Quarterly report pursuant to Section 13 or 15(d)

CONVERTIBLE NOTES PAYABLE

v3.21.2
CONVERTIBLE NOTES PAYABLE
9 Months Ended
Sep. 30, 2021
Debt Disclosure [Abstract]  
CONVERTIBLE NOTES PAYABLE

NOTE 8 – CONVERTIBLE NOTES PAYABLE

During the nine months ended September 30, 2021, the Company issued an aggregate of 905,667,530 shares of its common stock in settlement of issued convertible notes payable and accrued interest.  

 

For the nine months ended September 30, 2021 and September 30, 2020, the Company recorded amortization of debt discounts of $1,232,641 and $1,373,575, respectively, as a charge to interest expense.

 

Convertible notes payable are comprised of the following:

               
         
    September 30,   December 31,
    2021   2020
Lender   (Unaudited)   (Audited)
Convertible note payable - Power Up Lending Group   $        $ 35,000  
Convertible note payable - Crown Bridge Partners   $ 35,000     $ 172,500  
Convertible note payable – Labrys   $ 537,500     $     
Convertible note payable - GS Capital Partners LLC   $ 82,000     $ 143,500  
Convertible note payable – Geneva Roth   $ 153,750     $ 33,500  
Convertible note payable - Robert L. Hymers III   $ 110,000     $ 70,000  
Convertible note payable – Dutchess Capital   $ 135,000     $ 10,000  
Convertible note payable – Redstart Holdings   $        $ 109,000  
Convertible note payable - GW Holdings   $ 120,750     $ 98,175  
Convertible note payable – FF Global Opportunities funds     268,750          
Convertible note payable - St. George/Bucktown   $ 567,500     $ 1,160,726  
Total   $ 2,010,250     $ 1,832,401  
Less debt discounts   $ (950,807 )   $ (405,507 )
Net   $ 1,059,443     $ 1,426,894  
Less current portion   $ (1,059,443 )   $ (1,426,894 )
Long term portion   $        $    

 

Convertible Note Payable-Firstfire

In July 2021, the Company issued a convertible promissory note in the aggregate principal amount of $268,750 to Firstfire Global Opportunities Fund LLC (“Firstfire”). The promissory note accrues interest at 12% per annum, is due one year from the issuance date and includes an original issuance discount and financing fees in the aggregate amount of $44,888 and received $200,963 of net proceeds. The note is convertible at any time at a conversion price of $0.005 per share. The Company also issued a five-year warrants to purchase up to 38,174,715 shares of its common stock to Firstfire, at an exercise price of $0.00704 per share. The aggregate debt discount of $245,851 is being amortized to interest expense over the respective terms of the note.

 

The Company is prohibited from effecting a conversion of the note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the note. The Company is prohibited from effecting an exercise of the warrant to the extent that, as a result of such exercise, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon exercise of the note. Accrued interest on the note was $6,538 as of September 30, 2021.

Convertible Note Payable-Labrys

In June 2021, the Company issued a convertible promissory note in the aggregate principal amount of $537,500 to Labrys Funds, LP (“Labrys”). The promissory note accrues interest at 12% per annum, is due one year from the issuance date and includes an original issuance discount in the aggregate amount of $53,750. The Company also paid $33,750 in deferred financing fees and received $450,000 of net proceeds. The note is convertible at any time at a conversion price of $0.005 per share. The Company also issued a five-year warrants to purchase up to 76,349,431 shares of its common stock to Labrys, at an exercise price of $0.00704 per share. In addition, the Company issued five-year warrants to purchase up to 76,349,431 shares of its common stock to an investment banker for services, which warrants have an exercise price of $0.008448 per share. The aggregate debt discount of $533,526 is being amortized to interest expense over the respective terms of the note.

 

The Company is prohibited from effecting a conversion of the note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the note. The Company is prohibited from effecting an exercise of the warrant to the extent that, as a result of such exercise, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon exercise of the note. Accrued interest on the note was $20,219 as of September 30, 2021.

