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CONVERTIBLE NOTES PAYABLE

12 Months Ended

Dec. 31, 2022

NOTE 9: CONVERTIBLE NOTES PAYABLE

As of December 31, 2022 and 2021, the Company had the following convertible notes outstanding, all of which are current liabilities:

		December 31, 2022			December 31, 2021
Evergreen Capital Management LLC	(a)	$	48,000		$	1,440,000
GS Capital	(b)		112,021			-
Total Convertible Notes Payable		$	160,021		$	1,440,000
Less: Discounts			(96,240	)		(785,149	)
Convertible Notes Payable		$	63,781		$	654,851

(a)

On September 17, 2021, the Company entered into a 20% OID Senior Secured Promissory Note with Evergreen Capital Management LLC (the “Evergreen 1”) in the amount of $720,000 (includes $120,000 of Original Issue Discount). The Evergreen 1 had a maturity of nine months to June 17, 2022. The Evergreen 1 accrued interest at a rate of 10% per year. The conversion price of Evergreen 1 was the lower of (a) $11.60 (“Fixed Conversion Price”) or (b) upon the occurrence and during the continuation of any Event of Default, if lower, 90% of the average of the two lowest VWAPs for the five (5) consecutive Trading Day that is immediately prior to the applicable Conversion Date (the “Default Conversion Price”). There were certain price protections for Evergreen Capital Management LLC under the terms of Evergreen 1, which made the conversion option a derivative liability. The Company has not repaid this note as of the maturity date and is currently in negotiations with Evergreen Capital Management LLC on revised terms. As a result, this note was in default and subject to the Default Conversion Price. The Company granted 62,069 warrants that have a term of five-years and an exercise price of $11.60 per share with Evergreen 1. The warrants granted with Evergreen 1 also contained certain price protections, that made the value of the warrants a derivative liability. As a commission on this note, the Company granted to the investment bankers, 4,966 warrants with the same terms as the Evergreen Capital Management warrants. The Company recognized a commission expense of $37,977 on these warrants.

On October 8, 2021, the Company entered into a 20% OID Senior Secured Promissory Note in the amount of $480,000 (includes $80,000 of Original Issue Discount) with Evergreen Capital Management LLC (the “Evergreen 2”). The Evergreen 2 had a maturity of nine months to July 8, 2022. The Evergreen 2 accrued interest at a rate of 10% per year. The conversion price of Evergreen 2 was the lower of (a) $11.60 (“Fixed Conversion Price”) or (b) upon the occurrence and during the continuation of any Event of Default, if lower, 90% of the average of the two lowest VWAPs for the five (5) consecutive Trading Day that is immediately prior to the applicable Conversion Date (the “Default Conversion Price”). There were certain price protections for Evergreen Capital Management LLC under the terms of Evergreen 2, which made the conversion option a derivative liability. The Company had not repaid this note as of the maturity date and was in negotiations with Evergreen Capital Management LLC on revised terms. As a result, this note was in default and subject to the Default Conversion Price. The Company granted 41,379 warrants that have a term of five-years and an exercise price of $11.60 per share with Evergreen 2. The warrants granted with Evergreen 2 also contained certain price protections, that made the value of the warrants a derivative liability.

As a commission on this note, the Company granted to the investment bankers, 3,310 warrants with the same terms as the Evergreen Capital Management warrants. The Company recognized a commission expense of $9,695 on these warrants.

On October 15, 2021, the Company entered into a 20% OID Senior Secured Promissory Note in the amount of $240,000 (includes $40,000 of Original Issue Discount) with Evergreen Capital Management LLC (the “Evergreen 3”). The Evergreen 3 had a maturity of nine months to July 15, 2022. The Evergreen 3 accrued interest at a rate of 10% per year. The conversion price of Evergreen 3 was the lower of (a) $11.60 (“Fixed Conversion Price”) or (b) upon the occurrence and during the continuation of any Event of Default, if lower, 90% of the average of the two lowest VWAPs for the five (5) consecutive Trading Day that is immediately prior to the applicable Conversion Date (the “Default Conversion Price”). There were certain price protections for Evergreen Capital Management LLC under the terms of Evergreen 3, which made the conversion option a derivative liability. The Company had not repaid this note as of the maturity date and was in negotiations with Evergreen Capital Management LLC on revised terms. As a result, this note was in default and subject to the Default Conversion Price. The Company granted 20,690 warrants that have a term of five-years and an exercise price of $11.60 per share with Evergreen 3. The warrants granted with Evergreen 3 also contained certain price protections, that made the value of the warrants a derivative liability.

As a commission on this note, the Company granted to the investment bankers, 1,655 warrants with the same terms as the Evergreen Capital Management warrants. The Company recognized a commission expense of $5,756 on these warrants.

As of June 17, 2021, the Evergreen 1 note is in default as the Company has not repaid the note. Both Evergreen 2 and Evergreen 3 through July 15, 2022 are also in default as the Company has not repaid these notes by the maturity date. As these notes are in default, these notes are subject to the default interest rate of 24%.

On October 21, 2022, the Company entered into a 20% OID Senior Secured Promissory Note with Evergreen Capital Management, LLC (“Evergreen”) in the amount of $48,000 (includes $8,000 of Original Issue Discount). Evergreen has a maturity of twelve months to July 21, 2023. It accrues interest at a rate of 10% per year. The conversion price shall be equal 75% of the price per share at which the common stock of the Company is sold to the public in a qualified offering. There are certain price protections, which make the conversion option a derivative liability.

On December 31, 2022, the total outstanding principal and accrued interest balance of $2,051,904 was converted into 175,135 shares of the Company’s Series B Preferred Stock and 1,613,106 shares of the Company’s common stock.

Interest expense on these notes for years ended December 31, 2022 and 2021 is $570,480 and $78,247, respectively. Amortization of debt and original issue discounts was $799,354 and $629,759 for the years ended December 31, 2022 and 2021, respectively.

(b)

On July 5, 2022, the Company entered into a 11% OID Senior Secured Promissory Note with GS Capital Partners LLC (the “GS Capital”) in the amount of $144,000 (includes $14,000 of Original Issue Discount). The GS Capital has a maturity of twelve months to July 5, 2023. It accrues interest at a rate of 12% per year. The conversion price Subject to the adjustments described herein, the conversion price (the “Conversion Price”) shall be equal to 86% of the lowest trading price of the Company’s Common Stock for the 12 Trading Days immediately preceding the delivery of a notice of conversion. There are certain price protections, which make the conversion option a derivative liability.