v3.23.1
Notes Payable
 3 Months Ended
Mar. 31, 2023
Debt Disclosure [Abstract]  
Notes Payable

Note 6 – Notes Payable

 

Schedule of notes payable as of: 

          
   March 31,
2023		   December 31,
2022		 
Secured Royalty Participation Agreements (1)  $–   $150,000 
Vehicle and equipment loans (2)   9,949    11,246 
Notes payable (3)   280,000    285,000 
Convertible notes payable, net of discount (4)   739,315    482,885 
Total notes payable, net of discount  $1,029,264   $929,131 

 

(1) During June 2018, the Company entered into two (2) Secured Royalty Participation Agreements with Profile Solutions, Inc. (“PSI”) in exchange for working capital loans totaling $150,000. The loan amounts were due in June of 2019, plus an IRR of 18%. In consideration of these loan obligations, The Company agreed to pay a monthly royalty for one year being the greater of: x) 10% of the loan amount or y) 1.5% of the monthly gross revenues. PSI claims that these loans are in default, but the Company contends the loans reflected the terms of these agreements were usurious and contends that the loans are not legally enforceable obligations. This case was dismissed by the Court March 16, 2023. (See Legal Part I, 3.1)
   
(2) In 2019, Malaysia borrowed $27,295 to purchase a car. The note accrues interest at 4.42% and matures in 5 years with a balance due as at March 31, 2023 of $9,949 (December 31, 2022 - $11,246).
   
(3) In 2019, the Company entered into various promissory notes with lenders in the aggregate principal balance of $375,000. The effective interest rates of the notes are 10% and mature within one year. In addition, the Company issued 45,000 shares of common stock in the aggregate for the commitment of resulting in a charge of $22,500 to debt discount. In 2020, the Company entered into various promissory notes with lenders in the aggregate principal balance of $225,000 with effective interest rates between 8% and 10% per annum. Each of these notes was extended until May 31, 2023. On October 20, 2021, The Company issued two promissory notes to investors for a total of $10,000. One of these notes was paid in full on January 18, 2023. The other has been extended until May 20, 2023. The outstanding balance of these notes was $280,000 and $285,000 as of March, 31, 2023 and December 31, 2022, respectively.

 

(4)

During the year ended December 31, 2021, the Company issued an aggregate of $2,423,738 of convertible promissory notes to investors. The notes had maturity dates between nine months and three years and have interest rates between 8% and 12% per annum. The Company also issued 154,173 shares of common stock and granted warrants to purchase 2,400,000 shares of common stock with exercise prices ranging between $2.685 and $3.00 per share. The value of the common stock and warrants were recorded as a discount of the note at fair value.

 

 

During the second quarter of 2022, one of the nine-month notes was extended for an additional 60 days, until August 1, 2022. As consideration for the 60-day extension, the Company agreed to pay 100,000 shares of common stock to the note holder, reduce the conversion price of the note, and reprice the associated warrants from $3.00 per share to $1.00 per share. The new conversion price shall be equal to the lower of (i) 50% of the lowest volume weighted average prices for common stock as reported at the close of trading on the market reporting trade prices for the common stock during the 30 trading days ending on, and including, the date of the notice of conversion and (ii) Closing Price on the Closing Date, not to exceed $2.25. On July 13, 2022, one of the notes was extended to September 1, 2022 in exchange for 183,780 warrants to purchase common stock at $3.00 per share, 75,512 shares of common stock and the principal amount of the note was increased by $70,833. On September 8, 2022, the note was further extended to May 26, 2023 and the interest rate increased from 10% to 18% per annum. The Company recognized $252,429 loss on extinguishment from the amendment of the note. On August 18, 2022, another note was further extended to September 30, 2022, in exchange for 200,000 shares of common stock. During the fourth quarter of 2022, the note was extended until May 31, 2023.

 

During the third and fourth quarters of 2022, the Company issued an aggregate of $400,000 of convertible notes payable net of discount, in various tranches. The notes accrue interest ranging between 10% and prime plus 8% per annum and mature nine months from the date of each issuance. In addition, the lenders received 95,115 warrants with an exercise price of the lowest of $2.685 or 65% of lowest traded price in preceding 30 days and 81,760 warrants with an exercise price of lowest of $2.685 or 50% of VWAP for the preceding 30 days, with all warrants having an expiry of 5 years from the date of issuance.

 

During the year ended December 31, 2022, $798,526 of principal and $25,473 of accrued interest was converted into 4,114,816 common shares leaving a balance, net of discount, of $482,885 and accrued interest of $381,259 as of December 31, 2022.

 

On February 28, 2023, the Company entered into a Global Settlement and Exchange of Senior Secured Convertible Promissory Note with Leonite Fund 1, LP (“Leonite), whereby Leonite agreed to settle all of its outstanding liability and the cancellation of their warrants in exchange for 10,538,152 common stock of the Company and 110,000 warrants to purchase common stock of the Company at $0.05 per share. The agreement is contingent upon all other holders executing agreements to convert their balances.

 

On March 27, 2023, the Company and an institutional investor (the “Holder”) executed an investment agreement for up to $7,000,000 through a convertible promissory note, share purchase agreement and warrant agreement (the “2023 Note"). The 2023 Note has a principal amount of up to $7,000,000 with an original issue discount of 12% and is to be disbursed in four (4) disbursements as set forth as follows: (i) the first disbursement in the amount of $1,000,000 occurred on March 27, 2023; (ii) the second disbursement in the amount of $200,000 is due within three (3) days after the filing of an S-1 registration statement; (iii) the third disbursement in the amount of $500,000 is due forty-five (45) days after effectiveness of an S-1 registration statement; and (iv) $120,000 is due forty-five (45) days after the third disbursement. The S-1 Registration Statement was filed on May 9, 2023. The 2023 Note carries an interest rate equal to seven percent (7%) per annum and is redeemable by the Company at any time at an amount equal to one hundred twenty-five percent (125%) of the then outstanding principal and interest accrued on the Note. All additional disbursements will be made at the Holder’s discretion, at any time, and if the Holder’s broker refuses to custody the securities issued in connection therewith, the Holder will have no obligation to make a disbursement under the disbursement schedule but will have the option to make such disbursement.

 

On April 11, 2023, the Company entered into an Amendment of Promissory Note with MCUS LLC (“MCUS”), whereby MCUS agreed to convert its conversion price to $0.05.

 

The balance of the four convertible notes payable, net of discount, as of March 31, 2023 and December 31, 2022 was $739,315 and $482,885, respectively.