Convertible Notes

6 Months Ended

Dec. 31, 2018

Convertible Notes

Convertible Notes

8. Convertible Notes

As of December 31, 2018 and June 30, 2018, the balance owing on convertible notes, net of debt discount, with terms as described below was $876,386 and $2,399,941, respectively.

Convertible notes issued prior the year ended June 30, 2017 were as follows:

Convertible note 1: On August 24, 2012, the Company entered into a convertible promissory note with an accredited investor for $25,000. The note has a term of six (6) months with an interest rate of 10% and is convertible to common shares at a 25% discount of the average of 30 days prior to the conversion date. As of December 31, 2018, the note is in default.

Convertible note 2: On September 18, 2012, the Company entered into a convertible promissory note with an accredited investor for $25,000. The note has a term of six (6) months with an interest rate of 10% and is convertible to common shares at a 25% discount of the average of 30 days prior to the conversion date. As of December 31, 2018, the note is in default.

Convertible note 3: On December 21, 2012, the Company entered into a convertible promissory note with an accredited investor for $100,000. The note has a term of six (6) months with an interest rate of 10% and is convertible to common shares at a 25% discount of the average of 30 days prior to the conversion date. As of December 31, 2018, the note is in default.

Convertible note 4: On December 19, 2016, the Company entered into a convertible promissory note with an accredited investor for $20,000. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount. As of December 31, 2018, the note has been fully converted.

Convertible note 5: On January 17, 2017, the Company entered into a convertible promissory note with an accredited investor for $25,000. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount to the then current market price of our shares. As of December 31, 2018, the note has been fully converted.

Convertible note 6: On January 20, 2017, the Company entered into a convertible promissory note with an accredited investor for $80,000. The note has a term of seven (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount to the then current market price of our shares. As of December 31, 2018, the note has been fully converted.

Convertible note 7: On February 8, 2017, the Company entered into a convertible promissory note with an accredited investor for $50,000. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount to the then current market price of our shares. As of December 31, 2018, the note has been fully converted.

Convertible note 8: On February 24, 2017, the Company entered into a convertible promissory note with an accredited investor for $66,023. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount to the then current market price of our shares. As of December 31, 2018, the note has been fully converted.

Convertible note 9: On February 9, 2017, the Company entered into a convertible promissory note with an accredited investor for $50,000. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount to the then current market price of our shares. As of December 31, 2018, the note has been fully converted.

Convertible note 10: On February 28, 2017, the Company entered into a convertible promissory note with an accredited investor for $75,000. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount. As of December 31, 2018, the note has been fully converted.

Convertible note 11: On March 1, 2017, the Company entered into a convertible promissory note with an accredited investor for $100,000. The note has been purchased by other investor in total amount of $156,067 with a term of nine (9) months with an interest rate of 10% and is convertible to common shares at a 45% discount to the then current market price of our shares. As of September 30, 2018, there were $92,500 has been converted into the Company’s common stock and the Company incurred two conversion default penalties in total of $60,751. As of June 30, 2018, the remaining principal balance was $124,318. As of December 31, 2018, the Company converted $63,567 and the remaining balance of note was $60,751.

Convertible note 12: On March 23, 2017, the Company entered into a convertible promissory note with an accredited investor for $70,000. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount to the then current market price of our shares. As of December 31, 2018, the note has been fully converted.

Convertible note 13: On February 16, 2017, the Company entered into a convertible promissory note with an accredited investor for $30,000. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount to the then current market price of our shares. As of December 31, 2018, the note has been fully converted.

Convertible note 14: On March 31, 2017, the Company entered into a convertible promissory note with an accredited investor for $200,000. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount to the then current market price of our shares. As of December 31, 2018, the note has been fully converted.

Convertible note 15 & 16: On May 17, 2017, the Company entered a convertible promissory note with an investor for a total amount of $1,375,000 (after $10,000 legal and due diligence fee) with an OID of $125,000, the note will be fulfilled through a series of funding. The note is due 12 months after each funding date and bear an interest rate of 10%. The conversion price for the note is 55% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. In connection with the note, the investor will also receive warrants and is calculated based on 15% of the maturity amount. The warrants have a life of four years with exercise price of $0.15 per share and have cashless exercise option. The Company had outstanding balance of $921,004 as of the year ended June 30, 2018. The fair value of the warrants were $40,400 as of June 30, 2018. During the six months ended December 31, 2018, the Company converted $525,000 into the Company’s common stock, the remaining balance of the note was $396,004 as of December 31, 2018 and the fair value of the warrant liability was $14,480. As of December 31, 2018, the note is in default and bears a default interest rate of 22% per annum.

