NOTE 4 - CONVERTIBLE NOTE PAYABLE

SCHEDULE OF CONVERTIBLE NOTES PAYABLE

At December 31, 2022, $200,000 of the convertible notes was an 8% Unsecured Convertible Promissory Note from an investor issued March 5, 2021. The note has an automatic conversion into equity on the maturity date, which was July 3, 2022, or if a Qualified Financing (QF) of $5,000,000 is achieved, whichever occurs first. The maturity date pricing is $0.10. A QF converts into equity at the lesser of $1.00 or 75% of the average selling price of the aggregate offering. On July 10, 2023, the note was converted to 3,282,219 shares of common stock.

During the year ended December 31, 2022, the Company entered into Securities Purchase Agreements with five accredited investors, pursuant to which we issued and sold to the investors convertible promissory notes with a total principal amount of $715,000. We received $650,000 from the Notes after applying the original issue discount to the Notes. The Securities Purchase Agreements also included 812,500 warrants with a 5 year life and exercise price of $0.40 and 650,000 commitment shares. These notes have a Fixed Conversion Price or, at the option of the Holder in the event that the Borrower fails to complete a Qualified Offering before the five (5) month anniversary of the Issue Date, the Registration Conversion Price. The “Fixed Conversion Price” shall mean $0.15 per share. The “Registration Conversion Price” shall mean 75% multiplied by the Market Price (representing a discount rate of 25%). “Market Price” means the volume weighted average of the Common Stock during the twenty (20) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. The Company is currently working with each of the accredited investor on payoff options.

On June 27, 2022, the Company issued and sold to an accredited investor a convertible promissory note the principal amount of $138,800 under a Securities Purchase Agreement of the same date. The Company received $128,500 from the Note after applying the original issue discount to the Note. During the year ended December 31, 2023, the Company repaid the entire note.

On September 8, 2022, the Company issued and sold a senior secured convertible promissory note to AJB Capital Investments LLC (“AJB”) for a principal amount of $600,000, together with guaranteed interest of 12% per year calendar from the date hereof. All Principal and Interest owing hereunder, along with any and all other amounts, shall be due and owing on the Maturity Date March 8, 2023. We received $540,000 from the Note after applying the original issue discount to the Note. The note is convertible at a Variable Conversion Price shall equal the volume weighted average trading price (i) during the previous twenty (20) Trading Day period ending on the date of issuance of this Note, or (ii) during the previous twenty (20) Trading Day period ending on the Conversion Date.

The Maturity Date may be extended at the sole discretion of the Borrower up to six (6) months following the date of the original Maturity Date hereunder. In the event that the Maturity Date is extended, the interest rate shall equal fifteen percent (15%) per annum for any period following the original Maturity Date, payable monthly.

The maturity date for repayment of the Notes is nine months from issuance and the Notes bear interest at 10% per annum. On September 29, 2023, the Company entered into an amendment with AJB extending the maturity date of the Note through December 28, 2023. In exchange for this amendment, we issued AJB 3,000,000 shares (“extension shares”) of common stock. The Company can redeem certain shares if all principal and interest is repaid in full prior to the new maturity date.

The Securities Purchase Agreement contain a most-favored nation provision that allows the Investor to claim any lower price from any future securities six months after this closing and a blocker on issuing variable rate investments.

During the year ended December 31, 2023, the Company issued 5 convertible promissory notes totaling $457,500, net of debt issuance costs of $37,500. At December 31, 2023, the balance of the notes were $453,125, net of unamortized discount. These notes are convertible into common stock into the next funding round expected to be priced at $.08 per share issued in a Series Preferred with a 4% coupon payable until the Preferred is converted into common stock. A 2- year cash Warrant with 50% coverage priced at $.25 is also available as part of this conversion. A total of 6,243,000 commitment shares and 250,000 warrants issued. This Note has a personal guarantee for the full principal amount to Resonate Blends, Inc. by Darshan Vyas, Principal of Pegasus. Resonate Blends, Inc. in return will guarantee the Lender.

On November 11, 2023, the Company issued and sold to an accredited investor a convertible promissory note the principal amount of $80,000 under a Securities Purchase Agreement of the same date. The Company received $75,000 from the Note after applying the original issue discount to the Note. The note can be converted 6 months after issuance into common stock at a variable conversion price of 73% of the market price, the market price being the average of the 3 lowest trading prices over the prior 10 days.

In March 2024, the Company obtained a loan from AJB Capital Investments, LLC (“AJB”) which netted the Company $252,000 in proceeds. In consideration of such loan, the Company issued a $280,000 face amount promissory note (the “AJB Note”), with OID of $28,000, bearing interest at 12% per annum, with principal and interest payable on September 4, 2024. The Company has the right to repay the AJB Note at any time. Should the Company be in default, which shall not have been cured, the AJB Note is convertible into shares of the Company’s common stock at a conversion price that shall equal the volume weighted average trading price (a) during the previous 20 trading-day period ending on the date of issuance of the AJB Note or (b) during the previous 20 trading-day period ending on the relevant conversion date, whichever is lower.

The AJB Note is secured by all assets of the Company.

The Company accounts for the fair value of the conversion features of its convertible debt in accordance with ASC Topic No. 815-15 “Derivatives and Hedging; Embedded Derivatives” (“Topic No. 815-15”). Topic No. 815-15 requires the Company to bifurcate and separately account for the conversion features as an embedded derivative contained in the Company’s convertible debt. The Company is required to carry the embedded derivative on its balance sheet at fair value and account for’ any unrealized change in fair value as a component of results of operations. The Company values the embedded derivatives using the Black-Scholes pricing model.

In March 2024, the Company obtained a loan from Ray Vollintine (“Vollintine”) which netted the Company $250,000 in proceeds. In consideration of such loan, the Company issued a $280,000 face amount promissory note (the “Vollintine Note”), with OID of $30,000, bearing interest at 12% per annum, with principal and interest payable on September 29, 2024. The Company has the right to repay the Vollintine Note at any time. The Vollintine Note is convertible at any time and from time to time into shares of the Company’s common stock at a conversion price that shall equal to $.035 per share; provided, however, that, upon an event of default, the conversion price shall be the lower of (a) $.035 or (b) the volume weighted average trading price during the previous 20 trading-day period ending on the date of issuance of the Vollintine Note or during the previous 20 trading-day period ending on the relevant conversion date, whichever is lower.

The Vollintine Note is unsecured.

In addition, the Company issued to Vollintine a pre-funded common stock purchase warrant (the “Vollintine Warrant”) to purchase 7,200,000 shares of our common stock, with a nominal exercise price of $.00001 per share. The Vollintine Warrant may be exercised on a cashless basis, As further consideration for Vollintine’s purchasing the Vollintine Note, the Company entered into a make-whole agreement that assures that Vollintine shall derive not less than $250,000 in net proceeds from Vollintine’s sales of the common stock underlying the Vollintine Warrant.