v3.25.2
CONVERTIBLE NOTES PAYABLE
 12 Months Ended
Dec. 31, 2024
Debt Disclosure [Abstract]  
CONVERTIBLE NOTES PAYABLE

NOTE 9: CONVERTIBLE NOTES PAYABLE

 

Convertible notes payable consists of the following:

  

   December 31, 2024   December 31, 2023 
Convertible Notes - Issued in fiscal year 2020   97,946    97,946 
Convertible Notes - Issued in fiscal year 2021   508,440    508,440 
Convertible Notes - Issued in fiscal year 2022   1,234,251    1,201,083 
Convertible Notes - Issued in fiscal year 2023   1,854,584    2,067,893 
Convertible Notes - Issued in fiscal year 2024   183,982    - 
Convertible notes payable, Gross   3,879,203    3,875,362 
Less debt discount and debt issuance cost   (1,259)   (730,028)
Convertible notes payable   3,877,944    3,145,334 
Less current portion of convertible notes payable   3,877,944    3,047,388 
Long-term convertible notes payable  $-   $97,946 

 

 

During the years ended December 31, 2024 and 2023, the Company recognized interest expense on convertible notes payable of $1,334,432 and $5,071,570, and amortization of debt discount, included in interest expense of $793,616 and $1,189,987, respectively.

 

Convertible note payable with outstanding balance of $508,440 matured on October 2023. The default annual interest rate of 16% becomes the effective interest rate on the past due principal. We are in communication with the lender.

 

Convertible note payable with outstanding balance of $64,550 matured on February 11, 2023. The default annual interest rate of 24% becomes the effective interest rate on the past due principal. We are in communication with the lender.

 

Convertible note payable with outstanding balance of $72,000 matured on February 11, 2023. The default annual interest rate of 24% becomes the effective interest rate on the past due principal. We are in communication with the lender.

 

Convertible note payable with outstanding balance of $87,527 matured on February 14, 2023. The default annual interest rate of 24% becomes the effective interest rate on the past due principal. We are in communication with the lender.

 

Convertible note payable with outstanding balance of $102,340 matured on March 1, 2023. The default annual interest rate of 24% becomes the effective interest rate on the past due principal. We are in communication with the lender.

 

Convertible note payable with outstanding balance of $66,500 matured on February 9, 2023. The default annual interest rate of 24% becomes the effective interest rate on the past due principal. We are in communication with the lender.

 

Convertible note with outstanding balance $50,000 is in default as of September 30, 2022 with a default interest rate of 18%. We are in communication with the lender.

 

Convertible note with outstanding balance $750,000 is in default as of December 07, 2024 with no default interest rate. We are in communication with the lender.

 

Convertible note with outstanding balance $300,000 is in default as of January 24, 2025 with no default interest rate. We are in communication with the lender.

 

Convertible note with outstanding balance $718,750 is in default as of June 30, 2024 with a default interest rate of 12%. We are in communication with the lender.

 

Convertible note with outstanding balance $812,500 is in default as of June 30, 2024 with a default interest rate of 12%. We are in communication with the lender.

 

Convertible note with outstanding balance $16,773 is in default as of October 15, 2024 with a default interest rate of 22%. We are in communication with the lender.

 

Convertible note with outstanding balance $94,950 is in default as of January 30, 2025 with a default interest rate of 22%. We are in communication with the lender.

 

Convertible note with outstanding balance $72,289 is in default as of February 15, 2025 with a default interest rate of 22%. We are in communication with the lender.

 

Replacement of note

 

During the year ended December 31, 2020, the Company assigned a portion of note with outstanding principal amounts of $150,000 to a lender. Our CEO paid $135,000 to repay a principal amount of $81,000 on behalf of the company. As a result, the Company recorded due to related party of $135,000 and loss on settlement of debt of $54,000.

