NOTES PAYABLE

12 Months Ended

Dec. 31, 2021

NOTES PAYABLE

NOTE 4 - NOTES PAYABLE

NOTE 4 - NOTES PAYABLE

Notes payable

As of December 31, 2021 and 2020, the Company has notes payable as follows,

	December 31,			December 31,
	2021			2020
Promissory note issued on December 10, 2020	$	220,000		$	220,000
Promissory note issued on February 10, 2021		220,000			-
		440,000			220,000
Less unamortized debt discount		(55,292	)		(110,645	)
Total outstanding notes payable	$	384,708		$	109,355

During the years ended December 31, 2021 and 2020, the Company recorded interest expense of $49,907 and $1,591, respectively. As of December 31, 2021 and 2020, the Company had accrued interest of $51,498 and $1,591, respectively.

Notes payable issued in Fiscal year 2020

On November 25, 2020, the Company issued notes payable of $43,750. This note was unsecured, bore interest at 12% per annum, had no maturity date and was due on demand. The Company received $35,000 and recorded $8,750 as debt discount. During the year ended December 31, 2020, the Company fully repaid $43,750 and recorded amortization of discount of $8,750. 

On December 10, 2020 (the “Closing Date”), the Company entered into a Securities Purchase Agreement (the “SPA”), pursuant to which the Company purchased two promissory notes, each with a principal amount of $220,000, for a total principal amount of $440,000. The first Note was issued by the Company on the Closing Date and second Note was issued in February 2021. The Initial Note has an interest rate of 12% per annum and a maturity date of June 10, 2022. The Company received $195,000 from the first Note and recorded $25,000 as debt discount. In addition to the Initial Note, on the Closing Date, the Company issued a warrant to acquire 146,667 shares of Common Stock at an exercise price of $1.50 per share. The warrant contains a cashless exercise provision and expires on the fifth anniversary of the warrant. The Company identified conversion features embedded within warrants issued during the period ended December 31, 2020. The Company has determined that the conversion feature of the Warrants represents an embedded derivative since the conversion price includes a reset provision which could cause adjustments upon conversion. We accounted for the issuance of the Warrants as a derivative and recorded derivative liability of $92,400 as debt discount. During the year ended December 31, 2020, the Company recorded amortization of discount of $6,755.

Notes payable issued in Fiscal year 2021

On February 10, 2021, the second note payable, as part of the Securities Purchase Agreement entered into on December 10, 2020, was issued. The second note has an interest rate of 12% per annum and a maturity date of August 10, 2022. The Company received $195,000 and recorded $25,000 as debt discount. In addition, the Company issued a warrant to acquire 146,667 shares of Common Stock at an exercise price of $1.50 per share. The Company has determined that the conversion feature of the Warrants represents an embedded derivative since the conversion price includes a reset provision which could cause adjustments upon conversion. We accounted for the issuance of the Warrants as a derivative and recorded derivative liability of $31,533 as debt discount. During the year ended December 31, 2021, on the two notes the Company recorded total amortization of debt discount of $111,886.

Notes payable – related parties

The Company acquires on-going funding on an as-needed basis from related parties that include the Company’s officers, directors, majority shareholders, and these parties’ affiliates, pursuant to promissory notes with various origination dates in 2015 and 2017.

As of December 31, 2021 and 2020 outstanding notes payable – related parties are as follows:

	December 31,		December 31,
	2021		2020
Promissory note to an affiliate of the Company’s CFO, dated September 30, 2015, bearing no interest payable on demand	$	-	$	349,573
Promissory note to our CFO, dated December 15, 2015, bearing interest at 10% annually, payable on demand		-		41,810
Promissory note to a former CEO, dated December 15, 2015, bearing interest at 10% annually, payable on demand		-		24,101
Promissory note to a former CEO’ spouse, dated December 15, 2015, bearing interest at 10% annually, payable on demand		-		53,994
Promissory note to a former CEO, dated September 30, 2017, bearing 10% interest, payable on demand		-		59,044
Promissory note to our CFO, dated September 30, 2017, bearing 10% interest, payable on demand		-		3,200
	$	-	$	531,722
Reclassification to debt to be settled (Note 12)		-		(531,722	)

For the years ended December 31, 2021 and 2020, proceeds from related parties totaled $0 and $0, and interest of $0 and $18,214 was accrued. Accrued interest on related party loans totaled $0 and $82,536 as of December 31, 2021 and 2020, respectively.

In January 2021, the Company entered into a mutual agreement, whereby certain notes payable – related parties and accrued interest were fully settled (see Note 12).