XML 36 R13.htm IDEA: XBRL DOCUMENT

CONVERTIBLE NOTE

3 Months Ended

Mar. 31, 2020

NOTE 7 – CONVERTIBLE NOTE

7-1 AUCTUS FUND

On April 26, 2019, the Company entered into an agreement with Auctus Fund LLC. The terms and conditions are as follows:

The face value of the note is $110,000 at an interest rate of 12% and the maturity date is January 26, 2020. As of January 26, 2020, the Company is in default with the payments required by the note and is therefore subject to a default rate of 24%. At the time of the disbursement the Company received $97,250 net cash proceeds, as there was a deduction from proceeds to the Company of $2,750 for legal fees related to the issuance of the promissory note and a deduction of $10,000 as prepaid interest to the lender of which $1,111 was expensed in the current quarter. The repayment is a lump sum payment on the due date or is convertible into Company common stock at the discretion of the lender. The conversion, if chosen, will be at 50% of the two lowest trading days in the previous ten-day period prior to the date of conversion. This represents a discount of fifty percent (50%). The number of shares to be issued in the conversion will be calculated as follows: the average price of the two lowest trading days of the preceding the days will be multiplied by 0.50 ((to arrive at the discount factor) and then the resulting price will be divided into the principal and accrued interest resulting in the number of shares due. The lender agrees to limit the amount of stock received to less than 4.99% of the total outstanding common stock. There are also 440,000 warrants attached to this note with an exercise price of $0.25 and a life of 5 years.

The Company accounts for this conversion feature as a Beneficial Conversion Feature and has fully recognized the Beneficial Conversion Feature on inception. The fair value is calculated to be $110,000 for the expense portion of the note. This calculation is based on the current trading prices of the Company. Management has determined that this treatment, the expensing of the entire value of the note, is appropriate given the uncertain nature of the value of the Company and its stock. With this treatment there will be no revaluations until the note is paid or redeemed for stock.

The Company has accounted for the value of the warrants using the Black-Scholes model with a stock price of $0.38, volatility of 98%, risk free rate of 2.25% and a life of 5 years. Within these parameters the Company has recorded a warrant expense of $132,593.

During the quarter ended March 31, 2020 the lender exercised its right to convert $2,471 of accrued interest and $862 of principal into 2,387,795 shares of common stock of the Company.

As a result of these conversions the Company issued a total of 2,387,795 shares of its common stock and due to the difference between the trading price ant the value of the debt converted the Company recorded a loss of ($20,545). This is reported on the Statement of Income and Expense under the heading of “Loss on conversion of Notes Payable.”

7-2 GS CAPITAL PARTNERS

On November 1, 2019 the Company entered into a financing arrangement with GS Capital Partners LLC. The face value of the note is $70,000 at an interest rate of 10% and the maturity date is November 1, 2020. At the time of the disbursement the Company received $54,450 net cash proceeds, as there was a deduction from proceeds to the Company of $3,500 for legal fees related to the issuance of the promissory note, $6,000 as prepaid interest and $6,050 as a note placement expense. The repayment is a lump sum payment on the due date or is convertible into Company common stock at the discretion of the lender. The conversion, if chosen, will be at 50% of the two lowest trading days in the previous ten-day period prior to the date of conversion. This represents a discount of fifty percent (50%). The number of shares to be issued in the conversion will be calculated as follows: the average price of the two lowest trading days of the preceding the days will be multiplied by 0.50 (to arrive at the discount factor) and then the resulting price will be divided into the principal and accrued interest resulting in the number of shares due. The lender agrees to limit the amount of stock received to less than 4.99% of the total outstanding common stock. There are no warrants or options attached to this note.

7-3 ADAR ALEF

On November 4, 2019 the Company entered into a financing arrangement with Adar Alef, LLC. The face value of the note is $70,000 at an interest rate of 10% and the maturity date is November 1, 2020. At the time of the disbursement the Company received $54,450 net cash proceeds, as there was a deduction from proceeds to the Company of $3,500 for legal fees related to the issuance of the promissory note, $6,000 as prepaid interest and $6,050 as a note placement expense. The repayment is a lump sum payment on the due date or is convertible into Company common stock at the discretion of the lender. The conversion, if chosen, will be at 50% of the two lowest trading days in the previous ten-day period prior to the date of conversion. This represents a discount of fifty percent (50%). The number of shares to be issued in the conversion will be calculated as follows: the average price of the two lowest trading days of the preceding the days will be multiplied by 0.50 (to arrive at the discount factor) and then the resulting price will be divided into the principal and accrued interest resulting in the number of shares due. The lender agrees to limit the amount of stock received to less than 4.99% of the total outstanding common stock. There are no warrants or options attached to this note.

Upon issuance of the 2019 convertible notes, the Company recorded discounts of $229,922 against the notes’ face values, to be amortized ratably over the life of each note. The discounts initially consisted of $186,072 of beneficial conversion features, $9,750 of direct legal costs, $12,100 of placement costs and $22,000 of original issue discounts.

During the quarter ended March 31, 2020, the Company amortized the following to expense: $3,492 of legal fees, $3,008 of placement costs, $29,314 of beneficial conversion features and $3,929 of prepaid interest.

AMORTIZATION OF PREPAID INTEREST
OF CONVERTIBLE NOTES

									First
			Begin		End		2019		Quarter
	Prepaid		Date		Date		Amortize		2020		Balance
10-1 Auctus	$	10,000		4/26/2019		1/26/2020	$	9,054	$	946	$	—

10-2 GS Capital	$	6,000		11/1/2019		11/1/2020	$	984	$	1,500	$	3,516

10-3 Adar Alef	$	6,000		11/4/2019		11/4/2020	$	982	$	1,500	$	3,518

Totals							$	11,020	$	3,946	$	7,034