Convertible notes issued during the year ended June 30, 2018 were as follows: 

Convertible note 17: On July 17, 2017, the Company entered into a convertible promissory note with an accredited investor for $164,900. The note has a term of one year with an interest rate of 8% and is convertible to common shares at a fixed conversion price of $0.025. As of December 31, 2018, the note has been fully converted.

Convertible note 18: On August 3, 2017, the Company entered into a convertible promissory note with an accredited investor for $150,000. The note has a term of six (6) months with an interest rate of 10% and is convertible to common shares at a 45% discount to average of 3 lowest trading price during last 20 trading days. As of December 31, 2018, the note has been fully converted.

Convertible note 19: On August 22, 2017, the Company entered into a convertible promissory note with an accredited investor for $35,000. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount of average two lowest price of last 20 trading days prices. As of December 31, 2018, the note has been fully converted.

Convertible note 20: On September 15, 2017, the Company entered into a convertible promissory note with an accredited investor for $150,000. The note has a term of six (6) months with an interest rate of 10% and is convertible to common shares at a 45% discount to average of 3 lowest trading price during last 20 trading days. As of December 31, 2018, the note has been fully converted.

Convertible note 21: On September 26, 2017, the Company entered into a convertible promissory note with an accredited investor for $15,000. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount of average two lowest price of last 20 trading days prices. As of December 31, 2018, the note has been fully converted.

Convertible note 22: On December 7, 2017, the Company entered into a convertible promissory note with an accredited investor for $50,000. The note has a term of one year with an interest rate of 8% and is convertible to common shares at a fixed conversion price of $0.05. As of December 31, 2018, the note has been fully converted.

Convertible notes issued during the six months ended December 31, 2018 were as follows: 

Convertible note 23: On September 20, 2018, the Company entered a convertible promissory note with an investor for a total amount of $267,500 (includes $5,000 legal fee and an OID of $12,500). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 55% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date.

Convertible note 24: On October 5, 2018, the Company entered a convertible promissory note with an investor for a total amount of $250,000 (includes $5,000 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 45% of average three lowest closing bid for the 20 consecutive trading days prior to the conversion date.

Convertible note 25: On November 1, 2018, the Company entered into a convertible promissory note with an accredited investor for $100,000. The note has a term of one year with an interest rate of 8% and is convertible to common shares at a fixed conversion price of $0.07.

Convertible note 26: On November 16, 2018, the Company entered into a convertible promissory note with an accredited investor for $80,000. The note has a term of one year with an interest rate of 8% and is convertible to common shares at a fixed conversion price of $0.07.

Convertible note 27: On November 16, 2018, the Company entered into a convertible promissory note with an accredited investor for $40,000. The note has a term of one year with an interest rate of 8% and is convertible to common shares at a fixed conversion price of $0.07.

Convertible note 28: On December 3, 2018, the Company entered into a convertible promissory note with an accredited investor for $35,000. The note has a term of one year with an interest rate of 8% and is convertible to common shares at a fixed conversion price of $0.07.

Convertible note 29: On December 26, 2018, the Company entered a convertible promissory note with an investor for a total amount of $250,000 (includes $5,000 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 45% of average three lowest closing bid for the 20 consecutive trading days prior to the conversion date.

As of the period ended December 31, 2018, the Company’s convertible notes consisted of following:

