9. Convertible Note Payable

9 Months Ended

Dec. 31, 2020

NOTE 9 – CONVERTIBLE NOTE PAYABLE

The following is a summary of convertible notes payable as of December 31, 2020:

Note*	Inception Date	Maturity	Coupon	Face Value		Unamortized Discount		Carrying Value
Note 3	12/5/2019	12/5/2020	8%	$	62,000	$	–	$	62,000
Note 4	12/31/2019	12/31/2020	8%		62,000		–		62,000
Note 5	1/27/2020	1/27/2021	8%		184,000		2,840		181,160
Note 6	2/19/2020	2/19/2021	8%		78,000		3,151		74,849
Note 7	3/10/2020	3/10/2021	8%		78,000		3,894		74,106
Note 8	8/4/2020	8/4/2021	8%		156,000		34,266		121,734
Note 9	10/2/2020	10/2/2021	8%		205,000		93,004		111,996
Note 10	10/15/2020	10/15/2021	8%		172,000		61,621		110,379
Note 11	11/2/2020	11/2/2021	8%		69,000		28,264		40,736
Note 12	11/12/2020	11/12/2021	8%		69,000		18,953		50,047
Note 13	12/1/2020	12/1/2021	8%		107,500		94,476		13,024
Note 14	12/10/2020	12/10/2021	8%		80,000		31,896		48,104
Note 15	12/29/2020	12/29/2021	8%		55,650		48,908		6,742
				$	1,378,150	$	421,273	$	956,877

* Note 1 and Note 2 in the amounts of $82,000 and $208,000 were fully converted as of December 31, 2020.

Between October 4, 2019 and December 29, 2020, the Company issued to GS Capital Partners, LLC, an accredited investor (“GS Capital”), Convertible Promissory Notes aggregating a principal amount of $1,668,150. The Company received an aggregate net proceeds of $1,590,500 after $70,650 in original note discount. The Company has agreed to pay interest on the unpaid principal balance at the rate of eight percent (8%) per annum from the date on which Notes are issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Notes, provided it makes a payment to GS Capital as set forth in the agreements.

The outstanding principal amount of the Notes is convertible into the Company’s common stock at the lender’s option at $0.01 per share for the first six months of the term of the Notes. After the six-month anniversary, the conversion price is equal to 63% of the average of the three lowest trading prices of the Company’s common stock.

Accounting Considerations

The Company has accounted for the Notes as a financing transaction, wherein the net proceeds that were received were allocated to the financial instrument issued. Prior to making the accounting allocation, the Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. The material embedded derivative features consisted of the embedded conversion option and default puts. The conversion option and default puts bear risks of equity which were not clearly and closely related to the host debt agreement and required bifurcation. The contracts do not permit the Company to settle in registered shares and the contracts also contain make-whole provisions both of which preclude equity classification. Current accounting principles that are also provided in ASC 815 do not permit an issuer to account separately for individual derivative terms and features that require bifurcation and liability classification. Rather, such terms and features must be and were bundled together and fair valued as a single, compound embedded derivative.

Based on the previous conclusions, the Company allocated the cash proceeds first to the derivative components at its fair value with the residual allocated to the host debt contract, as follows:

	Note 1		Note 2		Note 3		Note 4		Note 5		Note 6		Note 7		Note 8
Compound embedded derivative	$	26,395	$	68,030	$	15,893	$	10,812	$	25,834	$	14,095	$	17,636	$	42,463
Convertible notes payable		48,605		133,970		44,107		49,188		152,666		60,905		57,364		107,537
Original issue discount		7,000		6,000		2,000		2,000		5,500		3,000		3,000		6,000
Face value	$	82,000	$	208,000	$	62,000	$	62,000	$	184,000	$	78,000	$	78,000	$	156,000

	Note 9		Note 10		Note 11		Note 12		Note 13			Note 14		Note 15
Compound embedded derivative	$	103,445	$	63,992	$	28,339	$	18,066	$	209,545		$	29,070	$	65,863
Convertible notes payable		91,555		101,008		36,661		46,934		–			45,930		–
Day one derivative loss		–		–		–		–		(109,545	)		–		(15,863	)
Legal fees		–		–		–		–		3,500			–		3,500
Original issue discount		10,000		7,000		4,000		4,000		4,000			5,000		2,150
Face value	$	205,000	$	172,000	$	69,000	$	69,000	$	107,500		$	80,000	$	55,650

The net proceeds were allocated to the compound embedded derivative and original issue discount. The notes will be amortized up to its face value over the life of Notes based on an effective interest rate. Amortization expense and interest expense for the nine months ended December 31, 2020 is as follows:

Note	Interest Expense		Accrued Interest		Amortization of Debt Discount		Unamortized
Note 1	$	2,696	$	–	$	28,186	$	–
Note 2		8,342				53,298		–
Note 3		3,737		5,327		13,021		–
Note 4		3,737		4,974		9,180		–
Note 5		11,090		13,671		23,669		2,840
Note 6		4,701		5,402		12,675		3,151
Note 7		4,701		5,060		15,254		3,894
Note 8		5,095		5,095		14,197		34,266
Note 9		4,044		4,044		20,440		93,004
Note 10		2,903		2,903		9,370		61,621
Note 11		892		892		4,075		28,264
Note 12		741		741		3,113		18,953
Note 13		707		707		2,274		94,476
Note 14		368		368		2,174		31,896
Note 15		366		366		1,177		48,908
	$	54,120	$	49,550	$	212,103	$	421,273

On April 23, 2020, GS Capital converted $7,000 in principal and $341 in accrued interest of the October 4, 2019 $84,000 face value note into 4,292,915 shares of common stock. On July 31, 2020, GS Capital converted $7,500 in principal and $488 in accrued interest of the October 4, 2019 $84,000 face value note into 5,071,885 shares of common stock. On August 20, 2020, GS Capital converted $12,500 in principal and $871 in accrued interest of the October 4, 2019 $84,000 face value note into 8,468,394 shares of common stock. On September 9, 2020, GS Capital converted $55,000 in principal and $4,075 in accrued interest of the October 4, 2019 $84,000 face value note into 12,123,426 shares of common stock. On September 9, 2020, GS Capital converted $55,000 in principal and $4,075 in accrued interest of the October 4, 2019 $84,000 face value note into 12,123,426 shares of common stock. On October 1, 2020, GS Capital converted $108,000 in principal and $7,196 in accrued interest of the October 31, 2019 $208,000 face value note into 33,934,758 shares of common stock. On October 15, 2020, GS Capital converted $45,000 in principal and $3,136 in accrued interest of the October 31, 2019 $208,000 face value note into 14,521,245 shares of common stock. On November 25, 2020, GS Capital converted $35,000 in principal and $2,754 in accrued interest of the October 31, 2019 $208,000 face value note into 15,120,623 shares of common stock. On December 22, 2020, GS Capital converted $20,000 in principal and $1,692 in accrued interest of the October 31, 2019 $208,000 face value note into 8,330,328 shares of common stock. As a result of the August, September, October, November and December conversions, the Company recorded $70,864 as loss on extinguishment of debt. As of December 31, 2020, Note 3 and Note 4 are considered in default. Upon an event of default, the interest accrues at 18%. Additionally, upon non-payment at maturity, the principal increases by 10%. The Company is in the process of obtaining a waiver for these defaults and as such has not recorded the additional interest or principal. The Company has not yet received any written notification from the note holder on the default in accordance with the agreement.