 

Effective September 30, 2020, the Company exchanged (i) its convertible promissory note originally issued on March 20, 2020 in the amount of $125,000 (referred to herein as the Granite Note); and, (ii) the Common Stock Purchase Warrant dated 18 March 2020 for the issuance of sixteen (16) shares of Company Common Stock (the “Granite Warrant”) for the issuance of a new convertible promissory note issued in favor of Blue Citi LLC in the amount of $325,000 (the “Exchange Note”). Both the Granite Note and the Granite Warrant were cancelled as a result of the exchange and the issuance of the Exchange Note. Terms of the Exchange Note include, without limitation, the following:

 

  a. Principal balance of $325,000, which includes all accrued and unpaid interest on the Granite Note;
     
  b. No further interest shall accrue so long as there is no event of default;
     
  c. Conversions into common stock under the Exchange Note shall be effected at the lowest closing stock price during the five (5) days preceding any conversion, with -0- discount and a conversion price not below $112;
     
  d. No prepayment premiums or penalties; and
     
  e. Maturity date of September 30, 2021. Notes were fully converted in February 2021

 

Effective November 17, 2020, the Company entered into a Settlement and Release Agreement (the “Settlement Agreement”) with an existing lender to, among things, settle all dispute regarding a convertible promissory note, and exchanged that note for a newly issued note. The disputed note, referred to herein as the “Smea2z Note”, was originally issued on October 23, 2018 in favor of Smea2z LLC in the original principal amount of Two Hundred Twenty Thousand Dollars ($220,000). Subsequent to the issuance of the Smea2z Note, a series of agreements were executed which amended various terms and conditions of the Smea2z Note, resulting in, among other things, a purported principal balance of Six Hundred Thousand Eight Hundred Fifty Dollars ($608,850). As a result of the Settlement Agreement, the Smea2z Note was cancelled, and a new note was issued (the “Exchange Note”) in exchange for the Smea2z Note. The Exchange Note was issued as of November 17, 2020 in the reduced original principal amount of Four Hundred Thousand Dollars ($400,000). The Exchange Note further provides as follows:

 

  a. No further interest shall accrue so long as there is no event of default;
     
  b. Maturity date remains the same: 30 June 2021;
     
  c. No right to prepay;
     
  d. Conversion price is fixed at $56;
     
  e. Typical events of default for such a note, as well as a default in the event the closing price for the Company’s common stock is less than $56 for at least 5-consecutive days; and

 

 

  f. Leak out provision:

 

  1. One conversion per week, for no more than forty million shares;
     
  2. If the trading volume for the Company’s common stock exceeds fifty million shares on any day, a second conversion may be exercised during that week, again for no more than forty million shares (a total of eighty million shares for that week). Notes were fully converted in February 2021

 

Effective November 18, 2020, the Company entered into an agreement with three existing investors in the Company (the “Warrant Holders”), each of which was the holder of warrants issued the Company. The total number of warrants (collectively, the “Exchanged Warrants”) held by the Warrant Holders totaled 39. The Company and the Warrant Holders agreed to exchange the Exchanged Warrants for three newly issued promissory notes (the “Warrant Exchange Notes”). As a result of the exchange, the Exchanged Warrants were cancelled and of no further force and effect. The Warrants Exchange Notes were issued as of November 18, 2020, in the total original principal amount of One Hundred Thousand Dollars ($100,000). The Warrant Exchange Notes further provide as follows: (i) interest accrues at 5% per annum; (ii) maturity date of November 18, 2025; (iii) no right to prepay; (iv) fixed conversion price of $160; and, (v) typical events of default for such a note.

 

Conversion

 

During the year ended December 31, 2024, the Company converted notes with principal amounts and accrued interest of $68,863 into 477,349 shares of common stock.

 

During the year ended December 31, 2023, the Company converted notes with principal amounts and accrued interest of $357,592 into 21,428 shares of common stock.

 

Convertible notes payable consists of the following:

 

Promissory Notes - Issued in fiscal year 2020

 

During the twelve months ended December 31, 2020, the Company issued a total of $2,466,500 of notes with the following terms:

 

  ● Terms ranging from 5 months to 60 months.
     
  ● Annual interest rates of 0% - 25%.
     
  ● Convertible at the option of the holders at issuance date, after maturity date or 6 months after issuance date.
     
  ● Conversion prices are typically based on the discounted (25% to 50% discount) average closing prices or lowest trading prices of the Company’s shares during various periods prior to conversion. Certain note has a fixed conversion price ranging from $16 to $112. Certain note has a fixed conversion price of $0.5 for a first 5 months Certain note allows the principal amount will increase by $15,000 and the discount rate of conversion price will decrease by 18% if the conversion price is less than $160.

 

 

As of December 31, 2024, $97,946 notes that were issued in fiscal year 2020 were outstanding.

 

Promissory Notes - Issued in fiscal year 2021

 

During the year ended December 31, 2021, the Company issued convertible notes of $1,696,999 for cash proceeds of $1,482,000 after deducting financing fee of $214,999 with the following terms;

 

  ● Terms ranging from 90 days to 12 months.
     