Balance						Conversion				Balance
as of		Default		Addition/		in		# of		as of			Interest			Conversion
06.30.2018		Penalty		(Repayment)		principal		shares		12.31.2018		Due Date	Rate			Price
	25,000		—		—		—		—		25,000	2/24/2013		14	%	75% of the average of 30 days prior to the conversion date.
	25,000		—		—		—		—		25,000	3/18/2013		14	%	75% of the average of 30 days prior to the conversion date.
	100,000		—		—		—		—		100,000	6/21/2013		14	%	75% of the average of 30 days prior to the conversion date.
	20,000		—		—		20,000		1,160,391		—	7/17/2017		10	%	40% discount of average price of last 20 trading days prices
	25,000		—		—		25,000		1,426,674		—	7/17/2017		8	%	40% discount of average two lowest price of last 20 trading days prices
	50,000		—		—		50,000		2,931,188		—	8/8/2017		8	%	40% discount of average two lowest price of last 20 trading days prices
	80,000		—		—		80,000		4,530,846		—	7/20/2017		8	%	40% discount of average two lowest price of last 20 trading days prices
	66,023		—		—		66,023		3,712,324		—	8/24/2017		8	%	40% discount of average two lowest price of last 20 trading days prices
	50,000		—		—		50,000		2,390,805		—	8/9/2017		8	%	40% discount of average two lowest price of last 20 trading days prices
	75,000		—		—		75,000		4,378,547		—	7/31/2017		8	%	40% discount of average two lowest price of last 20 trading days prices
	124,318		—		—		63,567		3,919,404		60,751	12/1/2017		10	%	45% discount of lowest price of last 20 trading days prices
	70,000		—		—		70,000		4,067,072		—	9/23/2017		8	%	40% discount of average two lowest price of last 20 trading days prices
	30,000		—		—		30,000		1,500,010		—	8/16/2017		8	%	Greater of 40% discount to average of 3 lowest trading price during last 20 trading days or $.05
	200,000		—		—		200,000		11,557,652		—	9/30/2017		8	%	40% discount of average two lowest price of last 20 trading days prices
	921,004		—		—		525,000		17,521,702		396,004	5/12/2018		22	%	45% discount of lowest price of last 20 trading days prices
	150,000		—		—		150,000		3,745,330		—	5/3/2018		10	%	45% discount to average of 3 lowest trading price during last 20 trading days
	164,900		—		—		164,900		6,596,000		—	7/17/2018		8	%	The conversion price shall be $0.025 per share
	35,000		—		—		35,000		691,184		—	8/22/2018		8	%	40% discount of average two lowest price of last 20 trading days prices
	15,000		—		—		15,000		294,114		—	9/26/2018		8	%	40% discount of average two lowest price of last 20 trading days prices
	50,000		—		—		50,000		1,000,000		—	12/7/2018		8	%	The conversion price shall be $0.05 per share
	—		—		267,500		—		—		267,500	9/15/2019		8	%	55% discount of lowest price of last 20 trading days prices
	—		—		250,000		—		—		250,000	10/5/2019		8	%	45% discount of average three lowest price of last 20 trading days prices
	—		—		100,000		—		—		100,000	10/31/2019		8	%	The conversion price shall be $0.07 per share
	—		—		80,000		—		—		80,000	11/15/2019		8	%	The conversion price shall be $0.07 per share
	—		—		40,000		—		—		40,000	11/15/2019		8	%	The conversion price shall be $0.07 per share
	—		—		35,000		—		—		35,000	12/2/2019		8	%	The conversion price shall be $0.07 per share
	—		—		250,000		—		—		250,000	12/26/2019		8	%	45% discount of average three lowest price of last 20 trading days prices
	2,426,245		—		1,022,500		1,819,490		75,167,248		1,629,255

In connection with the convertible debt, debt discount balance as of December 31, 2018 and June 30, 2018 were $752,869 and $26,303 respectively and were being amortized and recorded as interest expenses over the term of the convertible debt.

As of the period ended December 31, 2018, the Company’s debt discount consisted of following:

Note Date	Due Date	OID		Amortization in FY 2018		Debt Discount Balance at 6/30/2018		Amortization in 6 months ended 12/31/2018		Debt Discount Balance at 12/31/2018
8/22/2017	8/22/2018	$	35,000	$	29,918	$	5,082	$	5,082	$	—
9/26/2017	9/26/2018		15,000		11,384		3,616		3,616		—
7/17/2017	7/17/2018		164,900		160,445		4,455		4,455		—
12/7/2017	12/7/2018		50,000		36,849		13,151		13,151		—
9/20/2018	9/15/2019		12,500		—		—		3,542		8,958
9/20/2018	9/15/2019		250,000		—		—		70,833		179,167
10/5/2018	10/5/2019		5,000		—		—		1,192		3,808
10/5/2018	10/5/2019		245,000		—		—		58,397		186,603
11/1/2018	11/1/2019		84,286		—		—		13,855		70,431
11/16/2018	11/16/2019		36,571		—		—		4,509		32,063
11/16/2018	11/16/2019		18,286		—		—		2,254		16,031
12/3/2018	12/3/2019		10,000		—		—		767		9,233
12/26/2018	12/26/2019		5,000		—		—		68		4,932
12/26/2018	12/26/2019		245,000		—		—		3,356		241,644
Total:				$	41,302	$	26,303	$	185,077	$	752,869