Notes Payable

6 Months Ended

Jun. 30, 2024

Debt Disclosure [Abstract]

Notes Payable

6. Notes Payable

Notes payable consists of the following:

Schedule of notes payable
	March 31, 2024			December 31, 2023
Convertible promissory note	$	290,000		$	290,000
Promissory notes		30,000			30,000
Subtotal		320,000			320,000
Less current portion		(320,000	)		(320,000	)
Long-term portion	$	–		$	–

10% Convertible Promissory Note

On November 10, 2021 (the “Issue Date”), we entered into a Securities Purchase Agreement (the “SPA”) with a third party (the “Lender”), for the purchase of a Convertible Promissory Note (the “Note”) in the principal amount of $290,000. The Note carries an original issue discount of $29,000 along with a requirement to pay $16,550 in expenses. The total of $45,550 has been recorded as original issue discount. As a result, we were provided $244,500 upon the Note’s execution. The Note was to mature on May 10, 2022, subject to a six-month extension at our Company’s request. The Note accrued interest at 10% per annum from the Issue Date with monthly interest payments being due at the beginning of each month. In the event the Note was extended for six months, the interest accrual would adjust to 12% per annum and, in the event of a default, interest will accrue at 20% per annum. The Note is secured by all of our Company’s assets.

In addition to the issuance of the Note, we were obligated to issue to the Lender, as a commitment fee, 1,320,000 restricted shares of our common stock (the “Commitment Shares”). Along with the issuance of the Commitment Shares, we were required to issue to the Lender a warrant to purchase 750,000 shares of our common stock (the “Warrant”). All or any part of the Warrant is immediately exercisable at $1.00 per share and expires three years from the Issue Date. The Warrants are subject to adjustments as provided in the warrant agreement. The Commitment Shares and Warrant were issued in February 2022.

We allocated the proceeds from the Note between the Note, the Commitment Shares and the Warrant and recorded a debt discount of $290,000. We amortized the debt discount over the initial six-month term of the Note. The expense recorded for the six months ended June 30, 2022 was $208,287.

On May 22, 2022, pursuant to our Company’s request, the Note was extended for six months until November 10, 2022. Subsequent to this extension, the Lender further agreed to modify the terms of the Note as follows:

· On November 22, the lender agreed to extend the maturity date of the Note to February 10, 2023. Under the terms of this extension, we agreed to issue the noteholder 600,000 restricted shares of our common stock which we valued at $150,000, or $0.25 per share, based on the fair market value of our stock at the date of the extension. We recorded this amount as a loss on extinguishment of debt during the year ended December 31, 2022, as it represented a major modification to the Note. The shares have not yet been issued but we are working with our transfer agent to have them issued.

· On January 31, the lender agreed to an additional extension of the Note to August 31, 2023. Under the terms of this letter, we agreed to issue the noteholder 1,000,000 restricted shares of our common stock which we valued at $110,000, or $0.11 per share, based on the fair market value of our stock at the date of acceptance. This amount was recorded as a loss on extinguishment of debt during March 31, 2023, as it represented a major modification to the Note. The shares were issued in April 2023.

· On May 23, 2023, the lender agreed to fund an additional $30,000 and increase the principal of the Note amount due to $320,000. In consideration of this modification, we issued the lender a warrant to purchase 750,000 shares of our common stock, which warrant was in replacement of the original warrant issued effective November 10, 2021. The new warrant is immediately exercisable at $0.25 per share and expires five years from the Issue Date. We calculated the value of this replacement warrant using the Black Scholes method and recorded the difference between the value of the replacement warrant and the original warrant as a gain on extinguishment of debt in the amount of $187,500, as it represented a major modification to the terms of the Note. Assumptions used in the valuation of the new warrant were: Expected term of 5 years; risk free interest rate – 3.76%; volatility – 1,012.2%.

The Note is convertible only upon an event of default (as defined in the Note) and is then convertible, in whole or in part, into shares of the our common stock at a conversion price equal to the lesser of 90% multiplied by the lowest trading price (i) during the previous 20 trading day period ending on the Issue Date, or (ii) during the previous 20 trading day period ending on the date of conversion of the Note (the “Conversion Price”). The Conversion Price is subject to various adjustments, as specified in the Note. There has been no event of default to date.

While the Note is issued and outstanding, our Company is required at all times to have authorized and reserved five times the number of shares that are actually issuable upon full conversion of the Note (based on the Conversion Price of the Note in effect from time to time) (the “Reserved Amount”). If, at any time we do not maintain or replenish the Reserved Amount within three business days of the request of the Lender, the principal amount of the Note will increase by $5,000 per occurrence. If we fail to maintain our status as “DTC Eligible” for any reason, or, if the Conversion Price is less than $0.01 at any time after the Issue Date, the principal amount of the Note will be increased by $5,000 and the Conversion Price will be redefined to mean 50% multiplied by the Market Price (as defined in the Note), subject to adjustments (which includes an adjustment for anti-dilutive issuances). The Note and the SPA also contain various restrictions and grants the Lender various rights.

Upon an Event of Default, the Note will become immediately due and payable, and our Company will pay to the Lender the Default Sum (as defined in the Note) or the Default Amount (as defined in the Note).

During the six months ended June 30, 2024 and 2023, interest expense for this note amounted to $17,810 and $14,581, respectively.

6% Convertible Promissory Note

On April 28, 2023, we issued a convertible promissory note to a non-related third party in the principal amount of $25,000. The note, which is unsecured, bears interest at 6% per annum and is repayable one year from its date of issue. The note plus any accrued and unpaid interest is convertible at the option of the holder at any time prior to maturity into shares of our common stock a rate equal to the average closing price of our common stock over the prior ninety days prior to the date of conversion. The conversion provisions of the 6% convertible promissory note contains an embedded derivative feature and we valued the derivative feature separately using the Black Scholes model, recording debt discount and a derivative liability in accordance with the provisions of the note.

The assumptions used in determining the value of the embedded derivative in this note during the three and six months ended June 30, 2024 were as follows:

Schedule of assumptions used
Expected term in years	1 year
Risk-free interest rate	5.06% to 5.40%
Annual expected volatility	332.8% to 341.5%
Dividend yield	0.00%

Risk-free interest rate: The risk-free interest rate of a U.S. Treasury Bill with a similar term on the date of the option grant.

Volatility: Expected volatility of the stock price is based on the corresponding volatility of our historical stock price.

Dividend yield: 0% expected dividend yield as we have not paid dividends to date and do not anticipate declaring dividends in the near future.

Remaining term: The remaining term is based on the remaining contractual term of the warrant.

The following table represents derivative liability activity as it relates to this note for the six months ended June 30, 2024:

At note issuance date	$	11,180
Derivative expense		7,047
Balance at June 30, 2024	$	18,227

We are amortizing the debt discount on a straight-line basis over the term of the note. For the six months ended June 30, 2024, amortization of debt discount was $1,930. Interest expense in connection with this note was $259 for the six-month period ended June 30, 2024.

Promissory Note

On August 1, 2022, we issued a promissory note to a non-related third party in the principal amount of $20,000. The note, which is unsecured, bears interest at 10% per annum and was repayable January 26, 2023. The note is currently in default, and we are working with the note holder to extend the maturity date. During the six months ended June 30, 2023, interest expense was $992 for this note. There has been no further interest accrued.