NOTES PAYABLE & NOTES PAYABLE – RELATED PARTY

12 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

NOTES PAYABLE & NOTES PAYABLE – RELATED PARTY

6. NOTES PAYABLE & NOTES PAYABLE – RELATED PARTY

At December 31, 2021, the Company has outstanding notes payable of $1,088,421 and outstanding notes payable - related party of $4,064,211. At December 31, 2020, the Company had outstanding notes payable of $1,062,106 and outstanding notes payable – related party of $3,641,053. The notes payable and notes payable – related party accrued interest of 15% and are due within 10 days of a demand notice of the holders. There has been no notice of default or demand issued by any holder.

During the year ended December 31, 2021, the Company received additional notes payable of $469,474 of which $443,158 was received from a related party, Nicholas Gallagher, a shareholder and director of the Company, who also holds the full balance of the notes payable – related party described above and repaid $20,000 to Mr. Gallagher. The notes contained an original discount of $22,474 resulting in net proceeds of $447,000. During the year ended December 31, 2020, the Company received additional tranches of the notes payable for $436,842 discounted at 5%, or $21,842 resulting in net proceeds of $415,000, respectively, of which $375,000, was received from a related party, Nicholas Gallagher. The notes are due upon demand; therefore, all discounts have been immediately expensed to finance costs and the note balances are classified as current.

During the years ended December 31, 2021 and December 31, 2020, the Company incurred finder fees totaling $13,410 and $12,450, respectively, of which $12,660 and $11,250, respectively, were to a related party and are included in interest expense and finance costs, and interest expense and finance costs – related party in the consolidated statement of operations at December 31, 2021. Interest of $732,393 was expensed during the year ended December 31, 2021 of which $571,695 was to related parties and is included in interest expense and finance costs, and interest expense and finance costs – related party in the consolidated statement of operations at December 31, 2021. Interest of $678,119 was expensed during the year ended December 31, 2020 of which $520,382 was to related parties. Interest and finders fees are included in accounts payable and accrued liabilities, interest payable, and interest payable – related party on the consolidated balance sheet at December 31, 2021.

Inter-Creditor Agreement

As a result of an Amended and Restated Loan, Security, and Intercreditor Agreement (the “Amended Agreement”) dated November 1, 2019 and a First Amendment dated August 25, 2021, for each holder of the notes payable, whether or not a related party:

1. The borrower and holder entered into a Deed of Trust whereunder the notes are secured by a security interest in all real property, claims, contracts, agreements, leases, permits and the like.

2. The Company entered into a written Guaranty (“Guaranty”) whereunder, among other conditions, the Company unconditionally guarantees and promises to pay to the order of each holder the principal sum and all interest payable on each note payable held by such holder when and as the same becomes due, whether at the stated maturity thereof, by acceleration, call for redemption, tender, or otherwise. The Company is not in default as no demand has been made for payment or delivery.

3. Mr. Gallagher, at his option, has the right to convert outstanding but unpaid and future interest on his note into shares of the Company’s common stock at $0.015 per share.

4. All loans by Mr. Gallagher and any additional loans made by Mr. Gallagher are designated as Senior Notes, and accounted for as Notes payable – related party and all loans by the other holders made prior to August 25, 2021 were designated as Junior Notes. Additionally, notes arising in the future to certain unrelated parties are also designated as Senior notes. Senior Notes, which include principal and interest are entitled to be repaid in full before any of the Junior Notes are repaid.

5. The Company confirmed that the written Guaranty extends to the repayment of additional loans made by the holders.

6. The Company confirmed that repayment of additional loans will be and remain secured by the Deed of Trust.

In a separate agreement dated September 10, 2020, the Company and certain note holders, agreed to convert $36,813 of unpaid interest into shares of the Company’s common stock at $0.015 per share. During the year ended December 31, 2020, a total of 13,719,248 common shares were issued to the holders in exchange for interest payable of $205,787, of which $168,976 was payable to Mr. Gallagher. During the year ended December 31, 2021, a total of 280,752 common shares were issued to one holder in exchange for interest payable of $4,212.