See the accompanying notes to the unaudited condensed consolidated financial statements

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NUTRA PHARMA CORP.

Condensed Consolidated Statements of Changes in Stockholders' Deficit

For the six months ended June 30, 2019 and 2018

(Unaudited)

See the accompanying notes to the unaudited condensed consolidated financial statements

NUTRA PHARMA CORP.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

See the accompanying notes to the unaudited condensed consolidated financial statements

NUTRA PHARMA CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

SeptemberJune 30, 20182019

1.     BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Nutra Pharma Corp. (“Nutra Pharma”), is a holding company that owns intellectual property and operates in the biotechnology industry. Nutra Pharma was incorporated under the laws of the state of California on February 1, 2000, under the original name of Exotic-Bird.com.

Through its wholly-owned subsidiary, ReceptoPharm, Inc. (“ReceptoPharm”), Nutra Pharma conducts drug discovery research and development activities. In October 2009, Nutra Pharma launched its first consumer product called Cobroxin^®, an over-the-counter pain reliever designed to treat moderate to severe chronic pain. In May 2010, Nutra Pharma launched its second consumer product called Nyloxin^®, an over-the-counter pain reliever that is a stronger version of Cobroxin^® and is designed to treat severe chronic pain. In December 2014, we launched Pet Pain-Away, an over-the-counter pain reliever designed to treat pain in cats and dogs.

Basis of Presentation and Consolidation

The Unaudited Condensed Consolidated Financial statementsStatements and notes are presented in accordance with the rules and regulations of the Securities and Exchange Commission and do not contain certain information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.2018. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal, recurring nature. Interim results are not necessarily indicative of results for a full year. Therefore, the interim Unaudited Condensed Consolidated Financial statementsStatements should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto contained in the Company’s Annual Report on Form 10-K.

The accompanying Unaudited Condensed Consolidated Financial Statements include the results of Nutra Pharma and its wholly-owned subsidiaries Designer Diagnostics Inc. and ReceptoPharm (collectively “the Company”, “us”, “we” or “our”). We operate as one reportable segment. All intercompany transactions and balances have been eliminated in consolidation.

Reclassification of Prior Year Presentation

Reclassification occurred to certain prior year amounts in order to conform to the current year classifications. The reclassifications have no effect on the reported net loss.

Restatement of Prior Period Presentation

Certain prior period amounts have been restated. Restatements have been made for the three and six months ended June 30, 2018 to correct the change in the fair value of convertible notes and to record a gain on settlement of debt and accounts payable. As a result of these changes, the following occurred:

Liquidity and Going Concern

Our Unaudited Condensed Consolidated Financial Statements are presented on a going concern basis, which contemplate the realization of assets and satisfaction of liabilities in the normal course of business. We have experienced recurring, significant losses from operations, and have an accumulated deficit of $63,794,408$63,341,492 at SeptemberJune 30, 2018.2019. In addition, we have a significant amount of indebtedness in default, a working capital deficit of $5,324,461$7,622,011 and a stockholders’ deficit of $5,361,923$7,652,158 at SeptemberJune 30, 2018.2019.

There is substantial doubt regarding our ability to continue as a going concern which is contingent upon our ability to secure additional financing, increase ownership equity and attain profitable operations. In addition, our ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered in established markets and the competitive environment in which we operate.

At September 30, 2018, weWe do not have sufficient cash to sustain our operations for a period of twelve months from the next yearissuance date of this report and will require additional financing in order to execute our operating plan and continue as a going concern. Since our sales are not currently adequate to fund our operations, we continue to rely principally on debt and equity funding; however, proceeds from such funding have not been sufficient to execute our business plan. Our plan is to attempt to secure adequate funding until sales of our pain products are adequate to fund our operations. We cannot predict whether additional financing will be available, and/or whether any such funding will be in the form of equity, debt, or another form. In the event that these financing sources do not materialize, or if we are unsuccessful in increasing our revenues and profits, we will be unable to implement our current plans for expansion, repay our obligations as they become due and continue as a going concern.

On September 28, 2018, the United States Securities and Exchange Commission filed a lawsuit in the United States District Court for the Eastern District of New York against the Company and its CEO and Chairman Rik J. Deitsch, and a consultant to the Company, Sean McManus, alleging violations of the Securities Act, the Exchange Act and rules promulgated thereunder. The Company believes that the SEC complaint contains serious factual inaccuracies. The Company believes that the charges are without merit and intend to defend themselves vigorously.The Company does not believe the SEC investigation could impact Company’s ability to continue as a going concern (See Note 8).

The accompanying Unaudited Condensed Consolidated Financial Statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Impact of COVID-19 on our Operations 

The ramifications of the outbreak of the novel strain of COVID-19, reported to have started in December 2019 and spread globally, are filled with uncertainty and changing quickly. Our operations have continued during the COVID-19 pandemic and we have not had significant disruption. Beginning in June 2020, the Company experienced a delay in retail rollout as a downstream implication of the slowing economy. We also closed our Coral Springs office in effort to save money. During May 2020, we received approval from SBA to fund our request for a PPP loan for $64,895 (See Note 12). During April and June 2020, we obtained a loan in the amount of $154,900 from the SBA under its Economic Injury Disaster Loan assistance program. We intended to use the proceeds primarily for working capital purpose (See Note 12).

The Company is operating in a rapidly changing environment so the extent to which COVID-19 impacts its business, operations and financial results from this point forward will depend on numerous evolving factors that the Company cannot accurately predict. Those factors include the following: the duration and scope of the pandemic; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; and the development of widespread testing or a vaccine.

Use of Estimates

The accompanying Unaudited Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America which require management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the

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financial statements and the reported amounts of revenue and expense. Significant estimates include our ability to continue as going concern, the recoverability of inventories and long-lived assets, andthe recoverability of amounts due from officer, the valuation of stock-based compensation and certain debt and warrant liabilities.liabilities, recognition of loss contingencies and deferred tax valuation allowances. Actual results could differ from those estimates. Changes in facts and circumstances may result in revised estimates, which would be recorded in the period in which they become known.

Revenue Recognitionfrom Contracts with Customers

In May 2014, theOn January 1, 2018, we adopted Financial Accounting StandardsStandard Board (“FASB”) issued Accounting StandardsStandard Codification (“ASC׆ASC”) Topic 606, "Revenue Fromfrom Contracts With Customers, originally effectivewith Customers" ("ASC Topic 606") using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. The cumulative impact of adopting ASC Topic 606 resulted in no changes to retained earnings at January 1, 2018. The impact to revenue for public business entities with annual reporting periods beginning after December 15, 2016. On August 12, 2015, the FASB issuedthree and six months ended June 30, 2018 was an Accounting Standards Update (“ASU”), Revenue From Contracts With Customers (Topic 606): Deferralincrease of $1,280 and $2,780, respectively, as a result of applying ASC Topic 606 to certain revenues generated through online distributors which are now presented gross as we have control over providing the Effective Date, which deferred the effective date of ASC 606 for one year. ASC 606 provides accounting guidanceproducts related to revenue from contracts with customers. For public business entities, ASC 606 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017.such revenues. This new revenue recognition standard (new guidance) has a five-step process: a) Determine whether a contract exists;exists; b) Identify the performance obligations;obligations; c) Determine the transaction price;price; d) Allocate the transaction price;price; and e) Recognize revenue when (or as) performance obligations are satisfied. The Company has evaluated the impact of ASC Topic 606 and determined that there is no change to the Company’sCompany's accounting policies, except for the recording of certain product sales to a distributor, in which a portion of the cash proceeds received is remitted back to the distributor. Under ASC Topic 606, the Company determined that these sales should be recorded on a gross basis.

Adoption of ASC 606, RevenueOur revenues are primarily derived from Contracts with Customers

On January 1, 2018, we adopted ASC 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic revenue recognition methodology under ASC 605, Revenue Recognition.

The cumulative impact of adopting ASC 606 resulted in no changes to retained earnings at January 1, 2018. The impact to revenuecustomer orders for the nine months ended September 30, 2018 was an increasepurchase of $3,740our products. We recognize revenues as performance obligations are fulfilled upon delivery of products. We record revenues net of promotions and discounts. For certain product sales to a resultdistributor, we record revenue including a portion of applying ASC 606the cash proceeds that is remitted back to certain revenues generated through online distributors which are now presented gross as we have control over providing the products related to such revenues.distributor.

For the nine months ended September 30, 2018, the revenue recognized from contracts with customers was $104,323. The impact of adoption of ASC 606 on our unaudited condensed consolidated statement of operations was as follows:

There was no balance sheet impact.

