5. Convertible Notes Payable

On March 6, 2017, the Company closed on a private placement offering with institutional investors and one director pursuant to which the Company issued and sold the investors Senior Convertible Notes (the “Notes”) in the aggregate principal amount of $750,000, with an original issue discount of 5%, for gross proceeds to the Company of $712,500 prior to payment of $20,000 in reimbursement of legal fees of the lead investor. The Notes matured on September 3, 2017 with an initial interest rate of 8% and a default interest rate of 18% which became effective as of the maturity date. On the maturity date, the Company was obligated to repay an amount equal to 120% of outstanding principal and accrued interest. On the maturity date (and subsequently, if the holders elect to extend the maturity date), the investors may elect to convert the Notes into the common stock of the Company at $0.30 per share, subject to adjustment (the “Conversion Price”). As additional consideration, the Company issued the investors a total of 2,500,000 five-year warrants to purchase the Company’s common stock, which are exercisable on or after the maturity date at $0.35 per share. The Company failed to pay the Notes on the maturity date, which date the investors did not elect to extend.

On August 18, 2017, the Company closed on an offering of convertible notes and warrants on terms substantially identical to the March 6, 2017 financing. The purchasers are the same investors as in the March financing except for one person who is a former director that did not participate in this financing. The Company received $60,000 in net proceeds from the issuance of $63,158 of convertible notes. Additionally, the Company issued the investors a total of 210,526 five-year warrants exercisable at $.35 per share. The Company failed to pay these convertible notes when due on September 3, 2017.

The March 6 and August 18, 2017 notes were converted on January 3, 2018 via an exchange agreement into Series E Preferred stock. See Note 11.

On October 27, 2017, the Company closed on an offering of convertible notes with two institutional investors in the principal amount of $70,000. These notes matured on November 29, 2017 and bear interest at 8% per annum. On the maturity date, the Company was obligated to repay an amount equal to 120% of the outstanding principal and accrued interest. The investors may elect to convert the notes into common stock of the Company at $.03 per share. The Company failed to pay these convertible notes when due.

On December 21, 2017, the Company closed on an offering with three institutional investors pursuant to which the Company issued and sold convertible notes in the aggregate principal amount of $703,947. These notes had an original issue discount of 5%, for proceeds to the Company in the amount of $668,750. The notes matured on January 20, 2018, bear interest at 8%, and require the repayment of 120% of principal and accrued interest at maturity. The investors may elect to convert the notes into common stock of the Company at $.03 per share.

On March 6, 2018, the holders of the October 27, 2017 and December 21, 2017 notes agreed to extend the due date of these notes to April 15, 2019. See Note 11.

The aggregate principal amount of the above described Notes is $1,587,105, which is shown in the accompanying balance sheet as of December 31, 2017, net of $22,291 debt discount, as Convertible notes payable-net. Accrued interest amounted to $321,824 as of that date and interest expense aggregated $376,085 for the year ended December 31, 2017.