| Note G - Subsequent Events |
| (1) |
On January 3, 2019 the Company issued a convertible promissory note with a face value of $105,000, maturing on January 3, 2020, and a stated interest of 10% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company's common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on January 7, 2019, when the Company received proceeds of $91,500, after disbursements for the lender's transaction costs, fees and expenses which in aggregate resulted in a total discount of $13,500 to be amortized to interest expense over the life of the note. Additionally, the note’s variable conversion rate component requires that the note be valued at its stock redemption value (i.e., “if-converted” value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the note’s undiscounted face value being deemed a premium to be added to the principal balance and amortized to additional paid-in capital over the life of the note. As such, the Company recorded a premium on the note of $270,000 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.14 per share (60% of the lowest trading price during the 20 days preceding the note's issuance), which computed to 1,250,000 shares of 'if-converted' common stock with a redemption value of $375,000 due to $0.300 per share fair market value of the Company's stock on the note's date of issuance. Debt discount amortization is recorded as interest expense, while debt premium amortization is recorded as an increase to additional paid-in capital. |
| (2) |
On January 10, 2019 in exchange for payment of accrued interest in the amount of $5,000, the Company was granted an extension of maturity date on Note H with Tangiers Investment Group until March 11, 2019. On March 11, 2019, we entered into a Forbearance Agreement with Tangiers investment Group to extend the forbearance period until June 11, 2019 in exchange for a $10,000 cash forbearance payment. The cash forbearance is recorded as a debt discount to be amortized to interest expense over the life of the agreement. |
| (3) |
On January 17, 2019 the Company issued a convertible promissory note with a face value of $75,000, maturing on January 17, 2020, and a stated interest of 10% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company's common stock, based on a conversion rate of 60% of the lowest trading price for the 25 days prior to conversion. The note was funded on January 25, 2019, when the Company received proceeds of $59,500, after disbursements for the lender's transaction costs, fees and expenses which in aggregate resulted in a total discount of $15,500 to be amortized to interest expense over the life of the note. Additionally, the note’s variable conversion rate component requires that the note be valued at its stock redemption value (i.e., “if-converted” value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the note’s undiscounted face value being deemed a premium to be added to the principal balance and amortized to additional paid-in capital over the life of the note. As such, the Company recorded a premium on the note of $148,214 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.14 per share (60% of the lowest trading price during the 25 days preceding the note's issuance), which computed to 892,857 shares of 'if-converted' common stock with a redemption value of $223,214 due to $0.250 per share fair market value of the Company's stock on the note's date of issuance. Debt discount amortization is recorded as interest expense, while debt premium amortization is recorded as an increase to additional paid-in capital. |
| (4) |
On February 4, 2019, in exchange for 5% of the original principal amount of the note (or $3,150) in cash we extended the maturity date of Note J to April 2, 2019. In addition, the Company agreed to pay a prepayment penalty of 10% of the original principal amount of the note (or $6,300) payable upon maturity of the extended note. |
| (5) |
On February 4, 2019, in exchange for 5% of the original principal amount of the note (or $6,250) in cash we extended the maturity date of Note I to April 2, 2019. In addition, the Company agreed to pay a prepayment penalty of 10% of the original principal amount of the note (or $12,500) payable upon maturity of the extended note. |
| (6) |
On February 5, 2019, the Company issued a convertible promissory note with a face value of $78,000, maturing on February 5, 2020, and a stated interest of 12% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company's common stock, based on a conversion rate of 58% of the average of 2 lowest trading prices for the 15 days prior to conversion. The note was funded on February 8, 2019, when the Company received proceeds of $70,300, after disbursements for the lender's transaction costs, fees and expenses which in aggregate resulted in a total discount of $7,700 to be amortized to interest expense over the life of the note. Additionally, the note’s variable conversion rate component requires that the note be valued at its stock redemption value (i.e., “if-converted” value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the note’s undiscounted face value being deemed a premium to be added to the principal balance and amortized to additional paid-in capital over the life of the note. As such, the Company recorded a premium on the note of $149,276 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.25 per share (58 % of the average of 2 lowest trading day prices during the 15 days preceding the note's issuance), which computed to 537,931 shares of 'if-converted' common stock with a redemption value of $227,276 due to $0.423 per share fair market value of the Company's stock on the note's date of issuance. Debt discount amortization is recorded as interest expense, while debt premium amortization is recorded as an increase to additional paid-in capital. |
| (7) |