Accounting for Shipping and Handling Costs

We account for shipping and handling as fulfillment activities and record shipping and handling costs incurred in cost of sales.within revenue.

Accounts Receivable and Allowance for Doubtful Accounts

We grant credit without collateral to our customers based on our evaluation of a particular customer’s credit worthiness. Accounts receivable are due 30 days after the issuance of the invoice. In addition, allowances for doubtful accounts are maintained for potential credit losses based on the age of the accounts receivable and the results of periodic credit evaluations of our customers’ financial condition. Accounts receivable are written off after collection efforts have been deemed to be unsuccessful. Accounts written off as uncollectible are deducted from the allowance for doubtful accounts, while subsequent recoveries are netted against the provision for doubtful accounts expense. We generally do not charge interest on accounts receivable. We use third party payment processors and are required to maintain reserve balances, which are included in accounts receivables.

Accounts receivable are stated at estimated net realizable value. Accounts receivable are comprised of balances due from customers net of estimated allowances for uncollectible accounts. Management believes that the receivables are fully collectable. Therefore, no allowance for doubtful account is deemed to be required at June 30, 2019 and December 31, 2018.

Inventories

Inventories, which are stated at the lower of average cost or net realizable value, and consist of packaging materials, finished products, and raw venom that is utilized to make the API (active pharmaceutical ingredient). The raw unprocessed venom has an indefinite life for use.

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The Company regularly reviews inventory quantities on hand. If necessary, it records a provisionnet realizable value adjustment for excess and obsolete inventory based primarily on its estimates of component obsolescence, product demand and production requirements. Write-downs are charged to cost of goods sold. OurWe performed an evaluation of our inventory is carried net of a valuation allowance of $30,885and related accounts at SeptemberJune 30, 20182019 and December 31, 2017.2018, and increased the reserve on supplier advances for future venom purchases included in the prepaid expenses and other current assets by $0 and $47,757, respectively. At June 30, 2019 and December 31, 2018, the total valuation allowance for prepaid venom is $200,911.

Financial Instruments and Concentration of Credit Risk

Our financial instruments include cash, accounts receivable, accounts payable, accrued expenses, loans payable, due to officers and derivative financial instruments. Other than certain warrant and convertible instruments (derivative financial instruments) and liabilities to related parties (for which it was impracticable to estimate fair value due to uncertainty as to when they will be satisfied and a lack of similar type transactions in the marketplace), we believe the carrying values of our financial instruments approximate their fair values because they are short term in nature or payable on demand. Our derivative financial instruments are carried at a measured fair value.

Balances in various cash accounts may at times exceed federally insured limits. We have not experienced any losses in such accounts. We do not hold or issue financial instruments for trading purposes. In addition, for the ninethree months ended SeptemberJune 30, 2018,2019, there was one customer that accounted for 27% of the total revenues. For the three months ended June 30, 2018, there was one customer that accounted for 45% of the total revenues. For the six months ended June 30, 2019, there were two customers that accounted for 25% and 49% of the total revenues, respectively. For the six months ended June 30, 2018, there was one customer that accounted for 22% of the total revenues. As of June 30, 2019 and December 31, 2018, 100% and 84% of the accounts receivable balance are reserves due from two payment processors.

Operating Lease Right-of-Use Asset and Liability

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, “Leases” (Topic 842), as amended (“ASC Topic 842”). The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months and classify as either operating or finance leases. We adopted this standard effective January 1, 2019 using the modified retrospective approach for all leases entered into before the effective date. Adoption of the ASC Topic 842 had a significant effect on our balance sheet resulting in increased non-current assets and increased current and non-current liabilities. There was no impact to retained earnings upon adoption of the new standard. We did not have any finance leases (formerly referred to as capital leases prior to the adoption of ASC Topic 842), therefore there was no change in accounting treatment required. For comparability purposes, the Company will continue to comply with the previous disclosure requirements in accordance with the existing lease guidance and prior periods are not restated.

The Company elected the package of practical expedients as permitted under the transition guidance, which allowed us: (1) to carry forward the historical lease classification; (2) not to reassess whether expired or existing contracts are or contain leases; and, (3) not to reassess the treatment of initial direct costs for existing leases.

In accordance with ASC Topic 842, at the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present and the classification of the lease including whether the contract involves the use of a distinct identified asset, whether we obtain the right to substantially all the economic benefit from the use of the asset, and whether we have the right to direct the use of the asset. Leases with a term greater than one year are recognized on the balance sheet as ROU assets, lease liabilities and, if applicable, long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less under practical expedient in paragraph ASC 842-20-25-2.

Lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term. The implicit rate within our operating leases are generally not determinable and, therefore, the Company uses the incremental borrowing rate at the lease commencement date to determine the present value of lease payments. The determination of the Company’s incremental borrowing rate requires judgment. The Company determines the incremental borrowing rate for each lease using our estimated borrowing rate.

For periods prior to the adoption of ASC Topic 842, the Company recorded rent expense based on the term of the related lease. The expense recognition for operating leases under ASC Topic 842 is substantially consistent with prior guidance. As a result, there are no significant differences in our results of operations presented.

The impact of the adoption of ASC 842 on the balance sheet was:

Derivative Financial Instruments

Management evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

Convertible Debt

For convertible debt that does not contain an embedded derivative that requires bifurcation, the conversion feature is evaluated to determine if the rate of conversion is below market value and should be categorized as a beneficial conversion feature (“BCF”("BCF").

A BCF related to debt is recorded by the Company as a debt discount and with the offset recorded to equity. The related convertible debt is recorded net of the discount for the BCF. The discount is amortized as additional interest expense over the term of the debt with the resulting debt discount being accreted over the term of the note.

The Fair Value Measurement Option

We have elected the fair value measurement option for convertible debt with embedded derivatives that require bifurcation, and record the entire hybrid financing instrument at fair value under the guidance of FASB ASC Topic 815,Derivatives and Hedging (“ASC Topic 815”). The Company reports interest expense, including accrued interest, related to this convertible debt under the fair value option, within the change in fair value of convertible notes and derivatives in the accompanying consolidated statement of operations.

Property and Equipment and Long-Lived Assets

Property and equipment is recorded at cost. Expenditures for major improvements and additions are added to property and equipment, while replacements, maintenance and repairs which do not extend the useful lives are expensed. Depreciation is computed using the straight-line method over the estimated useful lives of the assets of 3 – 7 years.

Property and equipment consists of the following at September 30, 2018 and December 31, 2017:

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We review our long-lived assets for recoverability if events or changes in circumstances indicate the assets may be impaired. At September 30, 2018, we believe the carrying values of our long-lived assets are recoverable. Depreciation expense for the nine-months ended September 30, 2018 and 2017 was $4,858 and $4,421, respectively, and $1,105 and $1,168 for the three-months ended September 30, 2018 and 2017, respectively.

Income Taxes

We computeThe Company recorded no income taxes in accordance with Financial Accounting Standard Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 740,Income Taxes(“ASC Topic 740”). Under ASC Topic 740, deferred taxes are recognizedtax expense for the six months ended June 30, 2019 and 2018 because the estimated annual effective tax consequencesrate was zero. As of temporary differences by applying enacted statutory rates applicableJune 30, 2019, the Company continues to future years to differences betweenprovide a valuation allowance against its net deferred tax assets since the financial statement carrying amounts and theCompany believes it is more likely than not that its deferred tax bases of existing assets and liabilities. Also, the effect on deferred taxes of a change in tax rates is recognized in income in the period that included the enactment date. Temporary differences between financial and tax reporting arise primarily from the use of different methods to record bad debts and /or sales returns, and inventory reserves.will not be realized.

On an annual basis, we evaluate tax positions that have been taken or are expected to be taken in our tax returns to determine if they are more than likely to be sustained if the taxing authority examines the respective position.  At September 30, 2018, we do not believe we have a need to record any liabilities for uncertain tax positions or provisions for interest or penalties related to such positions.

Since inception, we have been subject to tax by both federal and state taxing authorities. Until the respective statutes of limitations expire (which may be as much as 20 years while we have unused net operation losses), we are subject to income tax audits in the jurisdictions in which we operate. The Company’s 2015 to 2017 tax returns are subject to examination by Internal Revenue Services and State Taxing Agencies.

Stock-Based Compensation

We account for stock-based compensation in accordance with FASB ASC Topic 718,Stock Compensation (“(“ASC Topic 718”). ASC Topic 718, which requires that the cost resulting from all share-based transactions be recorded in the financial statements over the respective service periods. It establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement in accounting for share-based payment transactions with employees. The statement also establishes fair value as the measurement objective for transactions in which an entity acquires goods or services from non-employees in share-based payment transactions.

