NOTE 5 - PROMISSORY AND CONVERTIBLE NOTES

12 Months Ended

Dec. 31, 2021

Notes

NOTE 5 - PROMISSORY AND CONVERTIBLE NOTES

NOTE 5 – PROMISSORY AND CONVERTIBLE NOTES

During the year ended December 31, 2021, the Company issued convertible promissory notes in the principal amount of $1,007,500. The principal amount includes $96,000 of original issue discount, $16,500 in cash financing fees, $49,750 in non-cash financing fees and 651,666 warrants with an exercise price of $1.50 per share. The term of the notes are 24 months and carry an effective interest rate of 8.00%. The notes mature beginning on August 27, 2023 through September 17, 2023. The convertible promissory notes are convertible into shares of common stock at $1.00 per share. The Company recorded a debt discount in the amount of $1,007,500, in the aggregate, in relation to the original issue discount and cash financing fees of $112,500, and the conversion feature, warrants, the 25,000 shares of common stock (see Note 6) recorded at fair value in the amount of $895,000. During the year ended December 31, 2021, the Company recorded amortization expense in the amount of $123,625 in relation to the amortization of debt discount of which $102,634 was recorded as amortization expense in relation to the warrants and conversion feature and $11,942 and $9,048 was recorded as interest expense in relation to the original issue discount and financing fees in the consolidated statements of operations and comprehensive income. As of December 31, 2021, the Company had an unamortized debt discount balance of $883,875 with a weighted amortization period of 1.87 years.

The Company recorded $895,000 as a debt discount with an offset to additional paid-in capital in relation to the beneficial conversion feature, the warrants, and the 25,000 shares of common stock issued in relation to the convertible debt. The common stock was valued at $49,750. The beneficial conversion feature was valued at $339,243 and the warrants were valued at $506,007, in the aggregate. The Company calculated the fair value of the beneficial conversion feature and warrants using the black-scholes option pricing model with the following assumptions:

	For the Year Ended December 31, 2021
Expected term, in years		2.0
Exercise price		1.5
Expected volatility		100%
Stock price		1.80 – 2.49
Risk-free interest rate		0.22% – 0.71%
Dividend yield		0%