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CONVERTIBLE NOTES PAYABLE | 9 Months Ended
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Mar. 31, 2015
CONVERTIBLE NOTES PAYABLE |
CONVERTIBLE NOTES PAYABLE | 4. CONVERTIBLE NOTES PAYABLE Notes payable – related parties and a third parties consist of the following:
|  | March 31, |  | June 30,
|  | 2015 |  | 2014
Note payable – former Managing Member |  | $ | 27,750 |  | $ | 27,750
Note payable – related corporation |  |  | 4,300 |  |  | 4,300
Notes payable – stockholders |  |  | 13,000 |  |  | 13,000
Convertible notes payable |  |  | 977,241 |  |  | 729,120
Total |  |  | 1,022,291 |  |  | 774,170
Convertible notes payable, discount |  |  | (178,460) |  |  | (126,722)
Total, net of discount |  |  | 868,831 |  |  | 647,448
Less current portion |  |  | 868,831 |  |  | 647,448
Long-term debt |  | $ | - |  | $ | -
All notes will mature prior to March 31, 2016 During the current fiscal year, the Company has issued $270,000 of notes for consulting purposes and $172,500 in notes for cash. The consulting notes are comprised of nine $30,000 notes which mature between January 1, 2015 and January 1, 2016. They carry no interest and convert into common stock at a 50% discount to the low closing bid price over the prior thirty days The notes for cash are comprised of six notes which convert into common stock at anywhere between a 42% and 50% discount to the prevailing market price. All notes mature before December 31, 2015. Derivative Liability Feature on Notes Payable Prior to the fourth quarter of the prior fiscal year, for conventional convertible debt where the rate of conversion is based on a discount to the prevailing market value, the Company recorded a “beneficial conversion feature” (“BCF”) and related debt discount. The BCF was recorded as a debt discount against the face amount of the respective debt instrument. There would be an offsetting increase to Additional paid in capital as the BCF is deemed to be an increase to equity. The discount would be amortized to interest expense over the life of the debt. Commencing with the fourth quarter of the prior fiscal year, the Company reconsidered the requirements of the Financial Accounting Standards Board Accounting Standards Classification 820 (‘FASB ASC 820” or “ASC 820”) and determined that newly issued debt were derivative financial instruments. As such, a derivative expense was recorded on the issuance of the debt as well as a quarterly mark to market Interest Expense Interest expense on notes payable, including amortization of the discount on the convertible notes and the accrual of the Original Issue Discount, was $444,937 and $305,113 for the nine months ended March 31, 2015 and 2014, respectively. Interest expense on notes payable, including amortization of the discount on the convertible notes and the accrual of the Original Issue Discount, was $152,473 and $137,181 for the three months ended March 31, 2015 and 2014, respectively.

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