Net Loss Per Share

Net loss per share is calculated in accordance with FASB ASC Topic 260,Earnings per Share. Basic loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted loss per share is calculated by dividing net loss by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods in which we incur losses, common stock equivalents, if any, are not considered, as their effect would be anti-dilutive or have no effect on earnings per share. Any common shares issued as of a result of the exercise of stock options and warrants would come from newly issued common shares from our remaining authorized shares. As of SeptemberJune 30, 20182019 and 2017,2018, the following items were not included in dilutive loss as the effect is anti-dilutive:

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02,Leases, which will amend current lease accounting to require lessees to recognize (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We expect the impact of this ASU will result in the recognition of right-of-use assets and related obligations.

In June 2018, the FASB issued ASU 2018-07, “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”). ASU No 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The guidance also specifies that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, (quarter ending March 31, 2019and is effective for the Company). Early adoption is permitted, but no earlier than an entity’s adoptionCompany as of January 1, 2019. The Company noted that all share based payments were settled as of the date of Topic 606. The Company will evaluate the effects of adopting ASU 2018-07 if and when it is deemed to be applicable.adoption, so there was no impact on the Company's financial statements.

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All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable.

2.     FAIR VALUE MEASUREMENTS

Certain assets and liabilities that are measured at fair value on a recurring basis at SeptemberJune 30, 20182019 are measured in accordance with FASB ASC Topic 820-10-05,Fair Value Measurements. FASB ASC Topic 820-10-05 defines fair value, establishes a framework for measuring fair value and expands the disclosure requirements regarding fair value measurements for financial assets and liabilities as well as for non-financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis in the financial statements.

The statement requires fair value measurement be classified and disclosed in one of the following three categories:

The following table summarizes our financial instruments measured at fair value at SeptemberJune 30, 20182019 and December 31, 2017:2018:

The following table shows the changes in fair value measurements for the warrant liability using significant unobservable inputs (Level 3) during the ninesix months ended SeptemberJune 30, 20182019 and the year ended December 31, 2017:2018:

(1)   The gain related to the revaluation of our warrant liability is included in “Change in fair value of convertible notes and derivatives” in the accompanying consolidated unaudited statement of operations.

We valued our warrants using a Dilution-Adjusted Black-Scholes Model. Assumptions used include (1) 1.76%1.75% to 2.81% risk-free rate, (2) warrant life is the remaining contractual life of the warrants, (3) expected volatility of 229%-245%256%-305% (4) zero expected dividends (5) exercise price set forth in the agreements (6) common stock price of the underlying share on the valuation date, and (7) number of shares to be issued if the instrument is converted.

The following table summarizes assumptions and the significant terms of each of the convertible notes for which the entire hybrid instrument is recorded at fair value at SeptemberJune 30, 20182019 and December 31, 2017:2018:

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Using the stated assumptions summarized in table above, we calculated the inception date and reporting period fair values of each note issued. The following table shows the changes in fair value measurements for the convertible notes at fair value using significant unobservable inputs (Level 3) during the ninesix months ended SeptemberJune 30, 20182019 and the year ended December 31, 2017 for2018:

(1)   The losses related to the Convertible Notes:valuation of the convertible notes are included in “Change in fair value of convertible notes and derivatives” in the accompanying consolidated statement of operations.

3.     INVENTORIES

Inventories are valued at the lower of average cost or net realizable value.value on an average cost basis. At SeptemberJune 30, 20182019 and December 31, 2017,2018, inventories were as follows:

4.     PROPERTY AND EQUIPMENT

Property and equipment consists of the following at June 30, 2019 and December 31, 2018:

We review our long-lived assets for recoverability if events or changes in circumstances indicate the assets may be impaired. At June 30, 2019, we believe the carrying values of our long-lived assets are recoverable. Depreciation expense for the six-months ended June 30, 2019 and 2018 was $2,210 and $3,753, respectively, and $1,105 and $1,825 for the three-months ended June 30, 2019 and 2018, respectively.

5.     DUE TO/FROM OFFICER

At SeptemberJune 30, 2018,2019, the balance due to our officerPresident and CEO, Rik Deitsch, is $200,437.$161,418, which is an unsecured demand loan that bears interest at 4%. During the ninesix months ended SeptemberJune 30, 2018,2019, we advanced $141,070repaid $61,715 to and collected $107,100$4,100 from Mr. Deitsch and the Companies owned by him. As of SeptemberAdditionally, accrued interest on the demand loan was $3,536 and is included in the due to officer account.

At December 31, 2018, the balance due to our President and CEO, Rik Deitsch, is $186,497, which is an unsecured demand loan that bears interest at 4%. . During the six months ended June 30, 2018, we recorded a bad debt expenserepaid $106,150 to and collected $105,100 from Mr. Deitsch and the Companies owned by him. Additionally, accrued interest on the demand loan was $7,674 and is included in the due to officer account. The Company has fully reserved receivables from companies owned by the Company's CEO. The reserve was $534,470 and $505,470 as of $498,470 which represents a full valuation allowance for amounts owed by these Companies.June 30, 2019 and December 31, 2018.

5.     OTHER INDEBTEDNESS6.     DEBTS

Other indebtedness consistsDebts consist of the following at SeptemberJune 30, 20182019 and December 31, 2017:2018:

(1)

During 2010 we borrowed $200,000 from one of our directors. Under the terms of the loan agreement, this loan was expected to be repaid in nine months to a year from the date of the loan along with interest calculated at 10% for the first month plus 12% after 30 days from funding. We are in default regarding this loan. The loan is under personal guarantee by Mr. Deitsch. We repaid principal balance in full as of December 31, 2016. At September 30, 2018, we owed this director accrued interest of $137,645, which is included in accrued expenses in the condensed consolidated balance sheets.

In August 2016, we issued two Promissory Notes for a total of $200,000 ($100,000 each) to a company owned by one of our directors. The notes carry interest at 12% annually and were due on the date that was nine-months from the execution and funding of the note. Upon default in February 2017, the Notes became convertible at $0.008 per share. During March 2017, we repaid principal balance of $6,365.  During April 2017, the Notes with accrued interest were restated. The restated principal balance of $201,818 bears interest at 12% annually and was due October 12, 2017. During June 2017, we repaid principal balance of $8,844. The loan is in default and negotiation for settlement. The loan was reclassified to notes payable – unrelated third parties after the director resigned in March 2018. At September 30, 2018, we owed principal balance of $192,974 and accrued interest of $34,196.

In December 2017, we issued a promissory note to a related party in the amount of $12,000 with original issuance discount of $2,000. The note iswas amended in December 2018 with original issuance discount of $2,400 and was due in twelve months from the execution and funding of the note. At SeptemberJune 30, 2019 and December 31, 2018, the principal balance of the loan is $12,000.

(2)

At September 30, 2018, the balance$13,200 and $12,000, net of $1,484,290, consisteddebt discount of the following loans:

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On August 2, 2011 under a settlement agreement with Liquid Packaging Resources, Inc. (“LPR”), we agreed to pay LPR a total of $350,000 in monthly installments of $50,000 beginning August 15, 2011$1,200 and ending on February 15, 2012. This settlement amount$2,400, respectively. The Note was recorded as general and administrative expenses on the date of the settlement. We did not make the December 2011 or January 2012 payments and on January 26, 2012, we signed the first amendment to the settlement agreement where we agreed to pay $175,000, which was the balance outstanding at December 31, 2011(this includes a $25,000 penalty for non-payment). We repaid $25,000 during the three months ended March 31, 2012. We did not make all of the payments under such amendment and as a result pursuant to the original settlement agreement, LPR had the right to sell 142,858 shares of our free trading stock held in escrow by their attorney and receive cash settlements for a total amount of $450,000 (the initial $350,000 plus total default penalties of $100,000).  The $100,000 penalty was expensed during 2012.  LPR sold the note to Southridge Partners, LLP (“Southridge”) for consideration of $281,772settled in June 2012. In August 2013 the debt of $281,772 reverted back to LPR.2020.

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At December 31, 2012, we owed University Centre West Ltd. approximately $55,410 for rent, which was assigned and sold to Southridge and is currently outstanding and carries no interest.

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In April 2016, we issued a promissory note to an unrelated third party in the amount of $10,000 bearing interest at 10% annually. The note was due in one year from the execution and funding of the note. The note is in default and negotiation of settlement. At September 30, 2018, the accrued interest is $2,483.

