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Other Lease Formerly with Related Party | 12 Months Ended
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Dec. 31, 2021
Other Lease Formerly With Related Party |
Other Lease Formerly with Related Party |
4. | Other Lease Formerly with Related Party
The Company’s former executive offices were located in Tomball, Texas (“Tomball Facility”) and leased from JBL Energy Partners, an entity owned by Jason Lane, former Director and Chairman of the Board of the Company who resigned in April 2021. The Tomball Facility was under a month-to-month lease at a lease rate of $5,000 per month, as amended. Total rent expense under this lease during the years ended December 31, 2021, and 2020 was $8,000 and $60,000. As of December 31, 2021, balance payable to JBL Energy Partners was $13,000 which is included as part of accounts payable and accrued expenses in the accompanying consolidated balance sheets. The Tomball Facility lease with Lane was terminated in connection with the resignation of Mr. Lane. At May 1, 2021, the Company agreed to continue to lease a portion of the Tomball facility from the new landlord on a month to month basis at $1,000 per month. The Company also rents a storage facility on a month to month basis for $250 per month. Convertible Notes Payable
Schedule of convertible notes |  |  |  |  |  |
|  | December 31, |
|  | 2021 |  |  | 2020 |
Convertible notes |  | $ | 1,154,000 |  |  | $ | 953,000 |
Accrued interest |  |  | 435,000 |  |  |  | 313,000 |
Subtotal, including $1,333,000 and $1,128,000 in default at December 31, 2021 and 2020, respectively |  |  | 1,589,000 |  |  |  | 1,266,000 |
Convertible note discount |  |  | (86,000 | ) |  |  | (83,000 | )
Total |  | $ | 1,503,000 |  |  | $ | 1,183,000 |
At December 31, 2019, total outstanding notes payable amounted to $1,019,000. During the year ended December 31, 2020, the Company issued convertible promissory notes in the aggregate of $329,000 for cash proceeds of $299,000, net of original issue discount (“OID”) of $30,000. The notes do not bear any interest; however, the implied interest rate used was 10% since the notes were issued 10% less than its face value, are unsecured, mature in twelve months from issuance and convertible into 11,434,037 shares of the Company’s common stock at $0.02 to $0.035 per share. In addition, the Company also granted these note holders warrants to purchase 5,717,017 shares of the Company’s common stock. The warrants are fully vested, exercisable at $0.03 to $0.035 per share and expire one year from the date of issuance. As a result, the Company recorded a note discount of $329,000 to account for the relative fair value of the warrants, the notes’ beneficial conversion feature, and OID. During 2020, a total of $395,000 of convertible notes payable and $16,000 of accrued interest payable were converted into 9,854,707 shares of common stock. At December 31, 2020, total outstanding notes payable amounted to $953,000. During the year ended December 31, 2021, the Company issued convertible promissory notes in the aggregate of $723,000 for cash proceeds of $658,000, net of OID of $65,000. The notes implied interest rate was 10%, mature in twelve months from issuance, and are convertible into 28,794,327 shares of the Company’s common stock at $0.02 to $0.03 per share. In addition, the Company also granted these note holders warrants to purchase 18,907,157 shares of the Company’s common stock. The warrants are fully vested, exercisable at $0.03 to $0.04 per share and expire one year from the date of issuance. As a result, the Company recorded a note discount of $356,000 to account for the relative fair value of the warrants and OID. During 2021, a total of $522,000 of convertible notes payable and $2,000 of accrued interest payable were converted into 22,085,646 shares of common stock. As of December 31, 2021, total outstanding notes payable amounted to $1,154,000. At December 31, 2019, the balance of the unamortized discount was $153,000. During the year ended December 31, 2020, debt discount of $328,000 was recorded and debt discount of amortization of $398,000 was recorded. During 2020, the note discounts are being amortized over the life of the notes or were amortized in full upon the conversion of the corresponding notes to common stock. At December 31, 2020, the unamortized debt discount was $83,000. On January 1, 2021 debt discount was decreased by $30,000 due to the adoption of ASU 2020-06 (see below). During 2021, due to the adoption of ASU 2020-06, unamortized note discounts are included in the carrying value of the corresponding convertible notes upon the conversion into common stock. During the year ended December 31, 2021, debt discount of $355,000 was recorded, debt discount of amortization of $59,000 was recorded, and $263,000 of debt discount was removed and included in the carrying amount of convertible notes that were converted. At December 31, 2021, the unamortized debt discount was $86,000. As of December 31, 2019 total accrued interest amounted to $184,000. During the year ended December 31, 2020, the Company accrued interest of $145,000 related to certain past due notes payable. As of December 31, 2020 total accrued interest amounted to $313,000. During the year ended December 31, 2021, the Company accrued interest of $124,000 related to certain past due notes payable. As of December 31, 2021 total accrued interest amounted to $435,000 which was included as part of convertible notes payable in the accompanying consolidated balance sheet. At December 31, 2021 and 2020, twenty-eight (28) and twenty-two (22) notes payable, respectively, with aggregate principal and accrued balances of $1,333,000 and $1,128,000, respectively, are past due. The Company is currently in negotiations with these note holders to settle these past due notes payable. As of December 31, 2021, convertible notes payable and accrued interest are convertible into approximately 24,101,000 shares of common stock at conversion rates ranging from $0.02 to $0.48 per share. The Company early adopted ASU No. 2020-06 effective January 1, 2021 using the modified retrospective approach. Upon adoption, the following changes resulted: (i) the intrinsic value of the beneficial conversion features recorded in 2020 was reversed as of the effective date of adoption, thereby resulting in an increase in the convertible debentures with an offsetting adjustment to additional paid in capital and (ii) interest expense recorded in 2020 that was related to the amortization of the discount related to the beneficial conversion feature was reversed against opening accumulated deficit. Accordingly, the adoption of ASU 2020-06 resulted in a decrease to accumulated deficit of $30,000, a decrease in addition paid in capital of $60,000, and an increase in total stockholders’ deficit of $30,000 on January 1, 2021.

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