Notes payable to related parties consist of the following:

February 2014 - $160,000

On February 16, 2014, the Company entered into a note payable agreement with Laurence Wainer, the director, President and sole officer of the Company. The note was for a principal balance of $160,000 and bears interest at 7.75% per annum. Principal and interest payments are due in 60 equal monthly installments beginning in March 2014 of $3,205. The Company and Laurence Wainer entered into an additional agreement effective April 2014 suspending loan repayments until January 2015. As of January 2015, the payments have resumed. On March 31, 2017 the Company entered into an agreement with Mr. Wainer to issue to him 1,000,000 Series A Preferred Shares in exchange $25,537 in accrued salary. On May 19, 2017, the Company amended the March 31, 2017 agreement to forgive $45,000 in debt owed by Company to Mr. Wainer instead of the forgiveness of $25,537 in accrued salary. The Company paid back the remaining amounts due under this note in June 2017.

Total interest expense was $3,604 and $9,931 for the years ended December 31, 2017 and 2016, respectively.

January 2016 - $55,000

On March 29, 2016, the Company consummated a non-interest bearing note payable and royalty agreement with a relative of the CEO with terms almost identical to the note referenced above. Under the note, the Company borrowed $55,000 and began to repay the principal amount at a rate of approximately $937 per month with escalations to approximately $3,531 per month as of April 2017 until the note is paid in full. In addition, starting in February 2018, the Company will pay the lender a royalty fee of five ($5) dollars per month for every ignition interlock devise that the Company has on the road in customers’ vehicles up to eight hundred (800) in perpetuity, and for every unit over 800, the Company will owe the lender $1 per month per device in perpetuity. In connection with this note, the Company recorded a debt discount of $55,000 relating to the future royalty payments, to be amortized over the life of the note.

On September 30, 2016, the Company entered into Amendment No. 1 to Royalty note #2 to amend the royalty provisions of the original note to be $1 for each Device on the road beginning in the 25th month after the date of the Royalty note #2. In connection with this amendment, the Company issued 50,000 shares of restricted common stock and recorded an additional debt discount of $8,959. This amendment was accounted for as a debt modification pursuant to ASC 470.

Total interest expense was $34,219 and $23,451 for the years ended December 31, 2017 and 2016, respectively.

September 2016 - $36,100

On September 30, 2016, the Company provided an agreement to a third party to obtain a $36,100 promissory note in exchange for $36,100 in cash. The promissory note had a maturity date of October 1, 2017 and bears interest at 25% per annum. The note required interest only payments of $752 per month and a balloon payment of $36,100 for principle upon maturity.

The note, along with other related party notes, was replaced by the November 2017 $900,000 note.

Total interest expense was $7,521 and $7,031 for the years ended December 31, 2017 and 2016, respectively.

September 2016 - $192,000

On September 30, 2016, the Company entered into a Loan and Security Agreement (the “LSA”) with Doheny Group, LLC, a Delaware limited liability company (“Doheny”), under which Doheny agreed to loan up to $542,400 in two phases, to be used to acquire additional parts and supplies to manufacture the Company’s proprietary breath alcohol ignition interlock devices. Under the terms of the LSA, the first phase will be a loan of up to $192,000 to acquire parts and supplies to manufacture 600 Devices; and the second phase will be a loan of up to $350,400 to acquire parts and supplies to manufacture 1,000 Devices.