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In May 2016, the Company issued a promissory note to an unrelated third party in the amount of $75,000 bearing monthly interest at a rate of 2%. The note was due in six months from the execution and funding of the note. During April 2017, we accepted the offer of a settlement to issue 5,000,000 common shares as a repayment of $25,000. The note is in default and in negotiation of settlement. At June 30, 2019 and December 31, 2018, the outstanding principal balance is $50,000 and accrued interest is $43,834 and $37,801.

During the first quarter of 2019, we issued convertible notes payable of $70,000 with original issuance discount of $5,000. The notes were due in six months from the execution and funding of each note. The notes are convertible into shares of Company’s common stock at a conversion price of $0.0005 per share. In addition, upon the note. During April 2017, we accepted the offerissuance of a settlement to issue 5,000,000 common shares as a repayment of $25,000. The note is in default and in negotiation of settlement. At September 30, 2018, the accrued interest is $34,734.

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In June 2016,convertible notes, the Company issued a promissory note togranted the total of 110,000,000 warrants at an unrelated third party inexercise price of $0.001 per share. The warrants were valued at $8,147 using the amount of $50,000 bearing monthly interest at a rate of 2%. The note was due in six months from the executionBlack-Scholes method and funding of the note. The note is in default and negotiation of settlement. At September 30, 2018, the accrued interest is $27,933.

·

In August 2016, we issued a promissory note to an unrelated third party in the amount of $150,000 bearing monthly interest at a rate of 2.5%. The note was due in six months from the execution and funding of the note. During April 2017, the note with accrued interest were restated. The restated principal balance of $180,250 bears monthly interest at a rate of 2.5% and was due October 20, 2017. During January 2018, the note with accrued interest were restated. The restated principal balance of $220,506 bears monthly interest at a rate of 2.5% and was due July 12, 2018. In connection with this restated note, we issued 2,000,000 shares of our restricted common stock (See Note 6). We recorded as a debt discount in the amount of $2,765 to reflect the value of the common stock as a reduction to the carrying amount of the debt and a corresponding increase to common stock and additional paid-in capital. Amortization for the debt discount for the nine months ended September 30, 2018that was $2,765. The note is in default and negotiation of settlement. During July 2018, we issued 5,000,000 restricted shares due to the default on repayment of the promissory note of $220,506 restated in January 2018 (See Note 6). The shares were valued at fair value of $5,500. At September 30, 2018, the accrued interest is $48,145.

·

On September 26, 2016, we issued a promissory note to an unrelated third party in the amount of $75,000 bearing interest at 10% annually. The note was due in one year from the execution and funding of the note. The note is in default and in negotiation of settlement. At September 30, 2018, the accrued interest is $15,354.

·

In October 2016, we issued a promissory note to an unrelated third party in the amount of $50,000 bearing monthly interest at a rate of 2%. The note was due in six months from the execution and funding of the note. The note is in default and in negotiation of settlement. At September 30, 2018, the accrued interest is $24,233.

·

In June 2017, we issued a promissory note to an unrelated third party in the amount of $12,500 bearing interest at 10% annually. The note was due in one year from the execution and funding of the note. The note is in default and in negotiation of settlement. At September 30, 2018, the accrued interest is $1,625.

·

During July 2017, we received a loan for a total of $200,000 from an unrelated third party. The loan was partially repaid through scheduled payments through August 2017 along with interest on average 15% annum. We have recorded loan costs in the amount of $5,500 for the loan origination fees paid at inception date. The debt discount was fully amortized as of September 30, 2018.  At December 31, 2017, the principal balance of the loan was $191,329 and in negotiation of settlement. During June 2018, the loan was settled for $170,402 with scheduled repayments of approximately $7,000 per month through July 2020. We recorded a gain on settlement of debt in other income for $20,927. The Company repaid $21,769 during the third quarter of 2018. At September 30, 2018, the principal balance is $148,633.

·

In July 2017, we issued a promissory note to an unrelated third party in the amount of $50,000 with original issue discount of $10,000. The note was due in six months from the execution and funding of the note. The original issuance discount was fully amortized as of September 30, 2018. The note is in default and in negotiation of settlement. At September 30, 2018, the principal balance of the note is $50,000.

·

In September 2017, we issued a promissory note to an unrelated third party in the amount of $51,000 with original issue discount of $8,500. The note was due in six months from the execution and funding of the note. The original issuance discount was fully amortized as of September 30, 2018. The Company repaid $8,500 in cash in November 2017. In May 2018, the Noteholder received a total of 187,500,000 shares of our restricted common stock with a fair value of $243,750 in satisfaction of the remaining balance of $42,500.  We recorded a loss on settlement of debt in other expense for $201,250 (See Note 6).

·

In September 2017, we issued a promissory note to an unrelated third party in the amount of $36,000 with original issue discount of $6,000. The note is due in one year from the execution and funding of the note. The original issue discount is amortized over the termlife of the loan. Amortization for the original issuance discount have been fully amortized as of September 30, 2018. Repayments of $1,500notes. The Notes were further restated in December 2019, and $5,000 have been made in 2017August and nine months ended September 30, 2018, respectively. The note is in default and in negotiation of settlement. During September 2018, we issued 5,000,000 restricted shares due to the default on repayment of the promissory note with a fair value of $3,000. At September 30, 2018, the principal balance of the note is $29,500.

·

In October 2017, we issued a promissory note to an unrelated third party in the amount of $50,000 with original issuance discount of $10,000. The note was due in six months from the execution and funding of the note. In connection with the issuance of this promissory note, we issued 5,000,000 shares of our restricted common stock. We recorded a debt discount in the amount of $3,200 to reflect the value of the common stock as a reduction to the carrying amount of the debt and a corresponding increase to common stock and additional paid-in capital.  Amortization for the debt discount and original issuance discount were fully amortized as of September 30, 2018. During April 2018, we issued a total of 1,000,000 restricted shares to a Note holder due to the default on repayment (See Note 6). The shares were valued at fair value of $1,700. Later in April 2018, the Note was restated with principal balance of $60,000 including the original issuance discount of $10,000 due October 2018. In connection with this restated note, we issued 5,000,000 shares of our restricted common stock. We recorded a debt discount in the amount of $8,678 to reflect the value of the common stock as a reduction to the carrying amount of the debt and a corresponding increase to common stock and additional paid-in capital.  The debt discount and original issuance discount have been fully amortized as of September 30, 2018. As of September 30, 2018, the principal balance of the note is $60,000.

·

In October 2017, we issued a promissory note to an unrelated third party in the amount of $60,000 with original issuance discount of $10,000. The note was due in six months from the execution and funding of the note. In connection with the issuance of this promissory note, we issued 5,000,000 shares of our restricted common stock. We recorded a debt discount in the amount of $3,300 to reflect the value of the common stock as a reduction to the carrying amount of the debt and a corresponding increase to common stock and additional paid-in capital.  The debt discounts were fully amortized as of September 30, 2018. The loan is in default and in negotiation of settlement. 1,000,000 shares of common stock were issued due to the default of repayments with a fair value of $1,500 (See Note 6). At September 30, 2018, the principal balance of the note is $60,000.

·

In November 2017, we issued a promissory note to an unrelated third party in the amount of $120,000 with original issuance discount of $20,000. The note was due in six months from the execution and funding of the note. In connection with the issuance of this promissory note, we issued 10,000,000 shares of our restricted common stock. We recorded a debt discount in the amount of $5,600 to reflect the value of the common stock as a reduction to the carrying amount of the debt and a corresponding increase to common stock and additional paid-in capital. The debt discounts were fully amortized as of September 30, 2018. The loan is in default and in negotiation of settlement. 1,500,000 shares of common stock were issued due to the default of repayments with a fair value of $2,250 (See Note 6). At September 30, 2018, the principal balance of the note is $120,000.

·

In November 2017, we issued a promissory note to an unrelated third party in the amount of $18,000 with original issuance discount of $3,000. The note was due in six months from the execution and funding of the note. In connection with the issuance of this promissory note, we issued 5,000,000 shares of our restricted common stock (See Note 6). We recorded a debt discount in the amount of $2,900 to reflect the value of the common stock as a reduction to the carrying amount of the debt and a corresponding increase to common stock and additional paid-in capital. The debt discounts were fully amortized as of September 30, 2018. The note is in default and in negotiation of settlement. 7,000,000 shares of common stock were issued due to the default of repayments with a fair value of $5,600 (See Note 6). At September 30, 2018, the principal balance of the note is $18,000.

·

In December 2017, we issued a promissory note to an unrelated third party in the amount of $60,000 with original issuance discount of $10,000. The note was due in one year from the execution and funding of the note. During August 2018, the Note holder sold the debt of $60,000 to a non-related party. The subsequent note holder received a total of 145,000,000 shares of our restricted common stock with a fair value of $101,500 in satisfaction of the Note of $60,000 in full. We recorded a loss on settlement of debt in other expense for $41,500 (See Note 6). As a result of the conversion of the note, the debt discount has been fully amortized as of September 30, 2018.

