Convertible Debentures | Note 12 – Convertible Debentures Convertible debentures consist of the following at June 30, 2018 and December 31, 2017, respectively: June 30, 2018 December 31, 2017 On May 18, 2018, the Company received net proceeds of $1,100,000 in exchange for an unsecured convertible promissory note that carries a 12% interest rate with a face value of $1,100,000 (“First Grass Roots Investors Note”), which matures on May 18, 2019. The principal and interest are convertible into shares of common stock after 90 days at the discretion of the note holder at a price equal to 50% of the closing traded price if the average of the high and low trading price of the Company’s common stock is less than or equal to $0.15, 40% of the closing traded price if such average is more than $0.15 and less than $0.20, and 30% of the closing traded price if such average is more than $0.20. Interest is payable semi-annually. The note is currently in default. $ 1,100,000 $ - On May 8, 2018, the Company issued a $108,000 unsecured promissory note to JSJ Investments, Inc., bearing interest at a rate of 8% per annum, with a maturity date of May 8, 2019 in exchange for net proceeds of $103,000. The note is convertible at 70% of the lowest VWAP during the ten (10) trading days prior to the conversion request date. The note is currently in default. 108,000 - On May 1, 2018, the Company issued a (i) $240,000 unsecured promissory note to SBI Investments, LLC, bearing interest at a rate of 5% per annum, with a maturity date of February 1, 2019, and (ii) a Warrant exercisable until May 1, 2021 to purchase 1,000,000 shares of the Company’s common stock at a price of $0.10 per share, in exchange for net proceeds of $225,000. The note is convertible at 70% of the lowest VWAP during the fifteen (15) trading days prior to the conversion request date. The note is currently in default. 240,000 - On April 17, 2018, the Company issued a $38,500 unsecured promissory note to Jefferson Street Capital, LLC, bearing interest at a rate of 8% per annum, with a maturity date of January 19, 2019 in exchange for net proceeds of $35,000. The note is convertible at 70% of the average of the three lowest closing traded prices during the ten (10) trading days prior to the conversion request date. The note is currently in default. 38,500 - On April 17, 2018, the Company issued a $136,500 unsecured promissory note to BlueHawk Capital, LLC, bearing interest at a rate of 8% per annum, with a maturity date of January 19, 2019 in exchange for net proceeds of $125,000. The note is convertible at 70% of the average of the three lowest closing traded prices during the ten (10) trading days prior to the conversion request date. The note is currently in default. 136,500 - On February 13, 2018, the Company received net proceeds of $120,000 in exchange for an unsecured convertible promissory note that carries a 10% interest rate with a face value of $122,400 (“Fifth Group 10 Note”), which matures on February 13, 2019. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to seventy percent (70%) of the average of the two lowest closing traded prices of the Company’s common stock over the fifteen (15) trading days preceding the conversion date. The Company paid total debt issuance costs of $2,400 that is being amortized over the life of the loan on the straight-line method, which approximates the effective interest method. The Company must at all times reserve at least 30 million shares of common stock for potential conversions. The note is currently in default. 122,400 - On January 16, 2018, the Company received net proceeds of $120,000 in exchange for an unsecured convertible promissory note that carries a 10% interest rate with a face value of $122,400 (“Fourth Group 10 Note”), which matures on January 16, 2019. The principal and interest are convertible into shares of common stock at the discretion of the note holder at a price equal to seventy percent (70%) of the average of the two lowest closing traded prices of the Company’s common stock over the fifteen (15) trading days preceding the conversion date. The Company paid total debt issuance costs of $2,400 that is being amortized over the life of the loan on the straight-line method, which approximates the effective interest method. The Company must at all times reserve at least 30 million shares of common stock for potential conversions. The note is currently in default. 122,400 - On December 15, 2017, the Company received net proceeds of $120,000 in exchange for an unsecured convertible promissory note that carries a 10% interest rate with a face value of $122,400 (“Third Group 10 Note”), which matures on December 15, 2018. The principal and interest are convertible into shares of common stock at the discretion of the note holder at a price equal to seventy percent (70%) of the average of the two lowest closing traded prices of the Company’s common stock over the fifteen (15) trading days preceding the conversion date. The Company paid total debt issuance costs of $2,400 that is being amortized over the life of the loan on the straight-line method, which approximates the effective interest method. The Company must at all times reserve at least 30 million shares of common stock for potential conversions. On June 26, 2018 the noteholder converted $50,000 of principal in exchange for the issuance of 1,547,508 shares. The note is currently in default. 