The Phase 1 Loan was funded in the amount of $192,000 by Doheny on September 30, 2016, upon which the Company forwarded the funds to its supplier on or about October 5, 2016, in order to acquire parts and supplies to manufacture 600 Devices. Both the Phase 1 Loan and the Phase 2 Loan mature three years from the date of funding and are at an interest rate of 25% per annum. The note requires interest only payments of $4,000 per month. The Company can prepay the Phase 1 Loan and the Phase 2 Loan (if applicable) at any time without penalty. In exchange for Doheny funding the Phase 1 Loan, the Company issued Doheny a promissory note for $192,000 and also issued Doheny shares of common stock equal to 4.99% of the then-outstanding common stock, pursuant to the terms of a stock purchase agreement. As a result, on or about October 7, 2016, the Company issued Doheny 845,913 shares of common stock. In addition, upon funding of any portion of the Phase 2 loan (Royalty Note #4 below) then the Company is obligated to issue Doheny that number of additional shares of common stock that equals 5% of the then-outstanding common stock. Until the Company repays the Phase 1 Loan and the Phase 2 Loan, as applicable, Doheny has anti-dilution rights for the percentage of stock Doheny owns in the event the Company issues additional shares of common stock during that period. The Company also entered into a Royalty Agreement with Doheny, under which Doheny was granted perpetual royalty rights on all Devices when the Company has 500 or more Devices in service whether leased to end users or distributors. The royalty amounts vary between $1 and $2 per Device depending on a variety of factors. The Company recorded a debt discount of $192,000 related to the relative fair value of the issued shares associated with the Phase 1 note to be amortized over the life of the note.

On August 3, 2017, the Company entered into an amendment (“Amendment No. 1 to Royalty Agreement”) with Doheny Group, LLC. The amendment amends the calculation of royalty amounts to a monthly calculation of $1.30 per unit (whether retail or wholesale unit) on the total number of units each month in perpetuity. The amendment also amends the payment of royalties to commence from and after the effective date of the amendment on all units at customers, beginning with the first unit.

The note, along with other related party notes, was replaced by the November 2017 $900,000 note.

Total interest expense was $216,000 and $28,000 for the years ended December 31, 2017 and 2016, respectively.

November 2016 - $325,000

On September 30, 2016, the Company entered into a Loan and Security Agreement (the “LSA”) with Doheny Group, LLC, a Delaware limited liability company (“Doheny”), under which Doheny agreed to loan up to $542,400 in two phases, to be used to acquire additional parts and supplies to manufacture the Company’s proprietary breath alcohol ignition interlock devices. Under the terms of the LSA, the first phase will be a loan of up to $192,000 to acquire parts and supplies to manufacture 600 Devices; and the second phase will be a loan of up to $350,400 to acquire parts and supplies to manufacture 1,000

On November 4, 2016, the Company agreed to fund an initial portion of the Phase 2 loan as described in “Royalty note #3” above. In connection with this funding the common stock ownership percentage of Doheny Group was increased to 9.95%. As also described in “Royalty note #3” above Doheny has anti-dilution privileges to maintain 9.95% of common stock ownership at no additional cost until both Royalty note #3 and Royalty note #4 are paid in full. As of September 30, 2017, the Company has drawn $325,000 out of the maximum allowance of $350,400 in connection with Royalty note #4.

The note, along with other related party notes, was replaced by the November 2017 $900,000 note.

Total interest expense was $378,966 and $18,117 for the years ended December 31, 2017 and 2016, respectively.

October 2016 - $24,960

On November 1, 2016, the Company provided an agreement to a third party to obtain a $24,960 promissory note in exchange for $24,960 in cash. The promissory note had a maturity date of November 1, 2017 and bears interest at 25% per annum. The note required total payments of $520 per month and a balloon payment of $24,960 for principle upon maturity.

The note, along with other related party notes, was replaced by the November 2017 $900,000 note.

Total interest expense was $5,200 and $1,040 for the years ended December 31, 2017 and 2016, respectively.

November 2016 - $50,000

On November 1, 2016, the Company provided an agreement to a third party to obtain a $50,000 promissory note in exchange for $50,000 in cash. The promissory note had a maturity date of November 1, 2019 and bears interest at 25% per annum. The note required total payments of $1,042 per month and a balloon payment of $50,000 for principle upon maturity.

The note, along with other related party notes, was replaced by the November 2017 $900,000 note.  

Total interest expense was $10,417 and $2,083 for the years ended December 31, 2017 and 2016, respectively.

