Annual report pursuant to Section 13 and 15(d)

Note 13 - Subsequent Events

Note 13 - Subsequent Events	12 Months Ended
Dec. 31, 2017
Notes
Note 13 - Subsequent Events	NOTE 13 – SUBSEQUENT EVENTS LOAN PAYABLE, RELATED PARTIES Loan Payable, Related Parties During the period from January 1, 2018 to February 15, 2018, Mr. Maggiore advance the Company an additional $60,000, for a total advanced of $302,602. CONVERTIBLE DEBT: HEP Investments, LLC Debt Modification On January 31, 2018, the Company and HEP Investments, LLC (“Lender”), entered into the following documents, effective as of January 31, 2018: (i) Ninth Amendment to Loan Agreement under which the Lender has agreed to advance up to a total of $17,500,000 to the Company, subject to certain conditions, and (ii) a Tenth Amended and Restated Senior Secured Convertible Promissory Note. The Ninth Amendment to Loan Agreement amends and restates the Eighth Amendment to Loan Agreement, which was entered into with the Lender on March 1, 2017 and disclosed in the Company’s Form 8-K Current Report filed on March 6, 2017. The Tenth Amended and Restated Senior Secured Convertible Promissory Note extends the maturity date for all convertible debt due to HEP Investments to April 1, 2019, including the payment of any interest due and owing at that time. The total outstanding debt as of January 31, 2018 is $16,411,839, and the related amount of unpaid interest is $1,476,607. In consideration for extending the maturity date of the Loan to April 1, 2019 in accordance with the Tenth Amended and Restated Senior Convertible Promissory Note, the Company agreed to issue to the Lender warrants to purchase 3,250,000 shares of common stock at an exercise price of $.10 with a term of 5 years. In accordance with FASB ASC 470-10-45, as a result of the January 31, 2018 amendment to the Loan Agreement and Convertible Promissory Note, the Company has reclassified all outstanding indebtedness to HEP Investments, LLC as non-current on the Consolidated Balance Sheet as of December 31, 2017. Based on the above, the total shares of common stock, if the Lender converted the complete $16,411,839 convertible debt, would be 164,118,392 shares, not including any future interest charges which may be converted into common stock. Amounts advanced under the Note are secured by all the Company’s assets. The Company has agreed to pay a closing fee of 9% in connection with the Loan transaction (when the remaining funding is achieved), consisting of 5.4% in cash and 3.6% paid in shares of common stock valued at various amounts based on the timing of the funding and the related stock price. The Company has made certain agreements with the Lender which shall remain in effect as long as any amount is outstanding under the Loan. These agreements include an agreement not to make any change in the Company’s senior management. Two representatives of the Lender will have the right to attend Board of Director meetings as non-voting observers. The Company determined that the modification of these Notes was not a substantial modification in accordance with ASC 470-50, “Modifications and Extinguishments.” 11% Convertible Debt - HEP Investments, LLC Through February 20, 2018, HEP Investments LLC (“Lender”) funded an additional of $203,000. Due to this additional funding, the Company issued to the Lender a $250,000, 11% convertible note and warrants to purchase 250,000 shares of common stock, at an exercise price of $.10 for a term of five years. The terms of the debt are in described in Note 7 - Convertible Debt. COMMITMENTS AND CONTINGENCIES Change of Control Provisions Effective as of February 9, 2018, the Board of Directors extended to December 31, 2018 the Change in Control Agreements (the “Agreements”) with both of its executive officers. The Agreements with each of the executive officers provide that if a Change of Control (as defined in the Agreements) occurs and the participant is not offered substantially equivalent employment with the successor corporation or the participant’s employment is terminated without Cause (as defined in the Agreements) during the three month period prior to the Change of Control or the 24 month period following the Change of Control, then 100% of such participant’s unvested options will be fully vested and the restrictions on his restricted shares will lapse. The Agreements also provide for severance payments of 500% of base salary and target bonus in such event. The Agreements terminate on December 31, 2018, with the provision that if a Change of Control occurs prior to the termination date, the obligations of the Agreements will remain in effect until they are satisfied or have expired.

