v3.19.2
Convertible Notes Payable
 6 Months Ended
Jun. 30, 2019
Debt Disclosure [Abstract]  
Convertible Notes Payable

Note 8 – Convertible Notes Payable

 

Convertible notes payable at June 30, 2019 and December 31, 2018 consists of the following:

 

   June 30, 2019   December 31, 2018 
September 15, 2017  $

337,653

   $344,262 
December 8, 2017   -    52,260 
December 12, 2017   -    107,109 
March 15, 2018   40,123    40,123 
April 27, 2018   -    16,000 
May 17, 2018   56,714    60,000 
September 17, 2018   60,000    60,000 
September 21, 2018   43,033    64,500 
November 28, 2018   64,500    64,500 
November 28, 2018   25,000    25,000 
December 13, 2018   105,000    105,000 
January 15, 2019   115,000    - 
February 7, 2019   132,720    - 
February 19, 2019   64,500    - 
February 19, 2019   55,125    - 
March 13, 2019   55,125    - 
May 14, 2019   26,500      
May 17, 2019   27,825      
Total  $1,208,818   $938,754 
           
Less: unamortized debt discount   (432,839)   (313,909)
           
Total convertible notes  $775,979   $624,845 

 

For the six ended June 30, 2019, the Company recognized interest expense of $499,422, all of which represented the amortization of original issue discounts, debt discounts and beneficial conversion features. For the six months ended June 30, 2019, the Company reduced the principal by $326,623 principal through conversion through the issuance of 877,994,574 shares of common stock. The issue discounts and debt discounts are being amortized over the life of the convertible notes using straight line amortization due to the short-term nature of the note. Remaining issue discounts and debt discounts of $432,839 will be fully amortized by May 2020.

  

The Company has twenty two (22) outstanding convertible notes as of June 30, 2019, with a total outstanding balance of $775,979. All the notes have matured that were entered into prior to 2019. The 2019 notes mature from January 2020 to March 2020. These notes carry an interest rate ranging between 8% and 12% per annum. The notes carry an original issue discounts ranging between 10% to 25% of the face value of each note.

 

The notes may be converted into shares of the Company’s common stock at any time on or after the occurrence of an event of default. The conversion price shall be the 60% multiplied by the lowest trading price during the 30 trading days period ending, in holder’s sole discretion on each conversion, on either (i) the last complete trading day prior to the conversion date or (ii) the conversion date. All terms of the note, including but not limited to interest rate, prepayment terms, conversion discount or look-back period will be adjusted downward if the Company offers more favorable terms to another party, while this note is in effect.

 

For some notes, the Company agreed to pay a one-time interest charge of 9% of the principal amount for each note. The notes may be converted at any time after the maturity date. The conversion price shall be 75% multiplied by the lowest trading price during the 10 prior trading days period ending on either (i) the last complete trading day prior to conversion date or (ii) the conversion date. All terms of the note, including but not limited to interest rate, prepayment terms, conversion discount or look-back period will be adjusted downward if the Company offers more favorable terms to another party, while this note is in effect.

 

The note may be redeemed by the Company at rates ranging from 105% to 130% depending on the redemption date provided that no redemption is allowed after the 180th day. All terms of the note, including but not limited to interest rate, prepayment terms, conversion discount or look-back period will be adjusted downward in the Company offers more favorable terms to another party, while this note is in effect. As additional consideration, the Company is to issue to Adar Bays Capital shares of common stock with a value equal to 25% of each note, determine at the time of signing of each note.

 

See summary of outstanding notes payable by debt holder with related change in derivative liability and amortization of debt discount for the period ended June 30, 2019.