72,400 122,400 On November 8, 2017, the Company amended the two notes with Black Mountain Equities, Inc. (“First Black Mountain Note”) and Gemini Master Fund, Ltd. (“First Gemini Note”). The amended notes extended the maturity dates to December 9, 2017, increased the principal amount owed by $8,250 each, and established conversion features. The principal and interest became convertible into shares of common stock at the discretion of the note holder at a price equal to seventy percent (70%) of the lowest volume weighted average price (“VWAP”) over the fifteen (15) trading days preceding the conversion date, as limited to $40,000 of conversion during any 10 day trading period. The notes were originally entered into on May 8, 2017, pursuant to which the Company sold to each Investor, for a purchase price of $150,000, (i) a Promissory Note (a “Note”) in the principal amount of $165,000, and (ii) a Warrant exercisable until May 31, 2022 to purchase 1,500,000 shares of the Company’s common at a price of $0.14 per share (a “Warrant”), resulting in aggregate gross proceeds to the Company of $300,000. Each Note matures on November 8, 2017, bears interest at a rate of 10% per annum payable at maturity, and is subject to acceleration in the event the Company becomes delinquent in its reporting obligation with the Securities and Exchange Commission and upon other customary events of default set forth in the Notes. The Warrants can be exercised on a cashless basis by the Investors, and the Company can require the Investors to exercise the Warrants on a cashless basis at any time following the six-month anniversary of the issuance date, provided that at such time (i) the volume weighted average price of the common stock has been greater than $0.25 for a period of thirty (30) consecutive trading days, and (ii) trading in the common stock has not been suspended by the Securities and Exchange Commission or the OTC Bulletin Board (or other exchange or market on which the Common Stock is trading). On various dates between December 11, 2017 and April 17, 2018, the noteholders converted an aggregate $339,873, consisting of $316,500 of principal and $23,373 of interest, in exchange for the issuance of 6,875,717 shares. The note has been satisfied in full. - 266,500 On November 8, 2017, the Company issued a $200,000 promissory note (“Second Group 10 Note”) in exchange for the debt acquired from Rxmm, as note below. The new note matures on November 8, 2018. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to seventy percent (70%) of the average of the two lowest closing traded prices of the Company’s common stock over the ten (10) trading days preceding the conversion date. The Company must at all times reserve at least 50 million shares of common stock for potential conversions. On various dates between December 6, 2017 and February 5, 2018, the noteholder converted $200,000 of principal in exchange for the issuance of 3,658,652 shares. The note has been satisfied in full. - 150,000 On November 7, 2017, the Company received net proceeds of $120,000 in exchange for an unsecured convertible promissory note with a face value of $122,400 (“First Group 10 Note”), which matures on November 7, 2018. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to seventy percent (70%) of the average of the two lowest closing traded prices of the Company’s common stock over the fifteen (15) trading days preceding the conversion date. The Company paid total debt issuance costs of $2,400 that is being amortized over the life of the loan on the straight-line method, which approximates the effective interest method. The Company must at all times reserve at least 50 million shares of common stock for potential conversions. On various dates between May 15, 2018 and May 30, 2018, the noteholders converted an aggregate $128,000, consisting of $122,400 of principal and $5,600 of interest, in exchange for the issuance of 4,378,352 shares. The note has been satisfied in full. - 122,400 On November 8, 2017, provisions within two notes with Black Mountain Equities, Inc. (“Second Black Mountain Note”) and Gemini Master Fund, Ltd. (“Second Gemini Note”) established conversion features. The principal and interest became convertible into shares of common stock at the discretion of the note holder at a price equal to seventy five percent (75%) of the lowest traded price during the fifteen (15) trading days preceding the conversion date. The notes were originally entered into on September 14, 2017, the Company entered into a Securities Purchase Agreement with Black Mountain Equities, Inc. and Gemini Master Fund, Ltd. (the “Investors”), pursuant to which the Company sold to each Investor, for a purchase price of $150,000, (i) a Promissory Note (a “Note”) in the principal amount of $158,000, and (ii) a Warrant exercisable until May 31, 2022 to purchase 1,500,000 shares of the Company’s common at a price of $0.14 per share (a “Warrant”), resulting in aggregate gross proceeds to the Company of $300,000. Each Note matures on March 14, 2018, bears interest at a rate of 10% per annum payable at maturity, and is subject to acceleration in the event the Company becomes delinquent in its reporting obligation with the Securities and Exchange Commission and upon other customary events of default set forth in the Notes. The Warrants can be exercised on a cashless basis by the Investors, and the Company can require the Investors to exercise the Warrants on a