November 2016 - $5,040

On November 1, 2016, the Company provided an agreement to a third party to obtain a $5,040 promissory note in exchange for $5,040 in cash. The promissory note had a maturity date of November 1, 2017 and bears interest at 25% per annum. The note, along with promissory notes #5, #7, #8, #9, #10, and #11 and royalty notes #3 and #4 (collectively “The Notes” and all to the same note holder), were amended November 1, 2017 and replaced by promissory note #13. The note requires interest only payments of $105 per month. In connection with the issuance of the note payable, the Company issued a warrant to purchase 50,000 shares of common stock at an exercise price of $0.10 per share. The warrant has an exercise period of four years from the date of issuance. The Black Scholes model was used in valuing the warrants in determining the relative fair value of the warrant using the following inputs: Expected Term – 4 years, Expected Dividend Rate – 0%, Volatility – 329%, Risk Free Interest Rate -1.56%. The Company recorded a discount of $5,040, related to the relative fair value of the warrants issued associated with the note to be amortized over the life of the note.

The note, along with other related party notes, was replaced by the November 2017 $900,000 note.

Total interest expense was $5,460 and $1,050 for the years ended December 31, 2017 and 2016, respectively.

January 2017 - $50,400

On January 15, 2017, the Company provided an agreement to a third party to obtain a $50,400 promissory note in exchange for $50,400 in cash. The promissory note had a maturity date of January 15, 2018 and bears interest at 25% per annum. The note required total payments of $1,050 per month and a balloon payment of $50,000 for principle upon maturity. The Company recorded a debt discount of $27,720 related to the value of the issued shares associated with the process of obtaining the note to be amortized over the life of the note.

The note, along with other related party notes, was replaced by the November 2017 $900,000 note.

Total interest expense was $38,220 and $0 for the years ended December 31, 2017 and 2016, respectively.

February 2017 - $70,000

On February 27, 2017, the Company provided an agreement to a third party to obtain a $70,000 promissory note in exchange for $70,000 in cash. The promissory note had a maturity date of February 27, 2020 and bears interest at 25% per annum. The note required total payments of $1,458 per month and a balloon payment of $70,000 for principle upon maturity. The Company recorded a debt discount of $28,000 related to the value of the issued shares associated with the process of obtaining the note to be amortized over the life of the note.

The note, along with other related party notes, was replaced by the November 2017 $900,000 note.

Total interest expense was $39,667 and $0 for the years ended December 31, 2017 and 2016, respectively.

March 2017 - $75,000

On March 16, 2017, the Company provided an agreement to a third party to obtain a $75,000 promissory note in exchange for $75,000 in cash. The promissory note had a maturity date of March 16, 2020 and bears interest at 25% per annum. The note required total payments of $1,563 per month and a balloon payment of $75,000 for principle upon maturity. The Company recorded a debt discount of $30,000 related to the value of the issued shares associated with the process of obtaining the note to be amortized over the life of the note.

The note, along with other related party notes, was replaced by the November 2017 $900,000 note.

Total interest expense was $42,500 and $0 for the years ended December 31, 2017 and 2016, respectively.

November 2017 - $900,000

On November 1, 2017, the Company entered into an agreement with a third party to exchange the September 2016 $36,100 note, the September 2016 $192,000 note, the October 2016 $24,960 note, the November 2016 $5,040 note, the November 2016 $50,000 note, the November 2016 $325,000 note, the January 2017 $50,400 note, the February 2017 $70,000 note, and the March 2017 $75,000 note for a new promissory note for $900,000. The new promissory note also included accrued interest payable and payment of Company expenses. The term of the loan is sixty months and payments are to be $25,000 per month with $15,000 in principal payment and $10,000 in interest payment. The first payment is to be on December 1, 2017 and the final payment on November 1, 2022.

Total interest expense was $39,016 and $0 for the years ended December 31, 2017 and 2016, respectively.