 

    Loan Holder  Principal Amount   Date   Maturity    Balance at
12 31 18		   Additions   Payments   Conversion   Balance at
6 30 19
 1   SBI Investment  $200,000    9/27/2017    3/15/2018     156,850    -    -    (6,697) 

150,153

 1   SBI Investment  $187,500    11/14/2017    5/14/2018     187,500    -    -    -   187,500
 2   LG Capital Funding, LLC  $185,292    12/8/2017    6/8/2018     52,260    -    -    (52,260)  -
 3   Cerberus Finance Group Ltd  $185,292    12/12/2017    6/8/2018     107,109    -    (99,684)   (7,425)  -
 6   Bellridge Capital LP  $60,000    5/17/2018    5/17/2019     16,000    -    -    (16,000)  -
 7   Auctus  $100,000    4/27/2018    4/25/2019     40,123    -    -    -   40,123
 8   Bellridge Capital LP  $60,000    9/17/2018    3/15/2019     60,000    -    -    (3,286)  56,174
 9   Bellridge Capital LP  $60,000    10/18/2018    10/18/2019     60,000    -    -    -   60,000
 10   Adar Alef Omnibus  $64,500    11/28/2018    11/29/2019     64,500    -    -    (21,467)  43,033
 11   Adar Alef Debt Purchase  $25,000    11/28/2018    11/29/2019     -    -    -    -   -
 12   LG Capital Omnibus  $64,500    11/28/2018    11/29/2019     64,500    -    -    -   64,500
 13   LG Capital Debt Purchase  $25,000    11/29/2018    11/29/2018     25,000    -    -    -   25,000
 14   LG Capital Omnibus  $105,000    12/13/2018    12/14/2019     105,000    -    -    -   105,000
 15   LG Capital Omnibus  $115,000    1/15/2019    1/15/2020          115,000    -    -   115,000
 16   Adar Alef Omnibus  $132,720    2/7/2019    2/7/2020          132,720    -    -   132,720
 17   Adar Alef Debt Note  $108,055    2/7/2019    2/7/2019          108,055    -    (108,056)  -
 18   Adar Alef Omnibus  $64,500    2/19/2019    2/19/2020          64,500    -    -   64,500
 19   LG Capital Omnibus  $55,125    2/19/2019    2/19/2020          55,125    -    -   55,125
 20   LG Capital Omnibus  $55,125    3/13/2019    3/13/2020          55,125    -    -   55,125
 21   Adar Alef Omnibus  $26,500    5/14/2019    2/20/2020          26,500    -    -   26,500
 22    LG Capital Omnibus  $27,825    5/17/2019    2/15/2020          27,825    -    -   27,825
                                          
 Convertible note total                  $938,843   $584,850    (99,684)   (215,191)  1,208,818

  

As a subsequent event, on July 25, 2019 the Company was served with a lawsuit from Auctus Fund, LLC (“Auctus”) alleging a default under their convertible promissory note with an original amount due of $100,000 and claiming to now be owned $ 482,509 including principal, Interest, damages, defaults and other costs. Management believes that this is a frivolous lawsuit directly related to the fact that Auctus ran out of reserve shares because of failure to act in a timely fashion to increase their reserve shares through the Company’s transfer agent. Management believes that this will be easily resolved as soon as more reserve shares are available. This is part of the reason the Company recently filed its pre-14C to change the capital structure of the Company’s common stock. The Company currently owes approximately $40,000 in principal to Auctus and management believes that this matter should settle for not much more than that amount. In the event that Auctus takes an unreasonable position, the Company fully intends to aggressively defend this lawsuit which has not yet been answered as the answer is not yet due.

 

Many of the other convertible notes that the Company holds, maintain cross default clauses that could cause significant increases in the amount that the Company would owe to each of the other note holders due to the Auctus Lawsuit. Management has contacted the other note holders who have assured management that they are not exercising those rights at this time. However, management calculated a default reserve which represents the additional amount management would have to payout to all note holders in the event of the default. Management quantified what this amount would be which includes additional premiums, additional accrued interest and default accrued interest. The total reserve quantified by management, including the $482,509 in the claim from Auctus, totals $1,165,380. This amount quantifies the amount that these cross defaults may cost and is included in the expenses incurred during period ended June 30, 2019.