The Company has the following convertible notes payable as of March 31, 2018 and December 31, 2017:

During 2016 through 2017, the Company issued convertible notes payable to unrelated, third party creditors/investors totaling $1,695,768. The notes bear an average interest rate of 8% per annum, secured by the Company’s assets, matures starting February 2018 through January 2019 and convertible to shares of common stock based upon a discounted market price. As of December 31, 2017, outstanding balance of the notes payable amounted $1,695,768 and unamortized debt discount of $675,453.

During the period ended March 31, 2018, the Company issued similar convertible notes payable totaling $150,000 in exchange for cash of $130,000. The Company determined that since the conversion floor had no limit to the conversion price, that the Company could no longer determine if it had enough authorized shares to fulfil the conversion obligation. As such, pursuant to current accounting guidelines, the Company determined that the conversion feature of the notes created a derivative with a fair value of $252,778 at the date of issuance. The Company accounted for the fair value of the derivative up to the face amount of the note of $150,000 as a valuation discount amortized over the life of the note, and the excess of $102,778 being recorded as financing cost (see Note 8 for discussion of derivative liability). In addition, the Company also recorded the notes’ original issue discount of $20,000 as financing costs.

As part of the offering, the Company also granted a five-year warrant to acquire 1,000,000 shares of the Company’s common stock with an exercise price of $0.14 per share. A total of 500,000 warrants that were granted included full ratchet reset provision in case a future offering at a price below $0.14 per share and a fundamental transaction provision that could give rise to an obligation to pay cash to the warrant holder and a reset. As such, pursuant to current accounting guidelines, the Company determined that the warrant exercise price and fundamental transaction clause created a derivative with a fair value of $48,961 at the date of issuance. The Company accounted for the fair value of the derivative as financing cost. See Note 8 for discussion of derivative liability.

During the period ended March 31, 2018 the Company paid $845,000 to settle certain outstanding convertible notes and converted outstanding convertible notes payable and accrued interest of $2,139,005 thru the issuance of 6,133,006 shares of common stock. As the fair value of the common shares issued of $1,679,276 exceeded the recorded amount of the convertible notes and accrued interest settled, the Company recorded a loss on debt extinguishment $1,090,056 on the settlement. The Company amortized the remaining debt discount of $675,453 to interest expense during the period.

As of March 31, 2018, all convertible notes payable had been settled or paid.

Total interest expense for convertible notes payable for the three months ended March 31, 2018 and 2017 was $144,541 and $20,128, respectively.