DERIVATIVE LIABILITIES

3 Months Ended

Mar. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE LIABILITIES

NOTE 15: DERIVATIVE LIABILITIES

On June 15, 2021 the Company issued a $400,000 promissory note to a director with a maturity date of December 12, 2021 (“the director note”). The director note did not bear interest however the director received two tranches of 18,750 shares of Common Stock each for lending this amount. Under the terms of the director note if the note was repaid by the maturity date, one of the two tranches of 18,750 shares was to be returned. The Company and the director extended the maturity date of this note to June 14, 2022, however the note was not repaid and the company was considered to be in default on the director note. On December 30, 2022, the director, the Company, and Evergreen Capital Management, LLC (“Evergreen”) signed a note purchase agreement (the “Evergreen note purchase”). In accordance with the Evergreen note purchase, Evergreen purchased the director note from the director, and the company issued 150,000 shares of its Common Stock to the director for a value of $17,555. Please See Note 13 – Stockholders’ equity (Deficiency). Pursuant to the Evergreen note purchase the Company exchanged the director note with Evergreen for a secured convertible promissory note (“Evergreen – 4”) which was issued on December 30, 2022 and has a maturity date of December 31, 2023.

On July 5, 2022, the Company entered into a 11% OID Senior Secured Promissory Note (the “GS Capital Note”) with GS Capital Partners LLC (“GS Capital”) in the amount of $144,000 (including a $14,000 Original Issue Discount). The GS Capital Note has a term of twelve months maturing on July 5, 2023. It accrues interest at a rate of 12% per year. The GS Capital Note also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is 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.

On February 12, 2021, the Company granted 25,000 warrants (the “Platinum Point Warrants”) that have a term of three-years and an exercise price of $16.00 to Platinum Point Capital, LLC. The warrants granted contain certain price protections, that make the value of the warrants a derivative liability. As a result of a separate issuance of warrants on September 17, 2021, the exercise price of the Platinum Point warrants was reduced to $11.60.

On March 3, 2023, the Company entered into a 20% OID Senior Secured Promissory Note (“Keystone – 1”) with Keystone Capital Partners. (“Keystone”) in the amount of $90,000 (including a $15,000 Original Issue Discount). Keystone – 1 has a maturity date of February 28, 2024. It accrues interest at a rate of 10% per year. Keystone - 1 also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability.

On March 21, 2023, the Company entered into a 20% OID Senior Secured Promissory Note (“Keystone – 2”) with Keystone Capital Partners. (“Keystone”) in the amount of $30,000 (including a $5,000 Original Issue Discount). Keystone – 2 has a maturity date of February 28, 2024. It accrues interest at a rate of 10% per year. Keystone - 2 also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability.

On March 14, 2023, the Company entered into a 20% OID Senior Secured Promissory Note (“Cavalry - 1”) with Cavalry Fund. (“Cavalry”) in the amount of $120,000 (including a $20,000 Original Issue Discount). Cavalry - 1 has a maturity date of February 28, 2024. It accrues interest at a rate of 10% per year. Cavalry - 1 also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability.

On February 16, 2023, the Company entered into a 20% OID Senior Secured Promissory Note (“Cavalry – 2”) with Cavalry Fund. (“Cavalry”) in the amount of $150,000 (including a $30,000 Original Issue Discount). Cavalry – 2 has a maturity date of February 28, 2024. It accrues interest at a rate of 10% per year. Cavalry - 2 also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability.

On March 14, 2023, the Company entered into a 20% OID Senior Secured Promissory Note (“Cavalry – 3”) with Cavalry Fund. (“Cavalry”) in the amount of $120,000 (including a $20,000 Original Issue Discount). Cavalry – 3 has a maturity date of February 28, 2024. It accrues interest at a rate of 10% per year. Cavalry - 3 also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability.

On February 14, 2023, the Company entered into a 20% OID Senior Secured Promissory Note (“Eleven 11 – 1”) with Eleven 11 Management LLC. (“Eleven 11”) in the amount of $60,000 (including a $10,000 Original Issue Discount). Eleven 11 – 1 has a maturity date of February 14, 2024. It accrues interest at a rate of 10% per year. Eleven 11 - 1 also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price shall be equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability.