On February 6, 2019 the Company issued a convertible promissory note with a face value of $65,000, maturing on February 6, 2020, and a stated interest of 10% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company's common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on February 7, 2019, when the Company received proceeds of $56,350, after disbursements for the lender's transaction costs, fees and expenses which in aggregate resulted in a total discount of $8,650 to be amortized to interest expense over the life of the note. Additionally, the note’s variable conversion rate component requires that the note be valued at its stock redemption value (i.e., “if-converted” value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the note’s undiscounted face value being deemed a premium to be added to the principal balance and amortized to additional paid-in capital over the life of the note. As such, the Company recorded a premium on the note of $107,250 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.25 per share (60% of the lowest trading price during the 20 days preceding the note's issuance), which computed to 433,333 shares of 'if-converted' common stock with a redemption value of $172,250 due to $0.398 per share fair market value of the Company's stock on the note's date of issuance. Debt discount amortization is recorded as interest expense, while debt premium amortization is recorded as an increase to additional paid-in capital. |
| (8) |
On February 9, 2019 in exchange for a $7,500 cash payment, we extended the conversion date of Note M from 180 days to 240 days. Additionally, the principal balance of the note shall increase by $15,000. |
(9) On February
13, 2019 the Company issued a convertible debenture with a face value of $50,000, maturing on February 13, 2022, to a third-party
investor. All unpaid principal due and payable on the maturity date is to be paid in the form of common stock of the Company. The
note is convertible at any time after 6 months of the funding of the note into a variable number of the Company's common stock,
based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on February
21, 2019, when the Company received proceeds of $35,900, after disbursements for the lender's transaction costs, fees and expenses
which in aggregate resulted in a total discount of $14,100 to be amortized to interest expense over the life of the note. Additionally,
the note’s variable conversion rate component requires that the note be valued at its stock redemption value (i.e., “if-converted”
value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the note’s undiscounted face value
being deemed a premium to be added to the principal balance and amortized to additional paid-in capital over the life of the note.
As such, the Company recorded a premium on the note of $74,800 as a reduction to additional paid-in capital based on a discounted
“if-converted” rate of $0.25 per share (60% of the lowest trading price during the 20 days preceding the note's issuance),
which computed to 333,333 shares of 'if-converted' common stock with a redemption value of $124,800 due to $0.374 per share fair
market value of the Company's stock on the note's date of issuance. Debt discount amortization is recorded as interest expense,
while debt premium amortization is recorded as an increase to additional paid-in capital.
| (10) |
On February 14, 2019 the Company issued a convertible promissory note with a face value of $100,000, maturing on February 14, 2020, and a stated interest of 10% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company's common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on February 15, 2019, when the Company received proceeds of $99,500, after disbursements for the lender's transaction costs, fees and expenses which in aggregate resulted in a total discount of $500 to be amortized to interest expense over the life of the note. Additionally, the note’s variable conversion rate component requires that the note be valued at its stock redemption value (i.e., “if-converted” value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the note’s undiscounted face value being deemed a premium to be added to the principal balance and amortized to additional paid-in capital over the life of the note. As such, the Company recorded a premium on the note of $140,333 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.25 per share (60% of the lowest trading price during the 20 days preceding the note's issuance), which computed to 666,666 shares of 'if-converted' common stock with a redemption value of $240,333 due to $0.361 per share fair market value of the Company's stock on the note's date of issuance. Debt discount amortization is recorded as interest expense, while debt premium amortization is recorded as an increase to additional paid-in capital. |
| (11) |
On February 19, 2019 the Company issued a convertible promissory note with a face value of $50,000, maturing on February 19, 2020, and a stated interest of 10% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company's common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on February 22, 2019, when the Company received proceeds of $43,200, after disbursements for the lender's transaction costs, fees and expenses which in aggregate resulted in a total discount of $6,800 to be amortized to interest expense over the life of the note. Additionally, the note’s variable conversion rate component requires that the note be valued at its stock redemption value (i.e., “if-converted” value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the note’s undiscounted face value being deemed a premium to be added to the principal balance and amortized to additional paid-in capital over the life of the note. As such, the Company recorded a premium on the note of $75,000 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.30 per share (60% of the lowest trading price during the 20 days preceding the note's issuance), which computed to 277,777 shares of 'if-converted' common stock with a redemption value of $125,000 due to $0.450 per share fair market value of the Company's stock on the note's date of issuance. Debt discount amortization is recorded as interest expense, while debt premium amortization is recorded as an increase to additional paid-in capital. |
