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Convertible Notes Payable to Related and Nonrelated Parties

12 Months Ended

Dec. 31, 2020

Convertible Notes Payable to Related and Nonrelated Parties

Note 6 - Convertible Notes Payable to Related Parties/Stockholders and Nonrelated Parties

In January, March, and May 2019, the Company issued Convertible Notes Payable totaling $200,000 to related parties and stockholders and $100,000 convertible note payable to a nonrelated party. The notes are to be paid in one principal payment, along with any unpaid interest by December 31, 2021. Interest is payable semiannually at 10%. The notes are convertible into common stock at a price of $.20 per share through December 31, 2019, $.30 per share from January 1, 2020 through December 31, 2020, and $.40 per share from January 1, 2021 through the maturity date of December 31, 2021.

In December 2019, the Company issued a Convertible Note Payable in the principal amount of $25,000 to a stockholder in connection with a loan in the same amount. The note is to be paid in one principal payment, along with any unpaid interest by December 31, 2022. Interest is payable semiannually at 10%. The note is convertible into common stock at a price of $.20 per share through December 31, 2020, $.30 per share from January 1, 2021 through December 31, 2021, and $.40 per share from January 1, 2022 through the maturity date of December 31, 2022. On December 4, 2020, the note along with accrued interest totaling $26,072 was converted into 130,362 shares of common stock.

In March 2020, the Company issued a Convertible Note Payable in the principal amount of $100,000 to a nonrelated party in connection with a loan in the same amount. The note is to be paid in one principal payment, along with any unpaid interest by December 31, 2022. Interest is payable semiannually at 10%. The note is convertible into common stock at a price of $.20 per share through December 31, 2020, $.30 per share from January 1, 2021 through December 31, 2021, and $.40 per share from January 1, 2022 through the maturity date of December 31, 2022.

In June 2020, the Company issued a Convertible Note Payable in the principal amount of $25,000 to a related party in connection with a loan in the same amount. The note is to be paid in one principal payment, along with any unpaid interest by July 31, 2023. Interest is payable semiannually at 10%. The note is convertible into common stock at a price of $.20 per share through December 31, 2020, $.30 per share from January 1, 2021 through December 31, 2021, and $.40 per share from January 1, 2022 through the maturity date of July 31, 2023.

In the third quarter 2020, the Company issued Convertible Notes Payable totaling $511,000, of which $25,000 was with a stockholder and the remaining $486,000 was with nonrelated accredited investors in connection with loans for the same amount. The notes are to be paid in one principal payment, along with any unpaid interest by December 31, 2023. Interest is payable semiannually at 10% on June 30 and December 31. The notes are convertible into common stock at a price of $.20 per share through December 31, 2020, $.30 per share from January 1, 2021 through December 31, 2021, and $.40 per share from January 1, 2022 through the maturity date of December 31, 2023.

In the fourth quarter 2020, the Company issued Convertible Notes Payable totaling $250,000, of which $75,000 was with a related party and stockholder and the remaining $175,000 was with nonrelated accredited investors in connection with loans for the same amount. The notes are to be paid in one principal payment, along with any unpaid interest by December 31, 2023. Interest is payable semiannually at 10% on June 30 and December 31. The notes are convertible into common stock at a price of $.20 per share through December 31, 2020, $.30 per share from January 1, 2021 through December 31, 2021, and $.40 per share from January 1, 2022 through the maturity date of December 31, 2023.

Consequently, the Company has outstanding Convertible Notes Payable in an aggregate principal amount of $1,186,000 through December 31, 2020, of which $325,000 are due to related parties and stockholders, and $861,000 are to nonrelated parties (collectively referred to as the “Notes”). See Note 12 for further related party transactions.

The Convertible Notes Payable that were issued in the third and fourth quarter 2020 included a beneficial conversion feature, which is recorded as a discount against the Notes and amortized through the earlier of the conversion into common stock, or the maturity date. Amortization of the debt discount is reported as interest expense in the Statement of Operations The total debt discount associated with the beneficial conversion feature for the year ended December 31, 2020 was $712,500. Total amortization associated with the beneficial conversion feature debt discount was $59,327 for the year ended December 31, 2020.

Total debt issuance costs were $11,625 and $26,000 for the years ended December 31, 2020 and December 31, 2019, respectively. Total amortization associated with the debt issuance costs paid was $13,530 and $7,254 for the years ended December 31, 2020 and December 31, 2019, respectively.

Convertible Notes Payable at December 31, 2020 and December 31, 2019 consisted of the following:

	December 31,		December 31,
	2020		2019
Current:
Convertible notes payable to related parties and stockholders	$	200,000	$	—
Less:
Unamortized debt issuance costs		5,578		—
Total convertible notes payable to related parties and stockholders	$	194,422	$	0

Convertible notes payable	$	100,000	$	—
Less:
Unamortized debt issuance costs		2,824		—
Total convertible notes payable, net	$	97,176	$	0

Long Term:
Convertible notes payable to related parties and stockholders	$	125,000	$	225,000
Less:
Unamortized debt discount - beneficial conversion feature		103,092		—
Unamortized debt issuance costs		1,371		13,100
Total convertible notes payable to related parties and stockholders	$	20,536	$	211,900

Convertible notes payable	$	761,000	$	100,000
Less:
Unamortized debt discount - beneficial conversion feature		550,080		—
Unamortized debt issuance costs		7,069		5,646
Total convertible notes payable, net	$	203,851	$	94,354