9. Convertible Note Payable

12 Months Ended

Mar. 31, 2021

NOTE 9 – CONVERTIBLE NOTE PAYABLE

The following is a summary of convertible notes payable as of March 31, 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		22,400		133,600
Note 9	10/2/2020	10/2/2021		8%		205,000		68,000		137,000
Note 10	10/15/2020	10/15/2021		8%		172,000		45,911		126,089
Note 11	11/2/2020	11/2/2021		8%		69,000		21,287		47,713
Note 12	11/12/2020	11/12/2021		8%		69,000		13,892		55,108
Note 14	12/10/2020	12/10/2021		8%		80,000		24,738		55,262
Note 15	12/29/2020	12/29/2021		8%		55,650		43,660		11,990
Note 16	1/14/2021	1/14/2022		8%		107,000		31,364		75,636
Note 17	1/27/2021	1/27/2021		8%		60,000		21,437		38,563
Note 18	2/3/2021	2/3/2022		8%		45,250		38,608		6,642
Note 19	2/12/2021	2/12/2022		8%		69,000		55,870		13,130
					$	1,461,900	$	387,167	$	1,074,733

* 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 October 4, 2019 and February 12, 2021, the Company issued to accredited investors, Convertible Promissory Notes aggregating a principal amount of $1,949,400. The Company received an aggregate net proceeds of $1,850,500 after $91,900 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 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:

	Notes 1-19
Compound embedded derivative	$	910,762
Convertible notes payable		1,091,717
Day one derivative expense		(151,978	)
Legal fees		7,000
Original issue discount		91,900
Face value	$	1,949,400

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 year ended March 31, 2021 is as follows:

Note	Interest Expense		Accrued Interest		Amortization of Debt Discount		Unamortized
Note 1	$	2,216	$	–	$	11,869	$	–
Note 2		8,821		–		53,298		–
Note 3		4,430		–		13,021		–
Note 4		4,294		–		11,688		–
Note 5		18,468		21,401		31,334		–
Note 6		7,249		7,950		17,095		–
Note 7		6,770		7,129		20,636		–
Note 8		8,172		8,172		26,063		22,400
Note 9		8,088		8,088		45,444		68,000
Note 10		6,296		6,296		25,081		45,911
Note 11		2,253		2,253		11,052		21,287
Note 12		2,102		2,102		8,175		13,892
Note 13		3,170		–		107,500		–
Note 14		1,946		1,946		9,332		24,738
Note 15		1,464		1,464		6,424		43,660
Note 16		1,782		1,782		5,070		31,364
Note 17		828		828		3,263		21,437
Note 18		555		555		2,117		38,608
Note 19		711		711		3,708		55,870
	$	89,615	$	70,677	$	412,170	$	387,167

As of March 31, 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.

Debt conversions

The following table illustrates the debt converted and the associated gain or loss:

Note	Conversion Date		Shares issued in conversion		Fair value of shares		Face Value		Accrued Interest		Fees		Total Debt		Derivative liability		Net (gain)/ loss
WLES LP LLC		May 8, 2020		12,000,000	$	48,281	$	30,000	$	–	$	–	$	30,000	$	–	$	18,281
Note 1		July 30, 2020		4,292,918		12,449		7,000		341		–		7,341		–		5,108
Note 1		July 30, 2020		5,071,886		16,737		7,500		488		–		7,988		8,570		179
Note 1		August 20, 2020		8,468,394		155,818		12,500		871		500		13,871		138,147		3,800
Note 1		September 9, 2020		12,123,426		261,866		55,000		4,075		500		59,575		142,490		59,801
Note 2		October 1, 2020		33,934,756		210,395		108,000		7,196		250		115,446		80,674		14,275
Note 2		October 15, 2020		14,521,245		81,319		45,000		3,136		350		48,486		39,128		(6,295	)
Note 2		November 25, 2020		15,120,622		78,627		35,000		2,754		350		38,104		44,183		(3,660	)
Note 2		December 22, 2020		8,330,328		39,153		20,000		1,691		–		21,691		19,806		(2,344	)
Note 3		January 19, 2021		15,087,285		69,402		35,000		3,145		350		38,495		32,195		(1,288	)
Note 3		February 4, 2021		11,659,246		59,462		27,000		2,521		350		29,871		30,603		(1,012	)
Note 4		February 10, 2021		26,279,805		394,198		62,000		5,531		350		67,881		323,556		2,760
				166,889,911	$	1,427,707	$	444,000	$	31,749	$	3,000	$	478,749	$	859,352	$	89,605

During the year ended March 31, 2021, the Company repaid Note 13 in cash. The principal balance was $107,500 and the accrued interest was $3,170. The prepayment fee was $16,125. The Company repaid $126,795. As of the repayment date, the derivative liability related to Note 13 was $126,892. As a result, the Company recorded a gain on loss of extinguishment in the amount of $126,892. Between the loss on extinguishment of $71,324 related the conversion and the gain on loss of extinguishment related to the repayment, the net gain was $55,568.