NOTE 9 - NOTES PAYABLE TO THIRD PARTIES

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

(9) NOTES PAYABLE TO THIRD PARTIES

(9) NOTES PAYABLE TO THIRD PARTIES

Notes Payable consist of:

						Look	Balance
Inception	Issue	Maturity		Interest	Conversion	Back	June 30,	December
Amount	Date	Date	OID	Rate	Price	Period	2020	31, 2019
a) Sale of Future Receivables
	various	various	-	-	-	-	$ 267,608	$ 309,311
b) Notes
$ 25,903	10/1/18	6/4/20	-	17%	-	-	-	3,372
$ 4,100	10/22/18	10/22/20	-	-	-	-	-	2,327
$ 14,800	6/5/18		-	-	-	-	8,505	10,219
$ 100,000	4/10/19	4/10/20	-	20%	-	-	104,603	114,630
							$ 113,108	$ 130,548
c) Convertible Notes - Variable Conversion Rate
$ 30,000	6/14/17	12/14/17	-	10%	35%	3 days	34,597	33,600
$ 50,000	4/16/19	1/16/20	10%	12%	45%	20 days	330	330
$ 153,000	5/28/19	5/24/20	-	12%	45%	20 days	39,543	72,105
$ 118,750	6/24/19	3/17/20	-	12%	50%	25 days	105,374	123,868
$ 50,000	6/28/19	3/27/20	10%	12%	45%	20 days	47,659	49,427
$ 50,000	6/28/19	3/27/20	10%	12%	45%	20 days	51,992	57,652
$ 50,000	6/28/19	3/27/20	10%	12%	45%	20 days	61,300	57,779
$ 103,000	7/1/19	6/27/20	-	12%	45%	20 days	115,394	109,197

						Look	Balance
Inception	Issue	Maturity		Interest	Conversion	Back	June 30,	December
Amount	Date	Date	OID	Rate	Price	Period	2020	31, 2019
c) Convertible Notes - Variable Conversion Rate, continued
$ 108,000	7/5/19	6/30/20	11.11%	12%	45%	20 days	129,438	132,699
$ 103,000	7/10/19	7/10/20	10%	8%	45%	20 days	96,255	121,862
$ 75,000	8/7/19	5/7/20	-	12%	50%	10 days	77,046	73,600
$ 70,000	8/7/19	5/7/20	12%	12%	40%	20 days	83,088	77,172
$ 90,000	8/8/19	8/8/20	-	10%	43%	20 days	92,938	96,914
$ 135,000	8/12/19	7/10/20	11%	8%	45%	20 days	162,352	160,160
$ 53,000	10/31/19	8/15/20	-	12%	45%	20 days	56,351	53,709
$ 18,235	12/13/19	12/13/20	9%	10%	35%	25 days	19,696	18,394
Subtotal Convertible Notes - Variable Conversion Rate							1,167,895	1,238,468
Less unamortized discounts							(49,870)	(553,646)
Net Convertible Notes - Variable Conversion Rate							$ 1,118,025	$ 684,822
d) Convertible Notes - Fixed Conversion Rate
$ 87,522	7/3/18	12/31/20	-	12%	$0.0035	-	23,358	22,039
$ 54,445	7/10/18	12/31/21	-	8%	$0.0035	-	61,500	59,406
$ 33,504	8/10/18	12/31/21	-	12%	$0.0035	-	39,465	37,551
$ 80,044	8/7/19	12/31/21	-	12%	$0.0035	-	39,664	37,866
$ 100,000	4/10/19	4/10/20	-	20%	$.05	-	104,603	114,630
Subtotal Convertible Notes - Fixed Conversion Rate							268,590	271,492
Less unamortized discounts							(4,196)	(76,465)
Net Convertible Notes - Variable Conversion Rate							$ 264,394	$ 195,027
e) Note of Wholly Owned Subsidiary
$ 375,000	3/5/15	12/5/15	-	18%	-	-	$ 538,896	$ 438,220

a) Future Receivables Sale Agreements

The Company, through Nixon Restaurant Group, Inc, J&F Restaurants, LLC, Illegal Burger, LLC, Illegal Burger Writer Square, LLC, Illegal Burger Capitol Hill, LLC and Illegal Burger CitiSet, LLC entered into several agreements at various times to obtain advances against future restaurant credit/debit card sales. The agreements provide for funding of various percentages of future qualified credit/debit merchant card receivables. Proceeds received from sales of future receivables during 2019 and 2018 totaled $415,000 and $140,000, respectively. At June 30, 2020 and December 31, 2019, the total payable balances inclusive of interest under the factoring agreements were $499,353 and $450,258, respectively.