 

Convertible Notes Payable-Power Up Lending

On June 25, 2020, the Company entered into a convertible promissory note with Power Up Lending Group Ltd. (“Power Up”). The promissory notes accrue interest at a rate of 10% per annum, were due one year from the respective issuance date The note was convertible at a conversion price equal to 61% of the market price of the Company’s common stock, defined as the lowest trading price during the 15-trading-day period prior to the date of conversion. During the nine months ended September 30, 2021, the principal and accrued interest of $1,750 were converted into 15,978,261 shares of common stock resulting in the settlement of $48,107 of derivative liabilities.

 

As of September 30, 2021 and December 31, 2020, the Company owed an aggregate of $0 and $35,000 of principal, respectively, on the notes. As of September 30, 2021 and December 31, 2020, the Company owed $0 and $1,167, respectively, of accrued interest on the notes.

 

Convertible Notes Payable-Redstart Holdings

During the year ended December 31, 2020, the Company entered into various convertible promissory notes with Redstart Holdings (“Redstart Holdings”) totaling a principal amount of $109,000. The promissory notes accrue interest at a rate of 10% per annum, were due one year from the respective issuance date. The notes were convertible at a conversion price equal to 61% of the market price of the Company’s common stock, defined as the lowest trading price during the 15-trading-day period prior to the date of conversion. Upon the issuance of these convertible notes, the Company determined that the features associated with the embedded conversion option embedded in the notes should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares of common stock would be available to settle all potential future conversion transactions. As of the funding date of each note, the Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest expense.

 

The Company has the right to prepay the notes for an amount ranging from 125% to 140% multiplied by the outstanding balance (all principal and accrued interest) depending on the prepayment period (ranging from 1 to 180 days following the issuance date). The Company is prohibited from effecting a conversion of any note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the note. During the three months ended March 31, 2021, the Company repaid $109,000 of principal and $43,204 of total interest and penalties.

 

During the nine months ended September 30, 2021, the Company entered into an additional three convertible promissory notes with principal value of $226,250, which accrued interest at 8% per annum and were convertible at 65% of the average of the two lowest trading prices during the previous 15 day trading period. These notes along with accrued interest and early repayment penalties of $40,857 were paid in full prior to September 30, 2021. As of September 30, 2021, the Company owes no amount to Redstart Holdings.

 

Convertible Notes Payable-Crown Bridge Partners

From October 1 through December 31, 2019, the Company issued convertible promissory notes in the aggregate principal amount of $225,000 to Crown Bridge Partners LLC (“Crown Bridge”). The promissory notes accrue interest at a rate of 10% per annum, were due one year from the respective issuance date and include an original issuance discount in aggregate amount of $22,500. Interest accrues from the issuance date, but interest shall not become payable until the notes becomes payable. The notes are convertible at any time at a conversion price equal to 60% of the market price of the Company’s common stock, defined as the lowest trading price during the 15-trading-day period prior to the conversion date. Upon the issuance of these convertible notes, the Company determined that the features associated with the embedded conversion option embedded in the debentures should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares of common stock would be available to settle all potential future conversion transactions. As of the funding date of each note, the Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $88,674 was being amortized to interest expense over the respective terms of the notes. The Company also issued a warrants to purchase up to 519,230 shares of the Company’s common stock with an initial exercise price of $0.26, with reset provisions based on issuances of common stock subsequent to the issuance date. Due to the reset provision, the exercise option of these warrants is also accounted for as a derivative liability. See Note 10.

 

The Company has the right to prepay the notes for an amount ranging from 125% to 140% multiplied by the outstanding balance (all principal and accrued interest) depending on the prepayment period (ranging from 1 to 180 days following the issuance date). The Company is prohibited from effecting a conversion of any note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the note.

 

As of September 30, 2021 and December 31, 2020, the Company owed an aggregate of $35,000 and $172,500 of principal, respectively, on the notes. As of September 30, 2021 and December 31, 2020, the Company owed accrued interest of $0 and $6,500 on the notes, respectively.

