7 .	CONVERTIBLE NOTES PAYABLE - AFFILIATES:

January 2015

Convertible Notes

The

January 2015

Convertible Notes accrue interest at

per annum and were due and payable on

December 31, 2017.

Effective

June 30, 2017,

the maturity dates were extended on the

January 2015

Convertible Notes until

July 1, 2019.

The

January 2015

Convertible Notes (including accrued interest, plus all future deferred compensation), are convertible, at the sole election of the noteholder, into Units consisting of

one

share of the Company’s common stock and

one

quarter warrant to purchase a share of the Company’s common stock, at a price of

$0.50

per Unit until

December 31, 2020.

The warrant contained in the Unit shall be exercisable at

$1.00

per share until

December 31, 2020.

The original conversion price of

$0.50

per Unit approximated the fair value of the Units at the date of the agreements; therefore

beneficial conversion feature exists. Management evaluated the terms and conditions of the embedded conversion features based on the guidance of ASC

815

“Embedded Derivatives” to determine if there was an embedded derivative requiring bifurcation. An embedded derivative instrument (such as a conversion option embedded in the deferred compensation) must be bifurcated from its host instruments and accounted for separately as a derivative instrument only if the “risks and rewards” of the embedded derivative instrument are

not

“clearly and closely related” to the risks and rewards of the host instrument in which it is embedded. Management concluded that the embedded conversion feature of the deferred compensation was

not

required to be bifurcated because the conversion feature is clearly and closely related to the host instrument, and because of the Company’s limited trading volume that indicates the feature is

not

readily convertible to cash in accordance with ASC

815

10,

“Derivatives and Hedging”.

As of

June 30, 2018,

the

January 2015

Convertible Note balances, including accrued interest, owed Bassani, Smith and Schafer were

$1,669,342,

$866,866

and

$431,188,

respectively. As of

June 30, 2017,

the

January 2015

Convertible Note balances, including accrued interest, owed Bassani, Smith and Schafer were

$1,610,760,

$836,445

and

$416,057,

respectively. The Company recorded interest expense related to the

January 2015

Convertible Notes of

$104,135

for both of the years ended

June 30, 2018

and

2017,

respectively.

September 2015

Convertible Notes

During the year ended

June 30, 2016,

the Company entered into

September 2015

Convertible Notes with Bassani, Schafer and a Shareholder which replaced previously issued promissory notes. The initial principal balances of the

September 2015

Convertible Notes were

$405,831,

$16,382

and

$82,921,

respectively. The

September 2015

Convertible Notes bear interest at

per annum, had maturity dates of

December 31, 2017

and

may

be converted at the sole election of the noteholders into restricted common shares of the Company at a conversion price of

$0.60

per share. As the conversion price of

$0.60

approximated the fair value of the common shares at the date of the

September 2015

Convertible Notes,

beneficial conversion feature exists. The balances of the

September 2015

Convertible Notes as of

June 30, 2018,

including accrued interest, are

$452,400,

$18,224

and

$87,196,

respectively. The balances of the

September 2015

Convertible Notes as of

June 30, 2017,

including accrued interest, were

$435,229,

$17,569

and

$88,927,

respectively. During the year ended

June 30, 2018,

Bassani and the Company agreed to split his original

September 2015

Convertible Note into

two

replacement notes with all the terms remaining the same. One of the replacement notes’ original principal is

$130,000,

which is being held by the Company as collateral for a subscription receivable promissory note from Bassani (Note

Effective

June 30, 2017,

the maturity dates of the

September 2015

Convertible Notes due Bassani and Schafer were extended until

July 1, 2019

and during the year ended

June 30, 2018,

the maturity date of the note due a Shareholder was extended until

July 1, 2019.

Also during the year ended

June 30, 2018,

the Shareholder was paid

$5,000

of principal related to his note.

The Company recorded interest expense of

$21,094

and

$20,205

for the years ended

June 30, 2018

and

2017,

respectively.