b) One Year Note

In April 2019, the Company entered into a one year note for $100,000 with a third party. This note carries a 20% interest rate and is collateralized by a second mortgage on the founder and CEO’s residence. The loan balance, including interest, was $104,603 at June 30, 2020. In June 2020, the lender agreed to extend the maturity one year in exchange for the Company paying the first year accrued interest of $20,000.

c) Convertible Notes - Variable Conversion

In the fourth quarter 2019, the Company entered into two convertible notes in exchange for $73,000 in cash with a principal amount of $73,000. Based on the variable conversion terms the beneficial conversion rights embedded in these convertible notes were recorded as a derivative liability in the amount of $73,000 with a related debt discount of $73,000.

In the third quarter 2019, the Company entered into six convertible notes in exchange for $567,000 in cash with a principal amount of $609,400. Based on the variable conversion terms the beneficial conversion rights embedded in these convertible notes were recorded as a derivative liability in the amount of $960,354 with a related debt discount of $609,400, and an immediate loss of $281,945.

In the third quarter 2019, the Company paid off three convertible notes in cash in the amount of $472,093.

In the second quarter 2019, the Company entered into nine convertible notes in exchange for $591,000 in cash with a principal amount of $669,000. Based on the variable conversion terms the beneficial conversion rights embedded in these convertible notes were recorded as a derivative liability in the amount of $891,345 with a related debt discount of $602,580, and an immediate loss of $291,355.

In the second quarter 2019, the Company paid off three convertible notes in cash in the amount of $504,812.

In the first quarter 2019, the Company entered into five convertible notes in exchange for $424,000 in cash. Based on the variable conversion terms the beneficial conversion rights embedded in these convertible notes were recorded as a derivative liability in the amount of $467,348 with a related debt discount of $432,166, and an immediate loss of $35,182.

In the first quarter 2019, the Company paid off two convertible notes in cash in the amount of $101,181.

In the fourth quarter 2018, the Company entered into two convertible notes in exchange for $238,000 in cash. Based on the variable conversion terms the beneficial conversion rights embedded in these convertible notes has been recorded as a derivative liability in the amount of $189,380, with a related debt discount of $138,000, and an immediate loss of $51,380. These notes were settled in 2019.

In the third quarter 2018, the Company entered into two convertible notes in exchange for $68,000 in cash. Based on the variable conversion terms the beneficial conversion rights embedded in these convertible notes has been recorded as a derivative liability in the amount of $151,769, with a related debt discount of $68,000, and an immediate loss of $83,763. These notes were settled in 2019.

In the first quarter 2018, the Company entered into three convertible notes in exchange for $280,000 in cash. Based on the variable conversion terms the beneficial conversion rights embedded in these convertible notes has been recorded as a derivative liability in the amount of $306,000, with a related debt discount of $306,000. These notes were settled in 2018, and which included a penalty of $40,528.

d) Convertible Notes - Fixed Conversion

In the third quarter 2019, the Company entered into one convertible note in exchange for $108,000 in cash with a note amount of $120,000. Based on the conversion terms the beneficial conversion rights embedded in this convertible note was recorded as a debt discount in the amount of $28,800.

In the second quarter 2019, the Company entered into one convertible note in exchange for $100,000 in cash. This note matures in one year and carry a 20% interest rates. The note converts into shares of the Company’s common stock at a price of $0.04 per share of Common Stock from October 10, 2019 to maturity. At maturity it is convertible at $0.05 per share as long as Company’s Volume Weighted Average Price, (“VWAP”) for the ten trading days prior to the conversion notice is greater than $0.07 per share. If the VWAP is below $0.07, then the conversion formula is $0.05xVWAP/$0.07. Based on the conversion terms the beneficial conversion rights embedded in this convertible note was recorded as a debt discount in the amount of $56,250 and is being amortized over the life of the loan. In June 2020, the lender agreed to extend the maturity one year in exchange for the Company paying the first year accrued interest of $20,000.

During the third quarter of 2018, two parties related to each other purchased, through assignment, three of the variable conversion price convertible notes then outstanding. These parties immediately amended the notes into four notes to replace the variable conversion rate with a fixed conversion rate of $0.0035 per share of the Company’s common stock. The maturity dates of the three notes were extended to December 31, 2020 and 2021. During 2019, $82,831 of these notes were converted into 23,665,964 shares of common stock. The aggregate remaining balance outstanding of these notes at December 31, 2019 is $156,862.

