NOTES PAYABLE & NOTES PAYABLE – RELATED PARTY

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

NOTES PAYABLE & NOTES PAYABLE – RELATED PARTY

5. NOTES PAYABLE & NOTES PAYABLE – RELATED PARTY

At March 31, 2022 and December 31, 2021, the Company had outstanding notes payable of $1,088,421 and outstanding notes payable – related party of $4,064,211. The notes payable and notes payable – related party and accrued interest of 15% 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 three months ended March 31, 2022, the Company received no additional tranches of the notes payable and notes payable - related party. During the three months ended March 31, 2021, the Company received additional tranches of the notes payable for $76,842, discounted at 5%, or $3,842, resulting in net proceeds of $73,000 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. The notes are due upon demand; therefore, all discounts have been immediately expensed to finance costs.

During the three months ended March 31, 2022 and March 31, 2021, the Company paid finder fees totaling $nil, to related party entities, and incurred $nil and $2,190, respectively, of other finance and placement costs. Interest of $193,224 and $177,854 was expensed during the three-month periods ended March 31, 2022 and March 31, 2021, respectively, of which $152,408 and $138,025 was to related parties, respectively, which is included in interest expense and finance costs on the condensed consolidated statements of operations. Interest and finders fees are included in accounts payable and accrued liabilities, interest payable and interest payable – related party on the condensed consolidated balance sheet at March 31, 2022.

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.