
$224,000 face value, issued in February 2017, interest rate of 10%, matures November 23, 2017, net amortized discount of $194,462 as of March 31, 2017.	29,538	-
$258,000 face value, issued in February 2017, interest rate of 12%, matures August 3, 2017, net amortized discount of $212,387 as of March 31, 2017.	45,613	-
Total convertible notes payable – non-related parties	2,052,335	1,029,718
Less current portion	2,052,335	1,029,718
Convertible notes payable – non-related parties, long-term	$-	$-

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 interest rate of 6% per annum and is convertible into shares of the Company’s Common stock at $0.50 per share. The note was amended on May 23, 2016 to extend the maturity date to July 23, 2016 and amended again on November 15, 2016 to extend the maturity date to January 31, 2017. 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. The note is currently in default.

On July 26, 2016, the Company issued a convertible note to an unrelated individual for $50,000 that matures on September 26, 2016. The note bears interest rate of 0% per annum and is convertible into shares of the Company’s Common stock at $0.40 per share, as part of the note the company issued options to purchase 35,000 shares of 144 restricted common stock at an exercise price $0.50 for a two-year period. The note was amended on November 21, 2016 to extend the maturity date to January 31, 2017. The Company evaluated amendment under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension did result in significant and consequential changes to the economic substance of the debt and thus resulted in a extinguishment of the debt and not modification of the debt resulting in a gain on extinguishment of debt of $5,418. The note is currently in default.

On August 8, 2016, the Company issued a convertible note to a related individual for $30,000 that matures on October 8, 2016. The note bears interest rate of 0% per annum and is convertible into shares of the Company’s Common stock at $0.40 per share, as part of the note the company issued options to purchase 21,000 shares of 144 restricted common stock at an exercise price $0.50 for a two-year period. The note was amended on November 21, 2016 to extend the maturity date to January 31, 2017. 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 extinguishment of the debt and not modification of the debt resulting in a gain on extinguishment of debt of $3,818. The note is currently in default.

On August 11, 2016, the Company issued a convertible note to a related individual for $30,000 that matures on October 11, 2016. The note bears interest rate of 0% per annum and is convertible into shares of the Company’s Common stock at $0.40 per share, as part of the note the company issued options to purchase 21,000 shares of 144 restricted common stock at an exercise price $0.50 for a two-year period. The Company paid $15,000 of principal. The note was amended on November 15, 2016 to extend the maturity date to January 31, 2017. 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. The note is currently in default.

On August 26, 2016, the Company issued a convertible note to an unrelated individual for $50,000 that matures on August 26, 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.

On September 1, 2016, an unrelated individual converted a convertible note entered into on August 21, 2012, with a principal balance of $50,000 and $21,164 in accrued interest at a rate of $0.25 per share of the Company’s Common stock for 280,650 shares.

On September 27, 2016, the Company issued a convertible note to an unrelated individual for $1,000,000 that matures on December 22, 2016. The note was amended subsequently in February 2, 2017 to extend the maturity date to June 30, 2017. The fund will be used for the manufacturing of the companies AfterMaster Pro TV box. 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, as part of the note the company issued 100,000 shares of 144 restricted common stock for a value of $33,349.

On November 20, 2015, the Company issued a convertible note to an unrelated company for $600,000 that matures on May 20, 2016. The company paid $200,000 in principle balance leaving a remain balance of $430,000 including the extension fees  and is not convertible unless the borrower defaults under the amendment agreement dated January 1, 2017. 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. The Company extended the maturity date for the sixth time by issuing additional $30,000 convertible notes on January 1, 2017 to February 15, 2017 and per the terms of the note there are no derivatives until it becomes convertible on the original note, however the $30,000 addition for the extension is to be considered derivatives. The Lender released a clarification of amendments to convertible promissory notes that explained the $30,000 extension fees are the only portion that is to be considered as convertible and converts within 2 days of issuance. The intent of the amendment agreements were to insure the original note dated November 20, 2015 in the amount of $600,000. Due to the conversion into 145,929 shares of common stock on January 1, 2017 (extension date) and January 3, 2017 (conversion date) sequencing is required on other instruments. Because the terms do not dictate a maximum numbers of convertible shares, the ability to settle these obligations with shares would be unavailable causing these obligations to potentially be settled in cash. This condition creates a derivative liability Under ASC 815-40.The Company has a sequencing policy regarding share settlement wherein instruments with the earliest issuance date would be settled first. The sequencing policy also considers contingently issuable additional shares, such as those issuable upon a stock split, to have an issuance date to coincide with the event giving rise to the additional shares. During the extension and conversion day period no additional convertible instruments were issued, therefore on the extension was considered in the derivative calculation. The Company extended the maturity date for the seventh time by increasing the principal balance by $30,000 on February 27, 2017 to May 6, 2017. 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.