(3)

At September 30, 2018, the balance of $1,512,544 net of discount of $61,300, consisted of the following convertible loans:

·

On March 19, 2014, we issued two Convertible Debentures in the amount of up to $500,000 each (total $1,000,000) to two non-related parties. The first tranche of $15,000 each (total $30,000) of the funds was received during the first quarter of 2014. The notes carry interest at 8% and were due on March 19, 2018. The note holders have the right to convert the notes into shares of Common Stock at a price of $0.20. The notes2020. They are in default and in negotiation of settlement. During the three months ended September 30, 2018, repaymentsecond quarter of $3,000 was made. At September 30, 2018, these2019, we restated two convertible notes payable with principal balanceadditional original issue discount of $27,000$6,400 and accrued interest of $11,024, at fair value, was recorded at $77.

·

During December 2015, Mr. Deitsch, assigned $80,000 of his outstanding loan to an unrelated third party in the form of a Convertible Redeemable Note. The note carries interest at 4% and was due on December 7, 2016. The Note reverted back as the promissory note upon maturity date. On June 27, 2017, the Company owed principal balance of $80,000 plus accrued interest of $4,971. The total of $84,971 was assigned and sold to an unrelated third party in the form of a Convertible Redeemable Note (See Note 6(2)). The note carries interest at 8% and was due on June 27, 2018, unless previously converted intoissued 6,000,001 shares of restricted common stock. The Noteholder has the right to convert the note into shares of Common Stock at fifty-five percent (55%) of lowest closing bid prices of our restricted common stock for the twenty trading days preceding the conversion date including the date of receipt of conversion notice. During July and August 2017, the Note holder made conversions of a total of 164,935,000 shares of our restricted common stock satisfying the principal balance of $55,325 with a fair value of $225,143. During February 2018, the Note holder made conversions of a total of 109,876,500 shares of our restricted common stock with a fair value of $156,625$1,800 (See Note 7). The two restated notes were due in satisfactionAugust 2019 and are in default. The total discount of $8,200 was amortized over the term of the remaining principal balancenotes.  

Repayment of $29,646$10,000 was made in full.May 2019.

·

On March 31, 2017, we issued a convertible denture in the amount of $80,000 to Coventry Enterprises, LLC (“Coventry”). The note carries interest at 8% and was due on March 30, 2018, unless previously converted into shares of restricted common stock. Coventry has the right to convert the note into shares of Common Stock at a fifty-five percent (55%) of the of the lowest closing bid price of our restricted common stockAmortization for the twenty trading days preceding the conversion date including the date of receipt of conversion notice. During Februarysix months ended June 30, 2019 and 2018 the Noteholder made a conversion of 70,123,500 shares of our restricted common stock with a fair value of $294,885 in satisfaction of a portion of the Note in the amount of $30,854 (See Note 6).

The noteholder soldwas $43,058 and assigned the remaining balance of $49,146 with accrued interest of $3,276 to an unrelated third party in the form of a Convertible Redeemable Note. The note carries interest at 8% and is due on February 13,$144,062. At June 30, 2019 unless previously converted into shares of restricted common stock. The noteholder has the right to convert the note into shares of our restricted common stock at sixty percent of the lowest trading price of our restricted common stock for the twenty-five prior trading days including the conversion date. During April and May 2018, the Note holder made conversions of a total of 65,885,713 shares of our restricted common stock with a fair value of $156,590 in satisfaction of the remaining principal balance of $49,146 and accrued interest in full (See Note 6).

·

On July 18, 2017, we issued a convertible denture in the amount of $150,000 to Coventry. The note carries interest at 8% and was due on July 18, 2018, unless previously converted into shares of restricted common stock. Coventry has the right to convert the note into shares of Common Stock at a fifty-five percent (55%) of the of the lowest closing bid price of our restricted common stock for the twenty trading days preceding the conversion date including the date of receipt of conversion notice. During February 2018, the noteholder sold and assigned the balance of $150,000 with accrued interest of $6,000 to an unrelated third party in the form of a Convertible Redeemable Note. The note carries interest at 8% and is due on February 13, 2019, unless previously converted into shares of restricted common stock. The noteholder has the right to convert the note into shares of our restricted common stock at sixty percent of the lowest trading price of our restricted common stock for the twenty-five prior trading days including the conversion date. During May and June 2018, the Noteholder made conversions of a total of 120,891,284 shares of our restricted common stock with a fair value of $202,292 in partial satisfaction of the note in the amount of $70,000 (See Note 6). During July through September 2018, the Note holder made conversions of a total of 206,988,570 shares of our restricted common stock with a fair value of $182,553 in satisfaction of the remaining principal balance $86,000 and accrued interest in full (See Note 6).

·

On March 28, 2016, we signed an expansion agreement with Brewer and Associates Consulting, LLC (“B+A”) to the original consulting agreement dated on October 15, 2015 for consulting services for twelve months for a monthly fee of $7,000. To relieve our cash obligation of $36,000 per original agreement, we issued three convertible notes for a total of $120,000 which includes the fees due under the original agreement and the new monthly fees due under the expansion agreement. $40,000 and $60,000 of the notes were paid in full as of December 31, 2016 and December 31, 2017, respectively. The remaining balance of $20,000 Notes is in default and negotiation of settlement. The conversion price is equal to 55% of the average of the three lowest volume weighted average prices for the three consecutive trading days immediately prior to but not including the conversion date. At September 30, 2018, the convertible notes payable with principal balance of $20,000, at fair value, were recorded at $32,316.

·

During June 2016, we issued a Convertible Debenture in the amount of $72,000 to an unrelated third party as a result of debt sale. The Note carries interest at 8% and was due on June 20, 2017, unless previously converted into shares of restricted common stock. The convertible note holder has the right to convert the note into shares of Common Stock at fifty-five percent (55%) of the average of the three lowest volume weighted average prices (the VWAP) of our restricted common stock for the fifteen trading days preceding the conversion date. During August 2018, a Note holder received a total of 300,000,000 shares of our restricted common stock in satisfaction of the principal balance of $72,000 with accrued interest in full (See Note 9).

·

During June 2016, the notes, payablenet of $50,000 originating in January 2016 with accrued interest of $4,800 was assigned and sold to an unrelated third party in the form of a Convertible Redeemable Note (See Note 5(2)). The note carries interest at 8% and was due on June 16, 2017, unless previously converted into shares of restricted common stock. The Noteholder has the right to convert the note into shares of Common Stock at fifty-five percent (55%) of the average of the three lowest VWAP prices of our restricted common stock for the fifteen trading days preceding the conversion date. During May 2018, the Note holder made a conversion of 228,000,000 shares of our restricted common stock with a fair value of $319,200 in satisfaction of the principal balance of $54,800 and accrued interest in full (See Note 6).

·

During July 2016, we issued a convertible note to an unrelated third party in the amount of $50,000 bearing monthly interest at a rate of 2.0% and convertible at $0.05 per share. During January 2017, the Note was restated with principal amount of $56,567 bearing monthly interest rate of 2.5%. The New Note of $56,567 was due on July 26, 2017 and convertible at $0.05 per share. During February 2018, the note with accrued interest of $65,600 was restated. The restated principal balance of $65,600 bears monthly interest at a rate of 2.5% and was due August 14, 2018. In connection with this restated note, we issued 1,000,000 shares of our restricted common stock (See Note 6). We recorded a debt discount in the amount of $4,035 to reflect the value of the common stock as a reduction to the carrying amount of the debt and a corresponding increase to common stock and additional paid-in capital. The debt discount was fully amortized as of September 30, 2018. During August 2018, the Notes with accrued interest of $10,476 were restated. The restated principal balance of $76,076 bears monthly interest at a rate of 2.5% and is due February 2019. In connection with this restated note, we issued 5,000,000 shares of our restricted common stock (See Note 6). We recorded a debt discount in the amount of $3,800 to reflect the value of the common stock as a reduction to the carrying amount of the debt and a corresponding increase to common stock and additional paid-in capital. Amortization of debt discount of $950 has been recorded as of September 30, 2018. The note$6,710 and $28,421 is under personal guarantee by Mr. Deitsch. At September 30, 2018, the convertible note payable was recorded at $76,076. The accrued interest as of September 30, 2018 is $2,345.$677,940 and $589,829.

