Quarterly report pursuant to Section 13 or 15(d)

Notes Payable, Related Party

Notes Payable, Related Party
6 Months Ended
Jun. 30, 2017
Debt Disclosure [Abstract]  
Notes Payable, Related Party



Notes payable, related party is comprised of the following:



June 30,



December 31,


Notes payable   $ 1,321     $ 7,487  
Convertible promissory notes     614,347       —    
Subtotal     615,668       7,487  
Less unamortized debt discount     (612,663 )     —    
Notes payable, net     3,005       7,487  
Less current maturities     (3,005 )     (7,487 )
Long term portion   $ —       $ —    


Notes payable


As of June 30, 2017 and December 31, 2016, the Company’s officers and directors have provided advances and incurred expenses on behalf of the Company. The issued notes are unsecured, due on demand and non-interest bearing.


Convertible promissory notes


On June 30, 2017, the Company issued 5% convertible promissory notes for an aggregate of $614,347 due June 30, 2018 for consideration of $585,092, after original interest discount (“OID) of $29,255; unsecured.


The notes are convertible, at any time, into shares of the Company’s common stock at 50% of the lowest reported sales price of the Company’s common stock for 15 trading days prior to the request to convert. In addition, the notes contain certain reset provisions should the Company issue subsequent equity linked instruments.


The Company has identified the embedded derivatives related to the above described notes. These embedded derivatives included certain conversion features and reset provisions. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of the note and to fair value as of each subsequent reporting date. 


At June 30, 2017, the Company determined the aggregate fair value of $1,317,555 of embedded derivatives. The fair value of the embedded derivatives was determined using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 449.09%, (3) weighted average risk-free interest rate of 1.24%, (4) expected life of 1.00 years, and (5) estimated fair value of the Company's common stock from $0.0205 per share. 


The determined fair value of the debt derivatives of $1,317,555 was charged as a debt discount up to the net proceeds of the notes with the remainder of $732,463 charged to current period operations as non-cash interest expense


For the three and six months ended June 30, 2017, the Company recorded amortization of debt discounts of $1,683 as a charge to interest expense.