| (12) |
On February 25, 2019 the Company issued a convertible promissory note with a face value of $68,000, maturing on February 25, 2020, and a stated interest of 12% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company's common stock, based on a conversion rate of 60% of the average of 2 lowest trading prices for the 15 days prior to conversion. The note was funded on February 27, 2019, when the Company received proceeds of $64,500, after disbursements for the lender's transaction costs, fees and expenses which in aggregate resulted in a total discount of $3,500 to be amortized to interest expense over the life of the note. Additionally, the note’s variable conversion rate component requires that the note be valued at its stock redemption value (i.e., “if-converted” value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the note’s undiscounted face value being deemed a premium to be added to the principal balance and amortized to additional paid-in capital over the life of the note. As such, the Company recorded a premium on the note of $58,974 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.33 per share (60% of the average of 2 lowest trading day prices during the 15 days preceding the note's issuance), which computed to 343,174 shares of 'if-converted' common stock with a redemption value of $126,974 due to $0.370 per share fair market value of the Company's stock on the note's date of issuance. Debt discount amortization is recorded as interest expense, while debt premium amortization is recorded as an increase to additional paid-in capital. |
| (13) |
On March 14, 2019 in exchange for a $2,500 cash payment, we extended the conversion date of Note N until May17, 2019. Additionally, the Company agrees to pay a prepayment penalty of an additional 10% of the original principal amount as additional consideration to the original prepayment schedule. |
| (14) |
On March 14, 2019, the Company issued a convertible promissory note with a face value of $610,000, maturing on March 14, 2020, and a stated interest of 9% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the company's common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on March 14, 2019, when the company received proceeds of $577,000, after disbursements for the lender's transaction costs, fees and expenses which in aggregate resulted in a total discount of $33,000 to be amortized to interest expense over the life of the note. Additionally, the note’s variable conversion rate component requires that the note be valued at its stock redemption value (i.e., “if-converted” value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the note’s undiscounted face value being deemed a premium to be added to the principal balance and amortized to additional paid-in capital over the life of the note. As such, the Company recorded a premium on the note of $1,300,101 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.33 per share (60% of the lowest trading price during the 20 days preceding the note's issuance), which computed to 3,080,808 shares of 'if-converted' common stock with a redemption value of $1,910,101 due to $0.620 per share fair market value of the Company's stock on the note's date of issuance. Debt discount amortization is recorded as interest expense, while debt premium amortization is recorded as an increase to additional paid-in capital. |
| (15) |
On March 25, 2019 we repaid convertible note “J” in the amount of $95,731 in principal and accrued interest. |
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|
| (16) |
On January 14, 2019, the Company entered into an agreement with ASKA Electronics Co., Ltd. (“ASKA”) of China. |
ASKA is a manufacturer of
Bluetooth headphones, sport earbuds and associated listening devices, and provides its products as an OEM and as an ODM for projects
worldwide.
Under the Agreement:
| ● |
ASKA will provide its design and manufacturing services in the capacity of a sub-contractor for the Company’s customers. |
| ● |
the Company will provide branding, sales and distribution services for existing and newly developed products that ASKA manufactures for sale in the North American market; |
| ● |
the Company will receive 2% of ASKA’s gross revenues resulting from the sales of ASKA’s products in North America, and |
| ● |
ASKA will receive up to 700,000 shares of the Company’s preferred shares, based on ASKA’s North American sales revenue for 2018 of approximately $14,000,000. |
The Agreement contemplates
the Company receiving a guaranteed minimum of $280,000 in gross profit for calendar year 2019.
Each Preferred Share is
convertible into one share of the Company’s common stock.
The Company, upon no less
than thirty days written notice, may redeem the Preferred Shares at a price of $2.00 per share.
The Preferred shares will
automatically convert into shares of the Company’s common stock if the Company’s common stock closes at a price of
$2.20 or more during any 30 consecutive trading days and if the average trading volume of the Company’s common stock during
such 30 consecutive trading days is at least 10,000 shares per day.
A “leak out provision”
will be established such that ASKA may not sell more than 100,000 shares per month with sales per trading day limited to no more
than 15% of the total trading volume that day.
The closing of the transaction
is subject to final Company board approval.
The Company has evaluated its subsequent events through the date
of this report issuance and determined there are no additional events to disclose.
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