XML 49 R11.htm IDEA: XBRL DOCUMENT

Convertible Notes Payable

12 Months Ended

Dec. 31, 2019

NOTE 5 – CONVERTIBLE NOTES PAYABLE

As long as the following convertible notes remain outstanding, the Company cannot amend its charter in any matter that materially effects rights of noteholders, repay or repurchase more than de minimis number of shares of common stock other than conversion or warrant shares, repay or repurchase all or any portion of any indebtedness, or pay cash dividends.

Auctus Note #1

On October 24, 2018 (the "Date of Issuance") the Company issued a convertible promissory note (the "Auctus Note #1") with a face value of $250,000, maturing on October 23, 2019, and a stated interest of 8% to a third-party investor. The Auctus Note #1 is convertible into common stock of the Company, par value $.001 per share (the "Common Stock") at any time after the earlier of: (i) 180 days from the date of the Auctus Note #1, or (ii) upon effective date of a registration statement. The conversion price of the Auctus Note #1 is equal to the lesser of: (i) the lowest trading price for the twenty-day period prior to the date of the Auctus Note #1 or (ii) 65% of the average of the three lowest trading prices during the twenty days prior to a conversion notice on the applicable trading market or the closing bid price on the applicable trading market. The Auctus Note #1 was funded on October 29, 2018, when the Company received proceeds of $222,205, after disbursements for the lender's transaction costs, fees and expenses which in aggregate resulted in a total discount of $27,795 to be amortized to interest expense over the life of the Auctus Note #1.

Additionally, the variable conversion rate component requires that the Auctus Note #1 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 undiscounted face value being deemed a premium to be added to the principal balance and accreted to additional paid-in capital over the life of the Auctus Note #1. As such, the Company recorded a premium of $343,796 as a reduction to additional paid-in capital based on a discounted "if-converted" rate of $0.20 per share (lowest trading price during the 20 days preceding the note's issuance), which computed to 1,211,828 shares of 'if-converted' common stock with a redemption value of $593,796 due to $0.49 per share fair market value of the Company's stock on the Auctus Note #1's date of issuance. Debt discount amortization is recorded as interest expense, while debt premium accretion is recorded as an increase to additional paid-in capital. For the year ended at December 31, 2019, the Company amortized $20,853 debt discount to operations as interest expense, and accreted $306,820 of premium to additional paid-in capital. For the year ended December 31, 2018, the Company amortized $5,173 debt discount to operations as interest expense.

Along with the Auctus Note #1, on the Date of Issuance the Company issued 208,333 Common Stock Purchase Warrants (the "Warrants"), exercisable immediately at a fixed exercise price of $0.60 with an expiration date of October 23, 2023. The Company has determined that the Warrants are exempt from derivative accounting and were valued at $101,937 on the Date of Inception using the Black Scholes Options Pricing Model. Assumptions used for the Black Scholes Options Pricing Model include (1) stock price of $0.49 per share, (2) exercise price of $0.60 per share, (3) term of 5 years, (4) expected volatility of 251% and (5) risk free interest rate of 2.51%. The note proceeds of $250,000 were then allocated between the fair value of the Auctus Note #1 ($250,000) and the Warrants ($101,937), resulting in a debt discount of $72,412. As the warrants were exercisable immediately, this debt discount was amortized in its entirety to interest expense on the Date of Issuance.

The Auctus Note #1 was payed-off at Maturity on 10/24/2019.

Auctus Note #2

On February 25, 2019, the Company entered into a $250,000 Senior Secured Promissory Note ("the Auctus Note #2"), dated February 25, 2019 at an interest rate of 8% per annum, maturing on February 24, 2020 (the "Maturity Date"). Issuance fees totaling $27,750 were recorded as a debt discount, resulting in net proceeds of $222,250. The Auctus Note #2 is convertible into common stock of the Company, par value $.001 per share (the "Common Stock") at any time after the earlier of: (i) 180 days from the date of the Auctus Note #2 or (ii) upon effective date of a new registration statement. The conversion price of the Auctus Note #2 is equal to the lesser of: (i) the lowest trading price for the twenty-day period prior to the date of the Auctus Note #2 or (ii) 65% of the average of the three lowest trading prices during the twenty days prior to a conversion notice on the applicable trading market or the closing bid price on the applicable trading market. The Company may prepay the Auctus Note #2 at any time at a rate of 120% of outstanding principal and interest during the first 90 days it is outstanding and 130% of outstanding principal and interest for the next 90 days thereafter. Thereafter the prepayment amount increases 5% for each thirty-day period until 270 days from the issue date at which time it is fixed at 150% of the outstanding principal and interest on the Auctus Note #2.

