DEBT

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

DEBT

NOTE 6: DEBT

Loan Treaty Agreement

On December 21, 2020, the Company entered into a Loan Treaty Agreement with a third party (“Treaty Agreement”) whereby the lender agreed to provide a loan in the amount of up to $450,000 to the Company in $25,000 tranches, deposited weekly, memorialized by promissory notes in increments of $100,000. Each amount deposited has a term of 12 months for repayment and shall bear an interest rate of 8% per annum. In addition, at the option of the Lender, each $25,000 loaned to the Company may be converted into common shares at a 25% discount to the market price at the close of business on November 23, 2020 ($0.26 x 75% = $0.195); or $0.195 per share. Each $25,000 may be converted at the one-year anniversary of the date of the weekly deposit, unless the Company becomes a fully reporting company, at which time the holder may convert such debt to common shares in six months, or if the underlying shares are registered, conversion may occur upon Notice of Effect from the Securities and Exchange Commission. On April 1, 2021, the Company entered into an amendment to the Loan Treaty Agreement originally executed on December 21, 2020.  Under the terms of the amendment the lender agreed to fund an additional $1 million dollars over 90 business days in equal weekly tranches of $55,556. Each tranche may be converted under the same terms as the original loan treaty, or $0.195 per share, commencing the one-year anniversary of the date of the weekly deposit, unless the Company becomes a fully reporting company, at which time the holder may convert such debt to common shares in six months, or if the underlying shares are registered, conversion may occur upon Notice of Effect from the Securities and Exchange Commission.

During the fiscal year ended December 31, 2021, the Company received weekly tranche deposits for an aggregate of $1,100,000. The Company recorded $11,656,833 as the liability on stock settled debt associated with the tranches which amount is amortized over the terms of the notes.

During the six months ended June 30, 2022, the Company received a further $50,000 under this loan treaty. The Company recorded $360,258, as the liability on stock settled debt associated with the tranche which amount is amortized over the terms of the notes.

On October 27, 2021, the Company issued 2,051,282 shares of common stock to the lender in consideration for $400,000 in loans provided under the terms of the Treaty Agreement at $0.195 per share. A total of $250,000 remains to be funded under the terms of this Treaty Agreement.

The carrying value of funding tranches is as follows:

	June 30, 2022			December 31, 2021
Principal	$	800,000		$	750,000
Stock-settled liability		8,680,783			8,320,525
Total		9,480,783			9,070,525
Unamortized debt discount		(891,941	)		(4,067,059	)
Debt carrying value	$	8,588,842		$	5,003,466

The interest expenses for the funding tranches are as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Interest expense on notes	$	15,956	$	12,959	$	31,507	$	16,394
Amortization of debt discount		1,415,635		1,599,476		3,535,376		1,884,293
Total:	$	1,431,591	$	1,612,435	$	3,566,883	$	1,900,687

The accrued interest payable is as follows:

Balance, December 31, 2021	$	50,981
Interest expense on the convertible notes		31,507
Balance, June 30, 2022	$	82,488

Convertible Debt with Warrant Agreement

On November 11, 2021, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the principal amount of $560,000 for the purchase price of $504,000. The Term of the Note is twelve months with an interest rate of 12%. The conversion rate of the Note is fixed at $1.00 per share. The Company concurrently entered into a Warrant Agreement for the purchase of an additional 560,000 common shares at $1.00 per share for a term of three (3) years.

On December 16, 2021, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the principal amount of $560,000 for the purchase price of $504,000. The Term of the Note is twelve months with an interest rate of 12%. The conversion rate of the Note is fixed at $1.00 per share. The Company concurrently entered into a Warrant Agreement for the purchase of an additional 560,000 common shares at $1.00 per share for a term of three (3) years.

In accordance with ASC 470 – Debt, the proceeds in fiscal year 2021 of $1,008,000 was allocated based on the relative fair values of the convertible notes and the warrants of $504,027 and $503,973, respectively. The Warrant was valued at $503,973 and was recorded as a debt discount which is being amortized over the life of the Note. In addition, the Note had a beneficial conversion feature (BCF) in the amount of $616,027 which was recorded as a debt discount which is being amortized over the life of the Note. The debt discount totaled $1,120,000.

On April 4, 2022, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the principal amount of $365,000 for the purchase price of $328,500. The Term of the Note is twelve months with an interest rate of 12%. The conversion rate of the Note is fixed at $1.00 per share. The Company concurrently entered into a Warrant Agreement for the purchase of an additional 365,000 common shares at $1.00 per share for a term of three (3) years.

On May 23, 2022, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the principal amount of $440,000 for the purchase price of $396,000. The Term of the Note is twelve months with an interest rate of 12%. The conversion rate of the Note is fixed at $0.30 per share. The Company concurrently entered into a Warrant Agreement for the purchase of an additional 1,466,667 common shares at $0.30 per share for a term of three (3) years.

