| 9. Senior Unsecured Convertible Promissory Notes | In December 2016, the Company entered into
securities purchase agreements (each, a "Securities Purchase Agreement" and, collectively, the "Securities Purchase
Agreements") with four accredited investors, pursuant to which it issued senior unsecured convertible promissory notes due
December 31, 2018 (each, a "Convertible Note" and, collectively, the "Convertible Notes") in the aggregate amount
of $132,500 in cash. Each Convertible Note accrues interest at 6%, is due December 31, 2018 and is convertible at the option
of the holder at $0.15 per share. Each investor was also issued a warrant certificate (each, a "Warrant Certificate"
and, collectively, the "Warrant Certificates"), pursuant to which such investor could acquire one share of Common Stock
at $0.25 per share for each $0.25 invested in the applicable Convertible Note until December 31, 2018. The full amount interest
under each Convertible Note is accrued and paid upon the maturity date or earlier conversion. The value allocated to the Warrant
Certificates was the fair value determined using the Black-Scholes option valuation with the following assumptions: no dividend
yield, expected annual volatility of 112%, risk free interest rate of 0.91% and an expected useful life of two years, The fair
value of the Warrant Certificates was allocated $38,115 to Paid in Capital and $38,115 as Debt Issue Costs. The Notes'
conversion features were valued at their intrinsic value in excess of the debt's allocated value of $38,115 and resulted in additional
Paid in Capital and Debt Issue Costs. The Debt Issue Costs represent a direct deduction of the face amount the Convertible Notes
is amortized as interest expense over the life of the Notes. In January 2017, the Company entered into
securities purchase agreements (each, a "Securities Purchase Agreement" and, collectively, the "Securities Purchase
Agreements") with two accredited investors, pursuant to which it issued senior unsecured convertible promissory notes due December
31, 2018 (each, a "Convertible Note" and, collectively, the "Convertible Notes") in the aggregate amount of $62,500
in cash. Each Convertible Note accrues interest at 6%, is due December 31, 2018 and is convertible at the option of the holder
at $0.15 per share. Each investor was also issued a warrant certificate (each, a "Warrant Certificate" and, collectively,
the "Warrant Certificates"), pursuant to which such investor could acquire one share of Common Stock at $0.25 per share
for each $0.25 invested in the applicable Convertible Note until December 31, 2018. The full amount of interest under each
Convertible Note is accrued and paid upon the maturity date or earlier conversion. The value allocated to the Warrant
Certificates was the fair value determined using the Black-Scholes option valuation with the following assumptions: no dividend
yield, expected annual volatility of 110%, risk free interest rate of 1.23% and an expected useful life of two years. The fair
value of the Warrant Certificates was allocated $16,975 to Paid in Capital. The Notes' conversion features were valued at
their intrinsic value in excess of the debt's allocated value of $16,975 and resulted in additional Paid in Capital. The Debt Issue
Costs represent a direct deduction of the face amount the Convertible Notes and is amortized as interest expense over the life
of the Notes. In September and October 2017, the
Company entered into securities purchase agreements (each, a "Securities Purchase Agreement" and, collectively, the "Securities
Purchase Agreements") with two accredited investors, pursuant to which it issued senior unsecured convertible promissory notes
due December 31, 2019 (each, a "Convertible Note" and, collectively, the "Convertible Notes") in the aggregate
amount of $65,000 in cash. Each Convertible Note accrues interest at 6%, is due December 31, 2019 and is convertible at the
option of the holder at $0.15 per share. Each investor was also issued a warrant certificate (each, a "Warrant Certificate"
and, collectively, the "Warrant Certificates"), pursuant to which such investor could acquire one share of Common Stock
at $0.25 per share for each $0.25 invested in the applicable Convertible Note until December 31, 2019. The full amount of
interest under each Convertible Note is accrued and paid upon the maturity date or earlier conversion. The value allocated to
the September Warrant Certificates was the fair value determined using the Black-Scholes option valuation with the following assumptions:
no dividend yield, expected annual volatility of 154%, risk free interest rate of 1.35% and an expected useful life of 28 months.
The value allocated to the October Warrant Certificates was the fair value determined using the Black-Scholes option valuation
with the following assumptions: no dividend yield, expected annual volatility of 180%, risk free interest rate of 1.51% and
an expected useful life of 27 months. The fair value of the Warrant Certificates of $13,918 was allocated to Paid in Capital.
The Notes' conversion features were valued at their intrinsic value in excess of the debt's allocated value of $13,918 and resulted
in additional Paid in Capital. The Debt Issue Costs represent a direct deduction of the face amount the Convertible Notes and is
amortized as interest expense over the life of the Notes. On December 31, 2018 the Company and investors
for all of the Senior Unsecured Convertible Promissory Notes entered into amended agreements whereby the maturity dates for the
notes maturing December 31, 2018 were extended to December 31, 2019, the conversion feature of the notes was modified from $0.15
per share of common stock to $0.10 per share. Additionally, the Warrant Certificates to purchase shares of common stock of the
Company, which were issued as a part of the original agreements, were repriced from $0.25 per share to $0.15 per share. The value
allocated to the Warrant Certificates modification was the fair value determined using the Black-Scholes option valuation
with the following assumptions: no dividend yield, expected annual volatility of 167%, risk free interest rate of 2.63% and
an expected useful life of 12 months. The change in fair value of the Warrant Certificates as a result of the modifications of
$139,985 was allocated to Paid in Capital and included as an expense in 2018. The Notes conversion features were equivalent
to their intrinsic value at the date of modification. The remaining Debt Issue Costs from the original notes which matured at December
31, 2019 of $5,798 will be amortized as interest expense over the remaining life of the Notes. The following table reflects the changes
in long term debt during the years ended December 31, 2018 and 2017, respectively:
2018 2017
Current Total
Convertible Notes Outstanding $ 260,000 $ 260,000 $ 260,000
Debt Issue Costs – Warrants and Conversion Feature (5,796 ) (5,796 ) (75,378 )
Convertible Notes Outstanding, Net $ 254,204 $ 254,204 $ 184,622 |
