Convertible Debentures and Notes Payable

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Convertible Debentures and Notes Payable

Note 5. Convertible Debentures and Notes Payable

Convertible Debentures

Convertible debentures consisted of the following at September 30, 2021:

Origination Date	Maturity Date	Interest Rate			Origination Principal Balance		Original Discount Balance			Period End Principal Balance		Period End Discount Balance			Period End Balance, Net		Accrued Interest Balance		Reg.
8/31/11	8/31/13		5	%		10,000		(4,286	)		-		-			-		-		(1	)
12/01/17	12/31/21		6	%		50,000		(12,500	)		-		-			-		-		(2	)
12/05/17	12/31/21		6	%		50,000		(12,500	)				-							(3	)
9/03/21	9/03/24		8	%		346,500		(12,355	)		346,500		(12,051	)		334,449		2,310		(4	)
9/03/21	9/03/24		8	%		3,500		(125	)		3,500		(122	)		3,378		23		(5	)
										$	350,000	$	(12,173	)	$	337,827	$	2,333

(1)

The Company borrowed $10,000 in exchange for a convertible debenture (the “Hoboken Convertible Note”). The holder at its option may convert all or part of the note plus accrued interest into common stock at a price of 30% discount as determined from the average four highest closing bid prices over the preceding five trading days. The Company valued the beneficial conversion feature of the convertible debenture at $4,286, which was accreted to interest expense over the period of the note. On February 22, 2021, this note and accrued interest of $4,777 were converted by the holder for 422,209 shares of common stock in accordance with the terms of the note.

(2)

On December 1, 2017, the Company entered into a $50,000 principal amount 6% secured convertible promissory note, initially due December 1, 2018, subject to extension. The note is secured with such assets of the Company equal to the principal and accrued interest, is guaranteed by the Company’s wholly-owned subsidiaries, Trebor and BHP and the personal guarantee of Mr. Carmichael.

The conversion price under the note initially ranged from $0.02 per share if converted in the first year to $0.125 per share if converted in year five. The lender may convert at any time until the note plus accrued interest is paid in full. Various other fees and penalties apply if payments or conversions are not done timely by the Company. The lender will be limited to maximum conversion of 9.99% of the outstanding common stock of the Company at any one time. In 2019, the maturity date of the note was extended for one additional year to December 31, 2019 with a reduction in the conversion price to $0.01 per share. The Company recorded a loss on extinguishment of debt of $32,000 upon the modification of conversion price. On June 10, 2021, this note and accrued interest of $10,554 were converted by the holder for 6,055,358 shares of common stock in accordance with the terms of the note.

(3)	On December 5, 2017, the Company entered into a $50,000 principal amount 6% secured convertible promissory note, initially due December 4, 2018, subject to extension. The note is secured with such assets of the Company equal to the principal and accrued interest, is guaranteed by the Company’s wholly-owned subsidiaries, Trebor and BHP and the personal guarantee of Mr. Carmichael.
	The conversion price under the note initially ranged from $0.02 per share if converted in the first year to $0.125 per share if converted in year five. The lender may convert at any time until the note plus accrued interest is paid in full. Various other fees and penalties apply if payments or conversions are not done timely by the Company. The lender will be limited to maximum conversion of 9.99% of the outstanding common stock of the Company at any one time. In 2019, the note was extended for one additional year to December 31, 2019 with a reduction in the conversion price to $0.01 per share. The Company recorded a loss on extinguishment of debt of $99,000 upon the modification of conversion price. The maturity date was further extended to December 31, 2021. On August 18, 2021, this note and accrued interest of $11,145 were converted by the holder for 6,114,516 shares of common stock in accordance with the terms of the note.
(4)	On September 3, 2021, the Company entered into a $346,500 note payable to Summit Holding V, LLC as part of the acquisition of SSI. The note carries 8% unsecured convertible promissory note, due September 3, 2024. Payments on the note are to be equivalent to 50% of the adjusted net profit of Submersible Systems, Inc. payable calendar quarterly. Interest is payable in company stock at the conversion price of $.051272 and shall be paid quarterly. The note holder may convert any outstanding principal and unpaid interest at a conversion rate of $.051272 at any time up to the maturity date of the note. The Company recorded $12,355 for the beneficial conversion feature.

(5) On September 3, 2021, the Company entered into a $3,500 note payable to Tierra Vista Partners, LLC as part of of the acquisition of SSI. The note carries 8% unsecured convertible promissory note, due September 3, 2024. Payments on the note are to be equivalent to 50% of the adjusted net profit of Submersible Systems, Inc. payable calendar quarterly. Interest is payable in company stock at the conversion price of $.051272 and shall be paid quarterly. The note holder may convert any outstanding principal and unpaid interest at a conversion rate of $.051272 at any time up to the maturity date of the note. The Company recorded $125 for the beneficial conversion feature.

Notes Payable

Gonzales Note

The Company issued an unsecured, non-interest-bearing note of $200,000 with Mr. Tom Gonzales on July 1, 2013. The note is payable upon demand. The Company made repayments totaling $40,000 during the nine months ended September 30, 2021, fully repaying the note. The note was paid in full as of September 30, 2021 and had a balance of $40,000 December 31, 2020.