In accordance with ASC 470 – Debt, the proceeds in six months ended June 30, 2022, of $724,500 was allocated based on the relative fair values of the convertible notes and the warrants of $364,497 and $360,003, respectively. The Warrant was valued at $360,003 and was recorded as a debt discount which is being amortized over the life of the Note. In addition, the Note had a beneficial conversion feature (BCF) in the amount of $444,007 which was recorded as a debt discount which is being amortized over the life of the Note. The debt discount totaled $805,000.

During the six months ended June 30, 2022, the Company paid $281,000 in cash to settle a portion of the outstanding principal and $19,711 in cash to settle interest payable related to the December 16, 2021, convertible note.

The carrying value of the tranches is as follows:

	June 30, 2022			December 31, 2021
Principal	$	1,925,000		$	1,120,000
Repaid to principal		(281,000	)		-
Unamortized debt discount		(1,361,563	)		(1,047,626	)
Debt carrying value	$	282,437		$	72,374

The interest expenses related to the tranches are as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Interest expense on notes	$	46,021	$	-	$	79,161	$	-
Amortization of debt discount		432,133		-		491,063		-
Total:	$	478,154	$	-	$	570,224	$	-

The accrued interest payable is as follows:

Balance, December 31, 2021	$	13,440
Interest expense on the convertible notes		79,161
Repaid in cash		(19,711	)
Balance, June 30, 2022	$	72,890

During the six months ended June 30, 2022, the Company issued shares in respect to a Put notice (Note 10(5)) with a strike price of $0.095985 per share which triggered a dilutive issuance clause in the aforementioned Convertible Note agreements downward adjusting the conversion price per share to match the strike price.

Convertible Promissory Note

On June 3, 2022, the Company entered into a Convertible Promissory Note with an investor in which the investor agreed to lend the Company the principal amount of $160,000 for the purchase price of $156,250. The Term of the Note is twelve months with an interest rate of 10%. The conversion rate of the Note is as follows: 35% discount to the lowest bid price during the ten-day trading period prior to a notice of conversion.

The carrying value of this convertible promissory note is as follows:

	June 30, 2022			December 31, 2021
Principal	$	160,000		$	-
Stock-settled liability		86,154			-
Total		246,154			-
Unamortized debt discount		(81,795	)		-
Debt carrying value	$	164,359		$	-

The interest expenses for the convertible promissory note are as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Interest expense on note	$	1,797	$	-	$	1,797	$	-
Amortization of debt discount		8,109		-		8,109		-
Total:	$	9,906	$	-	$	9,906	$	-

The accrued interest payable is as follows:

Balance, December 31, 2021	$	-
Interest expense on the convertible note		1,797
Balance, June 30, 2022	$	1,797

SBA

On May 19, 2020, the Company received a long-term loan from U.S. Small Business Administration (SBA) in the amount of $44,000, upon the following conditions:

Payment: Installment payments, including principal and interest, of $215 monthly, will begin twenty-four (24) months from the date of the promissory note, or May 19, 2022. The balance of principal and interest will be payable Thirty (30) years from the date of the promissory note.

Interest: Interest accrues at the rate of 3.75% per annum and will accrue only on funds actually advanced from the date(s) of each advance.

Payment terms: Each payment will be applied first to interest accrued to the date of receipt of each payment, and the balance, if any, will be applied to principal; each payment will be made when due even if at that time the full amount of the loan has not yet been advanced or the authorized amount of the Loan has been reduced.

The interest expenses related to the SBA loan are as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Interest expense on notes	$	412	$	402	$	818	$	818

The accrued interest payable is as follows:

Balance, December 31, 2021	$	2,672
Addition: Interest expense		818
Balance, June 30, 2022	$	3,490

PPP funds

The Paycheck Protection Program (“PPP”) is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. SBA will forgive loans if all employee retention criteria are met, and the funds are used for eligible expenses. The loan may be forgiven in full if the funds are used for payroll costs, interest on mortgages, rent, and utilities (with at least 60% of the forgiven amount having been required to be used for payroll). Additional terms include:

● An interest rate of 1% per annum;

● Loans issued prior to June 5, 2020, have a maturity of 2 years, with loans issued thereafter having a maturity of 5 years;

● Loan payments are deferred for six months;

● No collateral or personal guarantees are required; and

● Neither the government nor lenders will charge small businesses any fees.

On May 14, 2020, the Company received PPP proceeds of $45,450. As of December 31, 2021, the Company paid $5,702 including $5,061 in principal and $641 in interest payable in respect of this loan.  The Company requested full loan forgiveness by submitting a request to the lender. The total loan principal amount of $45,450 with the interest amount of $641 was forgiven in full in the three months ended March 31, 2022. As a result, the Company recorded the full amount of $46,091 that had been received as other income.

Other Short-term loans

On January 5, 2018, GZMC entered into a loan agreement with National Funding Inc. whereby the Company acquired funding in the amount of $20,625.   The terms of the loan called for the Company to pay an origination fee of $412 and to repay $26,400 by way of 176 daily payments of $150.   As of June 30, 2022, and December 31, 2021, there was an outstanding amount of $3,768 due and payable on the loan, and the loan was in default.