Note 13 - Subsequent Events

12 Months Ended

Dec. 31, 2017

Notes

Note 13 - Subsequent Events

NOTE 13 – SUBSEQUENT EVENTS

LOAN PAYABLE, RELATED PARTIES

Loan Payable, Related Parties

During the period from January 1, 2018 to February 15, 2018, Mr. Maggiore advance the Company an additional $60,000, for a total advanced of $302,602.

CONVERTIBLE DEBT: HEP Investments, LLC

Debt Modification

On January 31, 2018, the Company and HEP Investments, LLC (“Lender”), entered into the following documents, effective as of January 31, 2018: (i) Ninth Amendment to Loan Agreement under which the Lender has agreed to advance up to a total of $17,500,000 to the Company, subject to certain conditions, and (ii) a Tenth Amended and Restated Senior Secured Convertible Promissory Note. The Ninth Amendment to Loan Agreement amends and restates the Eighth Amendment to Loan Agreement, which was entered into with the Lender on March 1, 2017 and disclosed in the Company’s Form 8-K Current Report filed on March 6, 2017. The Tenth Amended and Restated Senior Secured Convertible Promissory Note extends the maturity date for all convertible debt due to HEP Investments to April 1, 2019, including the payment of any interest due and owing at that time. The total outstanding debt as of January 31, 2018 is $16,411,839, and the related amount of unpaid interest is $1,476,607.

In consideration for extending the maturity date of the Loan to April 1, 2019 in accordance with the Tenth Amended and Restated Senior Convertible Promissory Note, the Company agreed to issue to the Lender warrants to purchase 3,250,000 shares of common stock at an exercise price of $.10 with a term of 5 years.

In accordance with FASB ASC 470-10-45, as a result of the January 31, 2018 amendment to the Loan Agreement and Convertible Promissory Note, the Company has reclassified all outstanding indebtedness to HEP Investments, LLC as non-current on the Consolidated Balance Sheet as of December 31, 2017.

Based on the above, the total shares of common stock, if the Lender converted the complete $16,411,839 convertible debt, would be 164,118,392 shares, not including any future interest charges which may be converted into common stock.

Amounts advanced under the Note are secured by all the Company’s assets.

The Company has agreed to pay a closing fee of 9% in connection with the Loan transaction (when the remaining funding is achieved), consisting of 5.4% in cash and 3.6% paid in shares of common stock valued at various amounts based on the timing of the funding and the related stock price.

The Company has made certain agreements with the Lender which shall remain in effect as long as any amount is outstanding under the Loan. These agreements include an agreement not to make any change in the Company’s senior management. Two representatives of the Lender will have the right to attend Board of Director meetings as non-voting observers.

The Company determined that the modification of these Notes was not a substantial modification in accordance with ASC 470-50, “Modifications and Extinguishments.”

11% Convertible Debt - HEP Investments, LLC

Through February 20, 2018, HEP Investments LLC (“Lender”) funded an additional of $203,000. Due to this additional funding, the Company issued to the Lender a $250,000, 11% convertible note and warrants to purchase 250,000 shares of common stock, at an exercise price of $.10 for a term of five years. The terms of the debt are in described in Note 7 - Convertible Debt.

COMMITMENTS AND CONTINGENCIES

Change of Control Provisions

Effective as of February 9, 2018, the Board of Directors extended to December 31, 2018 the Change in Control Agreements (the “Agreements”) with both of its executive officers. The Agreements with each of the executive officers provide that if a Change of Control (as defined in the Agreements) occurs and the participant is not offered substantially equivalent employment with the successor corporation or the participant’s employment is terminated without Cause (as defined in the Agreements) during the three month period prior to the Change of Control or the 24 month period following the Change of Control, then 100% of such participant’s unvested options will be fully vested and the restrictions on his restricted shares will lapse. The Agreements also provide for severance payments of 500% of base salary and target bonus in such event. The Agreements terminate on December 31, 2018, with the provision that if a Change of Control occurs prior to the termination date, the obligations of the Agreements will remain in effect until they are satisfied or have expired.