·

In April 2017, we issued a Convertible Promissory Note for $33,000 to an unrelated third party. The note carries interest at 12% annually and was due on January 30, 2018. The Holder has the right to convert the loan, beginning on the date which is one hundred eighty (180) days following the date of the Note, into common stock at a price of sixty percent (60%) of the average of the three lowest trading prices of our restricted common stock for the fifteen trading days preceding the conversion date. During October 2017, the Noteholder made the conversions of a total of 50,125,000 of our restricted common stock satisfying the principal balance of $16,040 with a fair value of $35,596. During June 2018, the Note holder made a conversion of 150,000,000 shares of our restricted common stock with a fair value of $180,000 in satisfaction of the remaining principal balance of $16,960 with accrued interest in full (See Note 6).

·

During May and October 2017, we issued two Convertible Debentures for a total of $90,000 ($45,000 each) to Labrys. The notes carry interest at 12% and were due on July 19, 2017 and November 3, 2017, respectively, unless previously converted into shares of restricted common stock. Labrys has the right to convert the notes into shares of Common Stock at sixty percent (60%) of the lowest trading price of our restricted common stock for the twenty-five trading days preceding the conversion date. During November 2017, the Note holder made a conversion of 62,059,253 shares of stock satisfying the principal balance of $11,057 and accrued interest for a fair value of $51,732. During February 2018, we issued 45,000,000 shares of our restricted common stock with a fair value of $3,618,244 to Labrys in settlement of the remaining balance of $78,943 and accrued interest in full (See Note 6).

·

During December 2016, we issued a Convertible Debenture to an unrelated third party in the amount of $110,000. The note carries interest at 12% and matured on September 8, 2017. Unless previously converted into shares of restricted common stock, the Note holder has the right to convert the note into shares of Common Stock at a sixty percent (60%) of the lowest trading prices of our restricted common stock for the twenty-five trading days preceding the conversion date. During June and July 2017, the Note holder made conversions of a total of 179,800,000 shares of stock satisfying the principal balance of $63,001 and accrued interest for a fair value of $298,575. During February 2018, the remaining balance of $46,999 with accrued interest of $2,820 was assigned and sold to an unrelated third party in the form of a Convertible Redeemable Note. During February and July, 2018, in connection with the settlement of a default penalty of the original debt, we issued a total of 105,157,409 shares of our restricted common stock to the original Note holder with a fair value of $173,350.

The new note of $49,819 carries interest at 8% and iswas due on February 13, 2019, unless previously converted into shares2019. We have accrued interest at default interest rate of restricted common stock.24% after the note’s maturity date. The Noteholder has the right to convert the note into shares of our restricted common stock at sixty percent of the lowest trading price of our restricted common stock for the twenty-five prior trading days including the conversion date. During September 2018, the Noteholder made a conversions of 52,244,433 shares of our restricted common stock with a fair value of $37,011 in satisfaction of principal balance of $15,000 and accrued interest in full (See Note 6).full. At SeptemberJune 30, 2019 and December 31, 2018, the convertible note payable with principal balance of $34,819, at fair value, was recorded at $58,979.$90,965 and $62,508.

·

During May 2017, we issued a Convertible Debenture in the amount of $64,000 to an unrelated third party. The note carries interest at 8% and was due on May 4, 2018, unless previously converted into shares of restricted common stock. The Note holder has the right to convert the note into shares of Common Stock at a sixty percent (60%) of the lowest trading price of our restricted common stock for the twenty trading days preceding the conversion

·

During February 2018, we issued a convertible denture in the amount of $200,000 to an unrelated third party. The note carries interest at 8% and was due in February 2019. We have accrued interest at default interest rate of 24% after the note’s maturity date. During November 2017, the Note holder made a conversion of our restricted common stocks satisfying the principal balance of $856 and penalty of $6,400 for a fair value of $21,399. During February 2018, the remaining balance of $63,144 with accrued interest and penalty of $12,442 was assigned and sold to three unrelated third parties. During June 2018, a Note holder made a conversion of 50,670,000 shares of our restricted common stock with a fair value of $70,938 in satisfaction of the balance of $34,060 plus accrued interest of $6,476 (See Note 6). At September 30, 2018, the remaining principal of $29,381 plus accrued interest of $7,138, at fair value, was recorded at $60,876. · During January through September 2018, we issued convertible notes payable to the 14 unrelated third parties for a total of $435,750 with original issue discount of $40,450. The notes are due in six months from the execution and funding of each note. The notes are convertible into shares of Company’s common stock at a conversion price ranging from $0.0003 to $0.001 per share. The difference between the conversion price and the fair value of the Company’s common stock on the date of issuance of the convertible notes, resulted in a beneficial conversion feature in the amount of $246,913. In addition, upon the issuance of convertible notes, the Company issued 1,250,000 shares of common stock (See Note 6). The Company has recorded a debt discount in the amount of $3,087 to reflect the value of the common stock as a reduction to the carrying amount of the convertible debt and a corresponding increase to common stock and additional paid-in capital. The total discount of $250,000 and original issuance discount of $40,450 was amortized over the term of the debt.  Amortization for the nine months ended September 30, 2018 was $232,000. At September 30, 2018, the principal balance of the notes, net of discount of $58, 450 is $377,300. $99,150 of the above mentioned convertible notes payable to seven of the unrelated third parties with original issue discount of $10,150 are in default and in negotiation of settlement. · During February 2018, we issued a convertible denture in the amount of $200,000 to an unrelated third party. The note carries interest at 8% and is due in February 2019, unless previously converted into shares of restricted common stock. The Note holder has the right to convert the note into shares of Common Stock at sixty percent of the lowest trading price of our restricted common stock for the twenty-five trading days including the date of receipt of conversion notice. In connection with the issuance of the convertible note payable, we recorded a day-one derivative loss of $1,646,242. At June 30, 2019 and December 31, 2018, the convertible note payable with principal balance of $200,000, at fair value, was recorded at $520,037 and $358,665. The note carries additional $200,000 “Back-end Note” ($100,000 each) with the same terms as the original note.

All of the above convertible notes with principal balance of a total of $511,319 were settled in October 2020 (See Note 12).

·During January 2019, the principal balance of $60,000 from a promissory note of $75,000 originated in September 2016 (See Note 6(2)) and accrued interest of $15,900 was restated in the form of a Convertible Note. The new note of $75,900 was due in one year from the restatement of the note. The Noteholder has the right to convert the note into shares of Common Stock at 50% discount to the average trading price of the three lowest closing stock prices for the twenty days prior to the notice of conversion. In connection with the issuance of the convertible note payable, we recorded a day-one derivative loss of $1,646,242.$75,900. At SeptemberJune 30, 2018,2019, the convertible note payable, with principal balance of $200,000 and accrued interest of $10,037, at fair value, was recorded at $338,837.$202,400.

·During February 2019, we issued a convertible promissory note to an unrelated third party in the amount up to $1,000,000 paid upon tranches. The note carries additional $200,000 “Back-end Note” ($100,000 each) withis due two years from the same terms as the original note.

·

During April 2018, $65,000 of oneexecution and funding of the $100,000 Back-end Note was funded.note per tranche. The note carries interest at 8% and is due in February 2019, unless previously converted into shares of restricted common stock. The Note holderNoteholder has the right to convert the note into shares of Common Stock at sixty percenta conversion price of the lowestlower of $0.0005 or 50% discount to the average trading price of our restricted commonthe three lowest closing stock prices for the twenty-five tradingtwenty days includingprior to the datenotice of receiptconversion. The first two tranches of conversion notice.the Note in the amount of $219,879 has been funded as of June 30, 2019. In connection with issuance of the convertible note, the Noteholder agreed to eliminate two outstanding Notes of $27,000 and the accrued interest of $11,412 that were held by the Noteholder’s defunct entities. In connection with the issuance of the convertible note payable, we recorded a day-one derivative loss of $100,700.$335,576. During May and June 2019, the Note holder made conversions of a total of 750,000,000 shares of stock satisfying the principal balance of $100,000 for a fair value of $275,000 (See Note 7). At SeptemberJune 30, 2018,2019, the convertible note payablewith principal balance of $119,879, at fair value, was recorded at $110,122.$319,678.

·

During March 2018,June 2019, we issued a convertible denture in the amount of $60,000promissory note to an unrelated third party.party for $240,000 with original issuance discount of $40,000. The note carries interest at 8%was due one year from the execution and is due in March 2019, unless previously converted intofunding of the notes. In connection with the issuance of this note, we issued 16,000,000 shares of our restricted common stock. The common stock was valued at $4,688 and recorded as a debt discount that was amortized over the life of the note (See Note holder7). The Noteholder has the right to convert the note into shares of Common Stock at sixty percenta conversion price of the lowestlower of $0.0005 or 50% discount to the average trading price of our restricted commonthe three lowest closing stock prices for the twenty-five tradingtwenty days includingprior to the datenotice of receipt of conversion notice.conversion. In connection with the issuance of the convertible note payable, we recorded a day-one derivative loss of $48,418.$240,000. At SeptemberJune 30, 2018,2019, the convertible note payable, at fair value, was recorded at $101,958. The note carries an additional “Back-end Note” with the same terms as the original note that enables the lender to lend to us another $60,000.

