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CONVERTIBLE NOTES PAYABLE

6 Months Ended

Jun. 30, 2021

NOTE 5 - CONVERTIBLE NOTES PAYABLE

As of June 30, 2021 and December 31, 2020, the Company has convertible notes payable as follows:

	June 30,			December 31,
	2021			2020

Promissory note, dated June 2, 2017, bearing interest of 4% annually, payable within a year	$	18,260		$	18,260
Promissory note, dated September 30, 2017, bearing 10% interest, payable on demand		12,000			12,000
Promissory note, dated November 27, 2017 bearing interest of 12% annually, payable within a year		-			17,116
Promissory note, dated December 20, 2017, bearing interest of 12% annually, payable on September 20, 2018		-			39,591
Promissory note, dated January 5, 2018, bearing interest of 10% annually, payable on July 5, 2018		34,749			37,529
Promissory note, dated April 20, 2018, bearing interest of 12% annually, payable on April 20, 2019		50,000			50,000
Promissory note, dated April 30, 2018, bearing interest of 12% annually, payable on April 30, 2019		50,000			50,000
Promissory note, dated November 23, 2020, bearing interest of 10% annually, payable on November 23, 2021		200,000			100,000
Promissory note, dated February 12, 2021, bearing interest of 10% annually, payable on February 12, 2022		50,000			-
Promissory note, dated March 29, 2021, bearing interest of 10% annually, payable on March 29, 2022		100,000			-
Convertible notes before debt discount		515,009			324,496
Less debt discount		(211,653	)		(95,058	)
Total outstanding convertible notes payable	$	303,356		$	229,438

During the six months ended June 30, 2021 and 2020, the Company recognized interest expense of $33,789 and $19,455 and amortization of discount, included in interest expense, of $133,405 and $0, respectively. As of June 30, 2021 and December 31, 2020, the Company recorded accrued interest of $68,658 and $1,213,264, respectively.

Conversion

During the six months ended June 30, 2021, the Company converted convertible note principal and accrued interest of $1,236,291 into 57,372,320 shares of common stock. The corresponding derivative liability at the date of conversion of $4,801,926, was settled through additional paid in capital.

The Company has entered into various convertible notes with variable conversion rates that create derivative liabilities. A description of outstanding convertible notes payable is as follows:

Promissory Notes - Issued in fiscal year 2017

During the year ended December 31, 2017, the Company issued a total of $265,900 of notes with the following terms:

	•	Terms ranging from 9 months to 12 months. Certain note is due on demand.
	•	Annual interest rates of 4% - 12%.
	•	Convertible at the option of the holders at issuance.
	•	Conversion prices are typically based on the discounted (35% - 50% discount) lowest trading prices of the Company’s shares during various periods prior to conversion, the closing sale price
	•	Certain notes are currently in default. Default interest rates are 24%.

Promissory Notes - Issued in fiscal year 2018

During the year ended December 31, 2018, the Company issued a total of $325,000 of notes with the following terms:

	•	Terms ranging from 6 months to 12 months.
	•	Annual interest rates of 8% - 12%.
	•	Convertible at the option of the holders at issuance.
	•	Conversion prices are typically based on the discounted (25% - 50% discount) average closing prices or lowest trading prices of the Company’s shares during various periods prior to conversion. Certain note has a fixed conversion price of $0.0001.
	•	Notes are currently in default. Default interest rates are 24%.

Promissory Notes - Issued in fiscal year 2020

During the year ended December 31, 2020, the Company issued a note of $100,000 with the following terms:

	•	Term is 12 months.
	•	Annual interest rate of 10%.
	•	Convertible at the option of the holders at issuance.
	•	Conversion price is the lesser of a) $0.40 or b) 50% of the lowest Trading Price during 20 trading days

During the six months ended June 30, 2021, the Company issued an additional tranche of $100,000.

Promissory Notes - Issued in fiscal year 2021

During the six months ended June 30, 2021, the Company issued a note of $150,000 with the following terms:

	•	Term is 12 months.
	•	Annual interest rate of 10%.
	•	Convertible at the option of the holders at issuance.
	•	Conversion price is the lesser of a) $0.10 or b) 50% of the lowest Trading Price during 20 trading days

Derivative liabilities

The Company determined that the exercise feature of the warrants met the definition of a liability in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock. The Company bifurcates the embedded conversion option in the note once the note becomes convertible and accounts for it as a derivative liability. The fair value of the warrants was recorded as a debt discount being amortized to interest expense over the term of the note.

The Company valued the conversion features using the Black Scholes valuation model. The fair value of the derivative liability for all the notes and warrants that became convertible for the six months ended June 30, 2021 amounted to $606,699. $250,000 of the value assigned to the derivative liability was recognized as a debt discount to the notes while the balance of $356,699 was recognized as a “day 1” derivative loss.

The Company valued the conversion features using the Black Scholes valuation model. The fair value of the derivative liability for all the notes and warrants that became convertible for the year ended December 31, 2020 amounted to $1,596,647. $100,000 of the value assigned to the derivative liability was recognized as a debt discount to the notes while the balance of $1,496,647 was recognized as a “day 1” derivative loss.