On February 2, 2017, the Company amended the convertible note dated September 27, 2016 for $1,000,000 to extend the maturity date to June 30, 2017 and issued 200,000 warrants valued at $31,780. 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.

On February 3, 2017, the Company issued a convertible note to an unrelated company for $258,000 that matures on August 3, 2017. The note bears 12% interest per annum and is convertible into shares of the Company’s common stock at 57.5% of the lowest price of the Company’s Common Stock during the thirty (30) trading days immediately prior to the conversion date. Additionally, the note contains a ratchet provision. The Company determined under ASC 815, that the embedded conversion feature (if offering of common stock is at no consideration or at a price that is lower than the effective conversion price on the date shares are offered for sale, then a ratchet down of effective exercise price to price per share offered for common stock would be used to determine additional shares to be issued). The Company has determined that this ratchet provision indicates that these shares, if issued, are not indexed to the Company’s own stock and, therefore, is an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value.

In conjunction with the note, the Company issued to the holder 550,000 refundable shares of restricted Common Stock to be held in a treasury account and will be returned to the company if the note is paid on or before the due date. The value of the debt discount recorded was $163,749 and the debt discount related to the attached relative fair value of the restricted Common Stock was $94,251, for a total debt discount of $258,000, and a derivative expense of $65,750.

On February 23, 2017, the Company issued a convertible note to an unrelated company for $149,000 that matures on November 23, 2017. The note bears 10% interest per annum and is convertible into shares of the Company’s common stock at lesser of 40% of the average three lowest closing bids 20 days prior to the conversion date. Additionally, the note contains a ratchet provision. The Company determined under ASC 815, that the embedded conversion feature (if offering of common stock is at no consideration or at a price that is lower than the effective conversion price on the date shares are offered for sale, then a ratchet down of effective exercise price to price per share offered for common stock would be used to determine additional shares to be issued). The Company has determined that this ratchet provision indicates that these shares, if issued, are not indexed to the Company’s own stock and, therefore, is an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value.

On February 23, 2017, the Company issued a convertible note to an unrelated company for $224,000 that matures on November 23, 2017. The note bears 10% interest per annum and is convertible into shares of the Company’s common stock at lesser of 40% of the average three lowest closing bids 20 days prior to the conversion date. Additionally, the note contains a ratchet provision. The Company determined under ASC 815, that the embedded conversion feature (if offering of common stock is at no consideration or at a price that is lower than the effective conversion price on the date shares are offered for sale, then a ratchet down of effective exercise price to price per share offered for common stock would be used to determine additional shares to be issued). The Company has determined that this ratchet provision indicates that these shares, if issued, are not indexed to the Company’s own stock and, therefore, is an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value.

Notes Payable – Related Parties

Notes payable due to related parties consisted of the following as of March 31, 2017 and June 30, 2016, respectively:

	March 31,	June 30,
	2017	2016
Various term notes with total face value of $627,500, of which, $610,000 was issued from April 2011 to January 2014 with a maturity date of June 2015, and $17,500 issued in November 2016 payable on demand, interest rates range from 0% to 15%, net of unamortized discount of $0 as of March 31, 2017 and June 30, 2016, respectively, of which $52,500 has been paid. $5,000 extinguishment of loan (modification). The notes issued from April 2011 to January 2014 are currently in default.	$580,000	$575,000
Total notes payable – related parties	580,000	575,000
Less current portion	580,000	575,000
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, 2017 and June 30, 2016, respectively:

	March 31,	June 30,
	2017	2016
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	$-	$-