·

During June 2018, the $60,000 Back-end Note was funded. The note carries interest at 8% and is due in March 2019, unless previously converted into shares of restricted common stock. $640,000. The Note holder has the right to convert the note into sharesis in default and negotiation of Common Stock at sixty percent of the lowest trading price of our restricted common stock for the twenty-five trading days including the date of receipt of conversion notice. In connection with the issuance of the convertible note payable, we recorded a day-one derivative loss of $68,067. At September 30, 2018, the convertible note payable, at fair value, was recorded at $101,958.settlement

·

During May 2018, we issued a convertible denture in the amount of $60,000 to an unrelated third party. The note carries interest at 8% and is due in May 2019, unless previously converted into shares of restricted common stock. The Note holder has the right to convert the note into shares of Common Stock at sixty percent of the lowest trading price of our restricted common stock for the twenty-five trading days including the date of receipt of conversion notice. In connection with the issuance of the convertible note payable, we recorded a day-one derivative loss of $59,257. At September 30, 2018, the convertible note payable, at fair value, was recorded at $102,612.

·

During August 2018, we issued a convertible denture in the amount of $31,500 to an unrelated third party. The note carries interest at 8% and is due in August 2019, unless previously converted into shares of restricted common stock. The Note holder has the right to convert the note into shares of Common Stock at sixty percent of the lowest trading price of our restricted common stock for the twenty-five trading days including the date of receipt of conversion notice. In connection with the issuance of the convertible note payable, we recorded a day-one derivative loss of $23,794. At September 30, 2018, the convertible note payable, at fair value, was recorded at $54,365.

·

During July 2018, we issued a convertible denture in the amount of $50,000 to an unrelated third party. The note carries interest at 8% and is due in July 2019, unless previously converted into shares of restricted common stock. The Note holder has the right to convert the note into shares of Common Stock at fifty five percent of the average three lowest trading price of our restricted common stock for the fifteen trading days including the date of receipt of conversion notice. In connection with the issuance of the convertible note payable, we recorded a day-one derivative loss of $46,734. At September 30, 2018, the convertible note payable, at fair value, was recorded at $71,298.

·

During August 2018, we issued a convertible denture in the amount of $20,000 to an unrelated third party. The note carries interest at 8% and is due in August 2019, unless previously converted into shares of restricted common stock. The Note holder has the right to convert the note into shares of Common Stock at fifty five percent of the average three lowest trading price of our restricted common stock for the fifteen trading days including the date of receipt of conversion notice. In connection with the issuance of the convertible note payable, we recorded a day-one derivative loss of $17,829. At September 30, 2018, the convertible note payable, at fair value, was recorded at $28,627.

The Company has concluded that the embedded conversion option and several other features embedded in the hybrid debt agreement requires bifurcation and classification as liabilities, at fair value. As an alternative to this accounting, the Company elected to record the entire hybrid financing instrument as a single financial liability and measured at fair value under the guidance of ASC Topic 815.

6.7.     STOCKHOLDERS' DEFICIT

Authorized Shares

On March 7, 2018, we obtained written consents from stockholders holding a majority of our outstanding voting stock to approve an amendment of the Company’s articles of incorporation, as amended, to increase the number of authorized shares of common stock from 2,000,000,000 to 8,000,000,000.

Common Stock Issued with Indebtednessfor Accrued Expense

InDuring January and February 2018,2019, in connection with four notes payable,the settlement of a default penalty of debt of $110,000 originated in December 2016, we issued a total of 4,250,00081,000,000 shares of our restricted common stock with a fair value of $9,887 (See Note 5).

In April 2018, in connection with a note payable, we issued a total of 5,000,000 shares of our restricted common stock with a fair value of $8,678 (See Note 5).

In August 2018, in connection with a note payable, we issued a total of 5,000,000 shares of our restricted common stock with a fair value of $3,800 (See Note 5).

Common Stock Issued for Conversion of Convertible Debt

During February 2018, a Note holder made conversions of a total of 70,123,500 shares of our restricted common stock with a fair value of $294,885 in satisfaction of the principal balance of $30,854 of an $80,000 Note originated in March 2017 (See Note 5).

During February 2018, a Note holder received 109,876,500 shares of our restricted common stock with a fair value of $156,625 upon conversion of $29,646 of an $84,971 Note originated in June 2017 (See Note 5). During February 2018, a Note holder received 45,000,000 of our restricted common stock with a fair value of $3,618,244 upon conversion of the remaining balance of $78,943 of $90,000 Notes originated in May and October 2017 (See Note 5).

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During April and May 2018, a Note holder made conversions of a total of 65,885,713 shares of our restricted common stock with a fair value of $156,590 in satisfaction of the remaining principal balance of $49,146 assigned and purchased from a Note originated in March 2017 (See Note 5).

During May and June 2018, a Note holder made conversions of a total of 120,891,284 shares of our restricted common stock with a fair value of $202,292 in satisfaction of the balance of $70,000 of a $156,000 Note assigned and purchased from a Note originated in July 2017 (See Note 5).

During May 2018, a Note holder received a total of 228,000,000 shares of our restricted common stock with a fair value of $319,200 in satisfaction of the remaining principal balance of $54,800 assigned and purchased from a Note originated in June 2016 (See Note 5).

During June 2018, a Note holder made a conversion of 150,000,000 shares of our restricted common stock with a fair value of $180,000 in satisfaction of the remaining principal balance of $16,960 of $33,000 Notes originated in May 2017 (See Note 5).

During June 2018, a Note holder made a conversion of 50,670,000 shares of our restricted common stock with a fair value of $70,938 in satisfaction of the principal balance of $34,060 and accrued interest of $6,476 assigned and purchased from a Note originated in May 2017 (See Note 5).

During July through September 2018, a Note holder made conversions of a total of 206,988,570 shares of our restricted common stock with a fair value of $182,553 in satisfaction of the remaining principal balance $86,000 and accrued interest in full from a Note originated in February 2018(See Note 5).

During September 2018, a Note holder made a conversion of 52,244,433 shares of our restricted common stock with a fair value of $37,011 in satisfaction of principal balance of $15,000 and accrued interest in full from a Note originated in February 2018 (See Note 5).

During August 2018, a Note holder received a total of 300,000,000 shares of our restricted common stock in satisfaction of the principal balance of $72,000 with accrued interest in full for a Note originated in July 2016 (See Note 5).

Common Stock Issued for Conversion of Promissory Note

During May 2018, a Note holder received a total of 187,500,000 shares of our restricted common stock with a fair value of 243,750 in satisfaction of the remaining balance of $42,500 from a Note originated in September 2017 (See Note 5).

During August 2018, a Note holder received a total of 145,000,000 shares of our restricted common stock with a fair value of $101,500 in satisfaction of the Note of $60,000 originated in December 2017 in full.  We recorded a loss on settlement of debt in other expense for $41,500 (See Note 5).

Common Stock Issued for Account Payable

During August 2018, the Company issued a total of 2,800,000 shares of the company’s restricted common stock to settle the outstanding fees of $4,200 with a fair value of $2,800. We recorded a gain on settlement of accounts payable in other expense for $1,400.

Common Stock Issued for Settlement of Default Penalty

During February and July, 2018, in connection with the settlement of a default penalty of debt, we issued a total of 105,157,409 shares of our restricted common stock with a fair value of $173,350$32,400 to the Note holder (See Note 5)6).

Common Stock Issued We had an accrual of $32,400 to account for Default Payments

During April 2018, we issued a total of 1,000,000 restricted shares to a Note holder due to the default on repaymentcost of the promissory note of $50,000 originated in October 2017 (See Note 5). The shares were valued at fair value of $1,700.December 31, 2018.

During April through September, 2018, we issued a total of 26,625,000 restricted shares to 14 Note holders due to the default on repayment of the promissory notes.  The shares were valued at fair value of $23,815 (See Note 5).

Common Stock Issued for Services

During June 2018, the Company signed an agreement with a consultant for investor relation services for twelve months. In connection with the agreement, 100,000,000 shares of the Company’s restricted common stocks were issued. The share wasshares were valued at $0.0012 per share. The Company recorded an equity compensation charge of $40,000$20,000 and $50,000 during the ninethree and six months ended SeptemberJune 30, 2019. The Company recorded an equity compensation charge of $10,000 during the three and six months ended June 30, 2018.