Additionally, the variable conversion rate component requires that the Auctus Note #2 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 undiscounted face value being deemed a premium to be added to the principal balance and accreted to additional paid-in capital over the life of the Auctus Note #2. As such, the Company recorded a premium of $82,500 as a reduction to additional paid-in capital based on a discounted "if-converted" rate of $0.20 per share (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 $332,500 due to $0.266 per share fair market value of the Company's stock on the Auctus Note #2's date of issuance. Debt discount amortization is recorded as interest expense, while debt premium accretion is recorded as an increase to additional paid-in capital. For the year ended at December 31, 2019, the Company amortized $16,271 debt discount to operations as interest expense, and accreted $16,949 of premium to additional paid-in capital.

Along with the the Auctus Note #2, on the Date of Issuance the Company issued 208,333 Common Stock Purchase Warrants (the "Warrants"), exercisable immediately at a fixed exercise price of $0.60 with an expiration date of February 24, 2024. The Company has determined that the Warrants are exempt from derivative accounting and were valued at $55,417 on the Date of Inception using the Black Scholes Options Pricing Model. Assumptions used for the Black Scholes Options Pricing Model include (1) stock price of $0.27 per share, (2) exercise price of $0.60 per share, (3) term of 5 years, (4) expected volatility of 358% and (5) risk free interest rate of 2.48%. The Auctus Note #2 proceeds of $250,000 were then allocated between the fair value of the Auctus Note #2 ($250,000) and the Warrants ($55,417), resulting in a debt discount of $45,361. As the warrants are exercisable immediately, this debt discount was amortized in its entirety to issuance of warrants (other expenses) on the Date of Issuance.

In the period October 23, 2019 through December 30, 2019, the Company entered into five separate Secured Promissory Note Agreements ("SPA") with a face value of $636,900, and received net proceeds of $572,000. The Notes are convertible into common stock of the Company, par value $.001 per share (the "Common Stock") at any time after the earlier of: (i) 180 days from the date of the Note or (ii) upon effective date of a registration statement. The conversion price of the Notes is equal to 65% of the lowest trading price at close during the twenty days prior to a conversion notice. The debt discount of $64,900 is amortized over the duration of the loans. The Debentures permit the Company to pre-pay its obligations at a premium prior to maturity.

Further, the Company issued five-year warrants with cashless exercise provisions to purchase a total of 200,000 shares of Common Stock of the Company at an exercise price of $2.00 per share with cashless exercise provisions to four of the Lenders. The Company has determined that the Warrants are exempt from derivative accounting. The note proceeds of $636,900 were then allocated between the fair value of the Notes ($636,900) and the Warrants ($103,200), resulting in a debt discount of resulting in a fully amortized debt discount of $84,568. As the warrants were exercisable immediately, this debt discount was amortized in its entirety to interest expense on the Date of Issuance.

A summary of the outstanding notes at December 31, 2019, are as follows:

Debtor	Date of Issuance		Maturity Date	Principal Amount		Net Received			Interest			Warrants Issued		Term		Exercise Price		Amortization of Warrants		Debt Discount
Auctus Note #2		02/25/2019	02/25/2020	$	250,000	$	222,250			8	%		208,333		5	$	0.60	$	45,361	$	27,795
GS Capital		10/30/2019	10/30/2020		125,000		109,500			4	%		50,000		5		2.00		23,867		15,500
Power Up		10/24/2019	10/23/2020		106,000		100,000			8	%		-		-		-		-		6,000
Peak One		10/23/2019	10/22/2022		120,000		103,000			0	%		50,000		5		2.00		21,606		17,000
Tangiers		10/23/2019	10/22/2020		106,300		100,000			8	%		50,000		5		2.00		21,116		6,300
FirstFire		11/20/2019	11/20/2020		125,000		109,500			4	%		50,000		5		2.00		17,979		15,500
Power Up		12/30/2019	12/30/2020		54,600		50,000	*		8	%		-		-		-		-		4,600
				$	886,900	$	794,250						408,333					$	129,929	$	92,695

Deposit in transit

Convertible notes payable consists of the following at December 31, 2019 and December 31, 2018:

	December 31, 2019			December 31, 2018
Principal balance	$	886,900		$	250,000
Unamortized debt discount		(60,038	)		(22,622	)
Unamortized debt premium		24,121			-
Outstanding, net of debt discount and premium	$	850,983		$	227,378