 

Convertible Notes Payable-GS Capital Partners LLC

On December 19, 2019, the Company issued convertible promissory notes in the aggregate principal amount of $173,000 to GS Capital Partners LLC (“GS Capital”). The promissory notes accrue interest at a rate of 10% per annum, were due one year from the respective issuance date, and include an original issuance discount in an aggregate amount of $15,000. Pursuant to the notes, GS Capital is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of the notes into shares of the Company's common stock at a conversion price equal to 62% of the lowest trading price of the Company's common stock as reported on the OTC Markets or such other exchange on which the Company’s shares are then traded, for the 20 trading days prior to the date of conversion. During the nine months ended September 30, 2021, the Company repaid $96,130 of principal and $4,622 of accrued interest, and an additional $47,370 of principal and $2,628 of accrued interest were converted into 11,357,987 shares of common stock, resulting in the settlement of $129,285 of derivative liabilities.

 

As of the funding date of each note, the Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $166,193 was being amortized to interest expense over the respective terms of the notes. As of September 30, 2021 and December 31, 2020, the Company owed $0 and $143,500 of principal, respectively, on the notes. As of September 30, 2021 and December 31, 2020, the Company owed $0 and $2,789 in accrued interest on the notes, respectively.

 

Convertible Notes Payable-St. George Investments

On November 1, 2017, the Company issued a secured convertible promissory note in the principal amount of $601,420 to St. George Investments LLC (“St. George”). The promissory note accrues interest at a rate of 10% per annum compounded daily, was due upon maturity on September 10, 2018 and includes an original issue discount of $59,220. The promissory note was funded on November 11, 2017 for $542,200, net of the original issue discount and transaction costs. During the nine months ended September 30, 2021, $420,726 of principal and $125,090 of accrued interest, along with $1,297,664 of derivative liabilities valued as of the respective conversion date were converted into an aggregate of 181,938,599 shares of the Company’s common stock. As of September 30, 2021, the Company owed no principal or accrued interest on this convertible promissory note.

On March 25, 2019, the Company issued a secured convertible promissory note in the principal amount of $580,000 to St. George. The promissory note accrues interest at a rate of 10% per annum compounded daily, was due upon maturity on January 24, 2020 and includes an original issue discount of $75,000. In addition, the Company agreed to pay $5,000 for legal, accounting and other transaction costs of the lender. During the nine months ended September 30, 2019, the promissory note was funded in the amount of $580,000 resulting in net proceeds of $500,000. During the three months ended March 31, 2021, the principal balance of $580,000 and accrued interest of $93,755 were converted into 288,888,889 shares of common stock and resulted in the settlement of $1,207,773 of derivative liabilities. As of September 30, 2021, the Company owed no principal or accrued interest on this convertible promissory note.

The Company entered into five convertible note agreements with Bucktown Capital, LLC, an affiliated entity of St. George in fiscal year 2020 and during the nine months ended September 30, 2021. The notes have total principal due of $727,500 and bear interest at 8% per annum. The notes mature between December 2021 and March 2022. The notes are convertible at fixed prices, with $225,000 of principal convertible at $0.002 per share, $80,000 convertible at $0.003 per share, and $422,500 convertible at $0.005 per share.

As of September 30, 2021 and December 31, 2020, the Company owed $727,500 of principal on these notes. As of September 30, 2021 and December 31, 2020, the Company owed $27,031 of accrued interest on the above notes, respectively. 

Convertible Notes Payable - Robert L. Hymers III

On September 8, 2020, the Company issued convertible promissory notes in the aggregate principal amount of $70,000 to Robert L. Hymers III (“Hymers”). The promissory note accrues interest at a rate of 10% per annum and matured on September 8, 2021.  Hymers has the option to convert all or any portion of the unpaid principal amount of the notes, plus accrued interest, into shares of the Company’s common stock at a conversion price equal to a 50% discount to the lowest closing bid price of the Company’s common stock during the 15 day trading period prior to the date of conversion. The aggregate debt discount of $70,000 is being amortized to interest expense over the respective terms of the notes.

On February 4, 2021, $70,000 of principal and $4,286 of accrued interest, along with $385,688 of derivative liabilities valued as of the respective conversion date were converted into an aggregate of 30,952,626 shares of the Company’s common stock.