cashless basis at any time following the six-month anniversary of the issuance date, provided that at such time (i) the volume weighted average price of the common stock has been greater than $0.25 for a period of thirty (30) consecutive trading days, and (ii) trading in the common stock has not been suspended by the Securities and Exchange Commission or the OTC Bulletin Board (or other exchange or market on which the Common Stock is trading). On various dates between March 22, 2018 and May 30, 2018, the noteholders converted $167,657, consisting of $158,000 of principal and $9,657 of interest, in exchange for the issuance of 5,244,756 shares. The Second Gemini note has been satisfied in full, and $155,000 of cash was repaid on the Second Black Mountain leaving $3,000 of principal outstanding. The note is currently in default. 3,000 316,000 On October 27, 2017, the Company received net proceeds of $73,000 in exchange for an unsecured convertible promissory note that carries an 8% interest rate with a face value of $76,500 (“First Fourth Man Note”), which matures on October 27, 2018. The principal and interest are convertible into shares of common stock at the discretion of the note holder at a price equal to seventy five percent (75%) of the lowest traded price of the Company’s common stock over the fifteen (15) trading days preceding the conversion date. The Company paid total debt issuance costs of $3,500 that is being amortized over the life of the loan on the straight-line method, which approximates the effective interest method. The Company must at all times reserve at least 5 million shares of common stock for potential conversions. On June 1, 2018, a penalty of $15,300 was added to the principal balance of the note due to default provisions. The note is currently in default. 91,800 76,500 On October 27, 2017, the Company received net proceeds of $73,000 in exchange for an unsecured convertible promissory note that carries an 8% interest rate with a face value of $76,500 (“First Emunah Note”), which matures on October 27, 2018. The principal and interest are convertible into shares of common stock at the discretion of the note holder at a price equal to seventy five percent (75%) of the lowest traded price of the Company’s common stock over the fifteen (15) trading days preceding the conversion date. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance costs of $3,500 that is being amortized over the life of the loan on the straight-line method, which approximates the effective interest method. The Company must at all times reserve at least 5 million shares of common stock for potential conversions. On June 1, 2018, a penalty of $15,300 was added to the principal balance of the note due to default provisions. The note is currently in default. 91,800 76,500 On April 24, 2014, the Company received net proceeds of $33,250 in exchange for an unsecured convertible promissory note that carries an 8% interest rate with a face value of $35,000 (“Second LG Note”), which matured on April 11, 2015. The principal and interest are convertible into shares of common stock at the discretion of the note holder at a price equal to fifty five percent (55%) of the average of the lowest closing bid prices of the Company’s common stock for the twelve (12) trading days prior to, and including, the conversion date. The note carries an eighteen percent (18%) interest rate in the event of default. The Company paid total debt issuance cost of $1,750 that is being amortized over the life of the loan on the straight-line method, which approximates the effective interest method. The Company must at all times reserve at least 5 million shares of common stock for potential conversions. On October 31, 2014, the note holder sent demand for repayment. The note is currently in default. 35,000 35,000 Total convertible debentures 2,161,800 1,165,300 Less: unamortized debt discounts (1,820,149 ) (790,621 ) Convertible debentures $ 341,651 $ 374,679 In accordance with ASC 470-20 Debt with Conversion and Other Options, the Company recorded total discounts of $1,802,036 and $1,004,335 for the variable conversion features of the convertible debts incurred during the six months ended June 30, 2018 and the year ended December 31, 2017. The discounts are being amortized to interest expense over the term of the debentures using the effective interest method. The Company recorded $772,508 and $42,294 of interest expense pursuant to the amortization of the note discounts during the six months ended June 30, 2018 and 2017, respectively. All of the convertible debentures carry default provisions that place a “maximum share amount” on the note holders. The maximum share amount that can be owned as a result of the conversions to common stock by the note holders is 4.99% of the Company’s issued and outstanding shares. In accordance with ASC 815-15, the Company determined that the variable conversion feature and shares to be issued represented embedded derivative features, and these are shown as derivative liabilities on the balance sheet. The Company calculated the fair value of the compound embedded derivatives associated with the convertible debentures utilizing a lattice model. The Company recorded interest expense pursuant to the stated interest rates on the convertible debentures in the amount of $64,685 and $8,903 for the six months ended June 30, 2018 and 2017, respectively related to convertible debts. |