Hoboken Note

The Company issued an unsecured, non-interest-bearing note of $10,000 with Hoboken Street Association on October 15, 2016. The note was forgiven as part of the conversion of the Hoboken Convertible Note on February 22, 2021 as described above. The company recorded a gain on settlement of debt of $10,000. The note balance as of September, 2021 and December 31, 2020 was $0 and $10,000, respectively.

Loan Payable

Marlin Note

On September 30, 2019 the Company, via its wholly owned subsidiary BLU3, executed an equipment finance agreement for the purchase of certain plastic molding equipment through Marlin Capital Solutions. The initial principal balance was $96,725 payable over 36 equal monthly installments of $3,144 (the “Marlin Note”). The equipment finance agreement contains customary events of default. The loan balance was $35,665 as of September 30, 2021

	Payment Amortization
2021 (3 months remaining)	$	8,570
2022		27,095
Total Loan Payments	$	35,665
Current portion of Loan payable		(35,665	)
Non-Current Portion of Loan Payable	$	-

Mercedes Benz Note

On August 21, 2020, the Company executed an installment sales contract with Mercedes Benz Coconut Creek for the purchase of a 2019 Mercedes Benz Sprinter delivery van. The installment agreement was for $55,841 with a zero interest rate payable over 60 months with a monthly payment of $931 and is personally guaranteed by Mr. Carmichael. The first payment was due on October 5, 2020. The loan balance as of September 30, 2021 is $44,673.

	Payment Amortization
2021 (3 months remaining)	$	2,793
2022	$	11,168
2023	$	11,168
2024	$	11,168
2025 and thereafter	$	8,376
Total note payments	$	44,673
Current portion of note payable	$	(11,168	)
Non-Current Portion of notes payable	$	33,505

Navitas Note

On May 19, 2021 the Company, via its wholly owned subsidiary BLU3, executed an equipment finance agreement financed for the purchase of certain plastic molding equipment through Navitas Credit Corp. (“Navitas”). The amount financed is $79,309 payable over 60 equal monthly installments of $1,611 (the “Navitas Note”). The equipment finance agreement contains customary events of default. The agreement was fully funded as of September 30, 2021.

	Payment Amortization
2021 (3 months remaining)	$	2,837
2022		12,974
2023		14,403
2024		15,991
2025		17,753
Balance		11,310
Total Note Payments	$	75,268
Current portion of Note payable		(12,676	)
Non-Current Portion of Note Payable	$	62,592

PPP Loan

On May 12, 2020, we received an unsecured loan from South Atlantic Bank in the principal amount of $159,600 (the “SBA Loan”), under the Paycheck Protection Program (“PPP”), which was established under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration. The intent and purpose of the PPP is to support companies, during the COVID-19 pandemic, by providing funds for certain specified business expenses, with a focus on payroll. As a qualifying business as defined by the SBA, we used the proceeds from this loan to primarily help maintain our payroll and cover our rent and utilities as we navigated our business through the lockdowns associated with the COVID-19 pandemic until our return to normal operations earlier in 2020.

The term of the note is two years, though it may be payable sooner in connection with an event of default under the note. The SBA Loan carries a fixed interest rate of one percent per year, and a monthly payment of $8,983, with the first payment due seven months from the date of initial cash receipt. Under the CARES Act and the PPP, certain amounts of loans made under the PPP may be forgiven if the recipients use the loan proceeds for eligible purposes, including payroll costs and certain rent or utility costs, and meet other requirements regarding, among other things, the maintenance of employment and compensation levels. We used the SBA Loan for qualifying expenses and have applied for forgiveness of the SBA Loan in accordance with the terms of the CARES Act. On April 28, 2021, the Company was notified by South Atlantic Bank that the SBA Loan was forgiven in full under the terms of the CARES Act. The company recorded the forgiveness as a gain on the forgiveness of the PPP loan of $159,600 on our condensed consolidated income statement.

The note balance as of September 30, 2021 and December 31, 2020 was $0 and $159,600, respectively.

PPP Loan – Submersible Systems, Inc.

On May 12, 2020, SSI received an unsecured loan from City National Bank in the principal amount of $116,160 (the “Submersible SBA Loan”), under the CARES act.

The term of the note is two years, though it may be payable sooner in connection with an event of default under the note. The Submersible SBA Loan carries a fixed interest rate of one percent per year, and a monthly payment of $6,925, with the first payment due seven months from the date of initial cash receipt. As part of the forgiveness application and directly related to the acquisition of SSI by the Company, SSI was required to place $121,953 in an escrow account until forgiveness is determined and City National Bank has been paid in full by the SBA. On October 15, 2021, the Company was notified by City National Bank that the Submersible SBA Loan was forgiven in full under the terms of the CARES Act. The restricted cash in escrow was released in full by the bank as a result of this forgiveness on November 8, 2021.

The note balance as of September 30, 2021 and December 31, 2020 was $116,160 and $0 respectively.