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

NOTE 9 – CONVERTIBLE NOTES PAYABLE

 

The following is a summary of convertible notes payable as of June 30, 2021:

                      
Note*  Inception Date  Maturity  Coupon   Face Value   Unamortized Discount   Carrying Value 
Note 5  1/27/2020  1/27/2021   8%   $202,400   $–   $202,400 
Note 6  2/19/2020  2/19/2021   8%    85,800    –    85,800 
Note 7  3/10/2020  3/10/2021   8%    85,800    –    85,800 
Note 8  8/4/2020  8/4/2021   8%    156,000    9,379    146,621 
Note 9  10/2/2020  10/2/2021   8%    205,000    37,415    167,585 
Note 10  10/15/2020  10/15/2021   8%    172,000    27,964    144,036 
Note 11  11/2/2020  11/2/2021   8%    69,000    13,114    55,886 
Note 12  11/12/2020  11/12/2021   8%    69,000    8,318    60,682 
Note 14  12/10/2020  12/10/2021   8%    80,000    16,515    63,485 
Note 16  1/14/2021  1/14/2022   8%    107,000    23,068    83,932 
Note 17  1/27/2021  1/27/2021   8%    60,000    15,969    44,031 
Note 18  2/3/2021  2/3/2022   8%    45,250    33,439    11,811 
Note 19  2/12/2021  2/12/2022   8%    69,000    47,402    21,598 
Note 20  4/30/2021  4/30/2022   8%    104,000    3,343    100,657 
Note 21  5/25/2021  5/25/2022   8%    104,000    5,586    98,414 
Note 22  6/24/2021  6/24/2022   8%    185,652    57,529    128,123 
 Total             $1,799,902   $299,041   $1,500,861 

 

 

 * Notes 1, 2, 3 and 4 in the amounts of $82,000, $208,000, $27,000 and $62,000, respectively, were fully converted as of March 31, 2021.

 

Between April 1, 2021 and June 30, 2021, the Company issued to “accredited investors,” Convertible Promissory Notes aggregating a principal amount of $393,652. The Company received an aggregate net proceeds of $370,181 after $23,471 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 dates 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 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.

 

 

 

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 three months ended June 30, 2021 is as follows:

 

                
Note  Interest Expense   Accrued Interest   Amortization of Debt Discount   Unamortized 
Note 5  $8,730   $30,132   $–   $– 
Note 6   3,850    11,800    –    – 
Note 7   3,850    10,979    –    – 
Note 8   3,111    11,283    13,022    9,379 
Note 9   4,089    12,176    30,586    37,415 
Note 10   3,431    9,726    17,947    27,964 
Note 11   1,376    3,630    8,172    13,114 
Note 12   1,376    3,478    5,573    8,318 
Note 14   1,596    3,542    8,224    16,515 
Note 15   12    –    43,661    – 
Note 16   2,134    3,916    8,296    23,068 
Note 17   1,198    2,026    5,469    15,969 
Note 18   903    1,459    5,169    33,439 
Note 19   1,376    2,087    8,468    47,402 
Note 20   1,390    1,390    656    3,343 
Note 21   821    821    493    5,586 
Note 22   244    244    –    57,529 
   $39,487   $108,689   $155,736   $299,041 

 

As of June 30, 2021, Note 5, Note 6, and Note 7 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 principal on Note 5 increased by $18,400, Note 6 increased by $7,800 and Note 7 increased by $7,800.