During April 2019, we signed an agreement with a consultant to provide investor relation services for twelve months. In connection with the agreement, 120,000,000 shares of our restricted common stock were issued. The shares were valued at $24,000.

During June 2019, we signed an agreement with a consultant to provide investor relation services for twelve months. In connection with the agreement, 15,000,000 shares of our restricted common stock were issued. The shares were valued at $6,000.

The Company recorded an equity compensation charge of $6,500 during the three and six months ended June 30, 2019. The remaining unrecognized compensation cost of $80,000 related to non-vested equity-based compensation$23,500 will be recognized by the Company over the remaining vestingservice period.

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Beneficial Conversion FeaturesCommon Stock Issued with Indebtedness

In May 2019, in connection with amendment of two convertible notes payable, we issued a total of 6,000,001 shares of our common stock with a fair value of $1,800 (See Note 6).

In June 2019, in connection with issuance of a convertible notes payable, we issued a total of 16,000,000 shares of our common stock with a fair value of $4,688 (See Note 6).

Common Stock Issued for Conversion of Debt

During January through September 2018,May and June 2019, the Company has recorded beneficial conversion featuresNote holder made conversions of a total of 750,000,000 shares of stock for a fair value of $275,000 satisfying the principal balance of $100,000 of a $219,879 Note originated in the amountFebruary 2019 (See Note 6).

Common Stock Issued for Debt Modification

During May and June 2019, we issued a total of $246,913 as additional paid-in capital3,500,000 restricted shares to three Note holders due to the difference betweendefault on repayment of the conversion price and theconvertible notes. The shares were valued at fair value of the Company’s common stock on the date of issuance of the convertible notes (See Note 5).$1,050.

7.8.     STOCK WARRANTS

Common Stock Warrants

During March, 2013, the Company issued a total of 65,000 warrants to purchase common stock at an exercise price of $0.01 per share in connection with issuance of a convertible note payable to Coventry. The warrants expired on March 22, 2018.

On September 3, 2013 and September 12, 2013, the Company issued 500,000 and 375,000 warrants, respectively, to purchase common stock at an exercise price of $0.025 and $0.01 per share in connection with issuances of convertible notes payable to Coventry. The warrants expired on September 3, 2018 and September, 12, 2018, respectively.

On March 31, 2017, in connection with the issuance of an $80,000 Note, we granted three-year warrants to purchase an aggregate of 6,000,000 shares of our common stock at an exercise price of $0.005 per share. The warrants were valued at their fair value of $1,203 and $977 using the Black-Scholes method on June 30, 2019 and December 31, 2018. The warrants expire on March 30, 2020.

On March 3, 2016, in connection with the issuance of a convertible note, we granted five-year warrants to purchase an aggregate of 2,500,000 shares of our common stock at an exercise price of $0.03 per share. The warrants were valued at their fair value of $731 and $491 using the Black-Scholes method at June 30, 2019 and December 31, 2018. The warrants expire on March 3, 2021.

On April 4, 2016, in connection with the issuance of convertible notes, we granted three-year warrants to purchase an aggregate of 4,000,000 shares of our common stock at an exercise price of $0.05 per share. The warrants were valued at their fair value of $0 using the Black-Scholes method at June 30, 2019 and December 31, 2018. The warrants expired on April 4, 2019.

During April, 2014, the Company issued a total of 100,000 warrants to purchase common stock at an exercise price of $0.025 per share in connection with issuance of a convertible note payable to Coventry. The warrants were valued at their fair value of $0 using the Black-Scholes method at June 30, 2019 and December 31, 2018. The warrants expired on April 9, 2019.

During February 2019, the Company granted the total of 110,000,000 warrants to purchase common stock at an exercise price of $0.001 per share in connection with issuance of three convertible notes. The warrants were valued at $8,147 using the Black-Scholes method and recorded as a debt discount that was amortized over the life of the notes. The warrants expire in August 2019.

A summary of warrants outstanding in conjunction with private placements of common stock were as follows during the ninesix months ended SeptemberJune 30, 2019 and the year ended December 31, 2018:

The following table summarizes information about fixed-price warrants outstanding as of SeptemberJune 30, 2019 and December 31, 2018:

At SeptemberJune 30, 2018,2019, the aggregate intrinsic value of all warrants outstanding and expected to vest was $0. The intrinsic value of warrant share is the difference between the fair value of our restricted common stock and the exercise price of such warrant share to the extent it is “in-the-money”. Aggregate intrinsic value represents the value that would have been received by the holders of in-the-money warrants had they exercised their warrants on the last trading day of the periodyear and sold the underlying shares at the closing stock price on such day. The intrinsic value calculation is based on the $0.0004, closing stock price of our restricted common stock on SeptemberJune 28, 2018.2019. There were no in-the-money warrants at SeptemberJune 30, 2018.2019.

8.9.     ACCRUED EXPENSES

Accrued expenses consisted of the following:

10.     PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

We performed an evaluation of our inventory and related accounts at June 30, 2019 and December 31, 2018, and increased the reserve on supplier advances for future venom purchases by $0 and $47,757, respectively. At June 30, 2019 and December 31, 2018, the total valuation allowance for prepaid venom is $200,911.

11.     COMMITMENTS AND CONTINGENCIES

Operating Leases

In February 2013, we entered into a three-year operating lease for monthly payments of approximately $3,500 which expired in January 2016. In February 2016, we entered into a newour current three-year operating lease for monthly payments of approximately $3,200 which expiresexpired in February 2019. The lease is currently month-to-month, thus classified as short-term and not reported on the balance sheet under ASC 842.

ReceptoPharm leases a lab and renewed its operating lease agreement for five years in July of 2012. The lease requiresbeginning August 1, 2017 for monthly payments of approximately $6,400 from August 1, 2012 through August 1, 2017. The lease was renewed in February 2016 for another five years beginning August 1, 2017.$6,900 with a 5% increase each year.

Future minimum payments under these lease agreements are as follows:

Rent expense for the three-months ended September 30, 2018 and 2017 $25,166 and $31,867, respectively. Rent expense for the nine-months ended September 30, 2018 and 2017 approximated $92,968 and $92,552, respectively.  

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Consulting Agreements

During July 2015, we signed an agreement with a company to provide for consulting services for five years. In connection with the agreement, 500,000 shares of our restricted common stock and a one year 8% note of $50,000 were granted. The shares were valued at $0.18 per share. TheAs the services provided were in dispute, the shares and note payable have not been issued as of SeptemberJune 30, 2018.2019. We have accrued the $142,500 in accrued expense as of June 30, 2019 and December 31, 2018.

During October 2015, the Company signed an agreement with a consultant for consulting services for a year. In connection with the agreement, 2,500,000 shares of the Company’s restricted common stock were granted and the Company was to make monthly cash payments of $3,000. As of December 31, 2016, the Company recorded an equity compensation.compensation charge of $31,750, however, only 1,000,000 of the shares have been issued. As of June 30, 2019 and December 31, 2018, $19,150 has been recorded in accrued expense to account for the 1,500,000 shares of common stock that have not been issued.

Litigation

Patricia Meding, et. al. v. ReceptoPharm, Inc. f/k/a Receptogen, Inc.

On June 1, 2015, ReceptoPharm entered into a settlement agreement with Patricia Meding, a former officer and shareholder of ReceptoPharm.  The settlement relates to a lawsuit filed by Ms. Meding against ReceptoPharm (Patricia Meding, et. al. v. ReceptoPharm, Inc. f/k/a Receptogen, Inc., Index No.: 18247/06, New York Supreme Court, Queens County) in which she claimed to own certain shares of ReceptoPharm stock and claimed to be owed amounts on a series of promissory notes allegedly executed in 2001 and 2002.

The settlement agreement executed on June 1, 2015 provides that ReceptoPharm will pay Ms. Meding a total of $360,000 over 35 months. The first payment of $20,000 was made on July 1, 2015. A second payment of $20,000 was made on August 17, 2015 with 32 subsequent monthly $10,000 payments due on the 15th of every month thereafter. To date, ReceptoPharm has made all monthly payments due under the agreement.  In the event of default on any of the payments due under the settlement agreement, the settlement amount would increase by an additional $200,000.  As of September 30,December 31, 2018, all payments were made and the settlement is concluded. We have recorded $200,000 in lossgain on settlement of debt net foron the over accrualconsolidated statements of defaultoperations upon payments in full in April 2018.