On February 4, 2021, the Company issued convertible promissory notes in the aggregate principal amount of $75,000 to Hymers. The promissory notes accrue interest at a rate of 10% per annum and mature on February 4, 2022. Hymers has the option to convert all or any portion of the unpaid principal amount of the notes, plus accrued interest, into shares of the Company’s common stock at a conversion price of $0.07. The aggregate debt discount of $75,000 is being amortized to interest expense over the respective terms of the notes.

On August 11, 2021 the Company and Hymers modified the February 4, 2021 note so that the conversion price was equal to $0.002. As a result of the modification, the Company recorded a loss on the extinguishment of the old debt of $123,564. Also on August 11, 2021, $75,000 of principal and $3,884 of accrued interest, along with $102,324 of derivative liabilities valued as of the respective conversion date were converted into an aggregate of 39,441,780 shares of the Company’s common stock.

As of September 30, 2021 and December 31, 2020, the Company owed an aggregate of $0 and $70,000 of principal, respectively, to Hymers.  As of September 30, 2021 and December 31, 2020, the Company owed $0 and $1,005 in accrued interest on the notes, respectively.

Convertible Note Payable – GW Holdings Group

As of December 31, 2020, the Company owed $98,175 of principal on convertible promissory notes issued to GW Holdings Group, LLC (“GW”). GW has the option, beginning on the six month anniversary of the date of issuance, to convert all or any amount of the principal face amount of the notes then outstanding into shares of the Company's common stock at a conversion price equal to 40% discount of the lowest trading price for the 15 trading days prior to the date of the conversion. The notes accrue interest at a rate of 10% per annum. During the nine months ended September 30, 2021, GW converted all principal and $5,045 of accrued interest into 35,840,446 shares of the Company’s common stock, resulting in the settlement of $170,358 of derivative liabilities. 

On June 3, 2021, the Company entered issued a convertible promissory note in the amount of $120,750 to. The holder has the option to convert all or any amount of the principal face amount of the note then outstanding into shares of the Company's common stock at a conversion price equal to $0.005 for the first 90 days and $0.002 thereafter. The note accrues interest at a rate of 10% per annum and included $15,750 of deferred financing fees and original issue discount which is being amortized to interest expense over the term of the note. This note was repaid in full during the nine months ended September 30, 2021.

On August 24, 2021, the Company entered issued a convertible promissory note in the amount of $120,750 to GW. GW has the option to convert all or any amount of the principal face amount of the note then outstanding into shares of the Company's common stock at a conversion price equal to $0.0025 for the first 90 days and $0.001 thereafter. The note accrues interest at a rate of 10% per annum and includes a $15,750 original issue discount which is being amortized to interest expense over the term of the note

As of September 30, 2021 and December 31, 2020, the Company owed $120,750 and $98,175 of principal, respectively, on the note. As of September 30, 2021 and December 31, 2020, the Company owed $959 and $818 in accrued interest on the note, respectively.

 

Convertible Debt Summary:  

The Company has identified the embedded derivatives related to the above-described notes and warrants. These embedded derivatives included certain conversion and reset features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of the note and to fair value as of each subsequent reporting date.

 

At September 30, 2021, the Company determined the aggregate fair value of embedded derivatives to be $432,024. The fair values were determined using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 95.1% to 198.2%, (3) weighted average risk-free interest rate of 0.05% to 0.28%, (4) expected life of 0.05 to 4.7 years, (5) conversion prices of $0.0004 to $0.007 and (6) the Company's common stock price of $0.0029 per share as of September 30, 2021.

 

For the nine months ended September 30, 2021, the Company recorded a loss on the change in fair value of derivative liabilities of $1,101,640 and a loss of $1,035,115 related to the excess of the fair value of derivatives at issuance above convertible note principal as a charge to interest expense. For the nine months ended September 30, 2020, the Company recorded a gain on change in fair value of derivative liabilities of $1,142,272, a loss of $395,607 related to the excess of the fair value of derivatives at issuance above convertible note principal as a charge to interest expense, and amortization of debt discounts of $1,028,931 as a charge to interest expense.