During the fourth quarter of 2018, one of the parties that purchased one of the variable conversion price convertible notes assigned $50,000 of their note to a third party for $50,000 in cash. This new party immediately amended the assigned note portion to a fixed conversion rate of $0.01 per share of the Company’s common stock. The maturity date of this note was extended to December 31, 2021. During the second and third quarters of 2019 this note was converted into 5,000,000 shares of common stock, and the balance of this note is $0 at December 31, 2019.

In the fourth quarter 2018, the Company entered into a convertible note in exchange for $100,000 in cash. This note matures in two years and carries a 10% Original Issue Discount (OID). The note converts into shares of the Company’s common stock at a price of $0.05 per share. In the second quarter 2019, this note was paid in full in cash. The balance of this note is $0 at December 31, 2019.

e) Third Party Note Payable with Subsidiary

In March 2015, the Company entered into an agreement with a third party lender, who extended a $3,000,000 Senior Secured Note. Under the terms of this agreement a first draw was entered into in the amount of $375,000 as a Revolving Note. The lender retained $59,713 of this draw as fees. Under the terms of this Note, the Company was required to replace their credit card/debit card merchant processing to the lender. The lender retained 100% of the credit card/debit card transactions, and forwarded four wire transfers to the Company over a six week period. The credit card/debit card transactions for this six week period amounted to $84,534. The lender remitted $42,379 of this amount to the Company. Of the $42,155 retained by the lender, $14,861 was applied as principal reduction, $7,088 was applied to interest expense and the remaining $20,206 was charged as fees. The Senior Secured Note also called for the payment of a $75,000 investment banking fee.

In May 2015, when it was determined that this repayment structure was not practical for a restaurant operation, the lender agreed to restructure the Revolving Note into a Replacement Promissory Note. This Replacement Promissory Note carries interest at a stated rate of 18% with a maturity of June 1, 2016. The lender charged the Company a $25,000 penalty to convert the Revolving Note into a Replacement Promissory Note. The Replacement Promissory Note called for interest only payments in June, July and August 2015. Starting in September the terms called for the payment of interest, principal starting at $33,649 increasing monthly to $38,474 in June 2016, as the interest on the then outstanding balance fell. In addition, the Replacement Promissory Note called for the payment of a $106,000 Redemption Premium as part of the total monthly payment of $49,651. As a direct result of delays in opening the new Writer Square location, the lender agreed to interest only payments via ACH draft every Monday. In June 2015, the Company paid $1,080 per week, which was increased to $1,200 per week for July 1 through October 15, 2015. It was then increased to $1,500 per week from October 16, 2015 through the third week of March 2016, when it was increased to $2,000 per week.

At both March 31, 2020 and December 31, 2019, the principal balance of the loan was $322,220. The Company also accrued the $25,000 conversion penalty, the $75,000 investment banking fee and the $106,000 redemption premiums as accrued interest because the Replacement Promissory Note allows for prepayment but all these “Fees” are due upon prepayment. In October 2018, the lender filed a claim demanding repayment of all amounts outstanding in the amount of $565,267. (See Note 16a)

f) Third Party Notes Payable

Certain third parties have advanced funds to WCVC to fund its ongoing operations. These advances have been formalized into demand notes payable, which, at September 30, 2017, amount to $54,039 and carry a 5% interest rate. WCVC has a $250,000 note payable which is due in April 2018 and carries a 5% interest rate. These liabilities have been incorporated into liabilities from discontinued operations.

g) US Small Business Administration Paycheck Protection Program (PPP)

In April 2020, the Company received a loan of $298,700 under the SBA’s PPP. Depending upon the final determination of the requirements for forgiveness under this program, the Company expects its PPP loan to be substantially to wholly forgiven. Any amount not forgiven becomes a two year loan at 1% interest.

h) US Small Business Administration Economic Injury Disaster Loans (EIDL)

In May 2020, the Company, through one of its operating LLC subsidiaries, received a SBA EIDL in the amount of $21,900. In June 2020, the Company, through five of its operating LLC subsidiaries received five SBA EIDL in the total amount of $747,500 and EIDL Grants totaling $36,000. The EIDL are 30 year loans carrying a 3.25% interest rate with the first payment due in June 2021. The Grants do not get repaid.