On March 14, 2023, the Company entered into a 20% OID Senior Secured Promissory Note (“Eleven 11 – 2”) with Eleven 11 Management LLC. (“Eleven 11”) in the amount of $54,000 (including a $9,000 Original Issue Discount). Eleven 11 – 2 has a maturity date of February 28, 2024. It accrues interest at a rate of 10% per year. Eleven 11 - 2 also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability.

On October 21, 2022, the Company entered into a 20% OID Senior Secured Promissory Note (“Evergreen – 5”) with Evergreen Capital Management, LLC (“Evergreen”) in the amount of $48,000 (including a $8,000 Original Issue Discount). Evergreen - 5 has a maturity of twelve months to July 21, 2023. It accrues interest at a rate of 10% per year. Evergreen - 5 also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to 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 January 4, 2023, the Company entered into a 20% OID Senior Secured Promissory Note (“Evergreen – 6”) with Evergreen Capital Management, LLC (“Evergreen”) in the amount of $180,000 (including a $30,000 Original Issue Discount). Evergreen - 6 has a maturity of twelve months ending on January 4, 2024. It accrues interest at a rate of 10% per year. Evergreen - 6 also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability.

On February 14, 2023, the Company entered into a 20% OID Senior Secured Promissory Note (“Evergreen – 7”) with Evergreen Capital Management, LLC (“Evergreen”) in the amount of $12,000 (including a $2,000 Original Issue Discount). Evergreen - 7 has a maturity date of February 28, 2024. It accrues interest at a rate of 10% per year. Evergreen - 7 also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability.

On February 16, 2023, the Company entered into a 20% OID Senior Secured Promissory Note (the “Chambers Note”) with James D. Chambers Living Trust (“Chambers”) in the amount of $60,000 (including a $10,000 Original Issue Discount). The Chambers Note has a maturity of twelve months ending on February 28, 2024. It accrues interest at a rate of 10% per year. The Chambers Note also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability.

Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each warrant is estimated using the Black-Scholes valuation model. The following assumptions were used in March 31, 2022 and December 31, 2021:

	Three Months Ended March 31, 2023		Year Ended December 31, 2022
Expected term	0.87 – 0.05 years		1.00 – 1.00 years
Expected volatility	169.91 – 268.79	%	187.00 – 355.00	%
Expected dividend yield	0.00 – 0.00	%	0.00 – 0.00	%
Risk-free interest rate	3.98 – 4.78	%	1.65 – 4.73	%

The Company’s derivative liabilities are as follows:

	March 31, 2023		December 31, 2022
Fair value of the Evergreen 4 conversion option	$	66,775	$	58,917
Fair value of the GS Capital conversion option		74,859		157,676
Fair value of the Platinum Point warrants (25,000 warrants)		31,223		-
Fair value of the Keystone 1 conversion option		7,557,012		-
Fair value of the Keystone 2 conversion option		2,506,671		-
Fair value of the Calvary 1 conversion option		10,117,180		-
Fair value of the Calvary 2 conversion option		10,045,935		-
Fair value of the Calvary 3 conversion option		9,999,387		-
Fair value of the Eleven 11 - 1 conversion option		5,061,347		-
Fair value of the Eleven 11 – 2 conversion option		4,520,708		-
Fair value of the Evergreen 5 conversion option		40,928,831		-
Fair value of the Evergreen 6 conversion option		15,352,562		-
Fair value of the Evergreen 7 conversion option		1,012,268		-
Fair value of the Chambers conversion option		5,058,590		-
	$	112,333,348	$	216,593

Activity related to the derivative liabilities for the three months ended March 31, 2023 is as follows:

Beginning balance as of December 31, 2022	$	216,593
Issuances of warrants/conversion option – derivative liabilities		95,288,462
Extinguishment of derivative liability upon conversion/repayment of convertible notes		-
Change in fair value of warrants/conversion option - derivative liabilities		16,828,293
Ending balance as of March 31, 2023	$	112,333,348