  ● Annual interest rates of 5% to 12%.
     
  ● Convertible at the option of the holders after varying dates.
     
  ● Conversion prices are typically based on the discounted (39% discount) average closing prices or lowest trading prices of the Company’s shares during 20 periods prior to conversion.
     
  ● 1,414 shares of common stock valued at $133,663 issued in conjunction with convertible notes.
     
  ● 117,992 warrants to purchase shares of common stock with an exercise price a range from $7.44 to 36.00 granted in conjunction with convertible notes. The term of warrant is 5 years from issue date. (Note 12)
     
  ● The convertible note on October 19, 2021 by the Company in favor of Mast Hill Fund matured on October 19, 2022 which triggered the conversion provision, the default interest rate of 16% and penalty of 125% additional principal based on the outstanding principal balance and accrued interest. As a result of additional principal penalty, the outstanding principal balance increase $91,311 and the effective interest rate increased to 16%.

 

As of December 31, 2024, $508,440 notes that were issued in fiscal year 2021 were outstanding.

 

 

Promissory Notes - Issued in fiscal year 2022

 

During the year ended December 31, 2022, we issued convertible promissory notes with principal amounts totaling $2,120,575, which resulted in cash proceeds of $1,857,800 after deducting a financing fee of $262,775. The 2022 Convertible Notes have the following key provisions:

 

  ● Terms ranging from 3 to 12 months.
     
  ● Annual interest rates of 9% to 20%.
     
  ● Convertible at the option of the holders after varying dates.
     
  ● Conversion price based on a formula corresponding to a discount (20% or 39% discount) off the lowest trading price of our Common stock for the 20 prior trading days including the day on which a notice of conversion is received, although one of the 2022 Convertible Notes establishes a fixed conversion price of $4.50 per share.
     
  ● 554,464 shares of common stock valued at $473,691 issued in conjunction with convertible notes.

 

In connection with the adoption of ASU 2020-06 on January 1, 2022, we reclassified $517,500, previously allocated to the conversion feature, from additional paid-in capital to convertible notes on our balance sheet. The reclassification was recorded to combine the two legacy units of account into a single instrument classified as a liability. As of January 1, 2022, we also recognized a cumulative effect adjustment of $439,857 to accumulated deficit on our balance sheet, that was primarily driven by the derecognition of interest expense related to the accretion of the debt discount as required under the legacy accounting guidance. Under ASU 2020-06, we will no longer incur non-cash interest expense related to the accretion of the debt discount associated with the embedded conversion option.

 

As of December 31, 2024, $1,216,631 notes that were issued in fiscal year 2022 were outstanding.

 

Promissory Notes - Issued in fiscal year 2023

 

During the year ended December 31, 2023, we issued convertible promissory notes with principal amounts totaling $2,211,083, which resulted in cash proceeds of $2,015,000 after deducting a financing fee of $462,112. The 2023 Convertible Notes have the following key provisions:

 

  ● Terms ranging from 9 to 12 months.
     
  ● Annual interest rates of 9% to 20%.
     
  ● Convertible at the option of the holders after varying dates.
     
  ● Conversion price based on a formula corresponding to a discount (20% or 30% discount) off the lowest trading price of our Common Stock for the 20 prior trading days including the day on which a notice of conversion is received, although one of the 2023 Convertible Notes establishes a fixed conversion price of $.50 per share and two of the 2023 Convertible Notes have a fixed conversion price of $.005 per share.
     
  ● As of the year ended December 31, 2023, there were no derivative liabilities.

 

As of December 31, 2024, $1,854,584 notes that were issued in fiscal year 2023 were outstanding.

 

Promissory Notes - Issued in fiscal year 2024

 

During the year ended December 31, 2024, we issued convertible promissory notes with principal amounts totaling $314,250, which resulted in cash proceeds of $255,000 after deducting a financing fee of $59,250. The 2024 Convertible Notes have the following key provisions:

 

  ● Terms ranging from 9 to 12 months.
     
  ● Annual interest rates of 13% to 15%.
     
  ● Convertible at the option of the holders after varying dates.
     
  ● Conversion price based on a formula corresponding to a discount (20% or 30% discount) off the lowest trading price of our Common Stock for the 20 prior trading days including the day on which a notice of conversion is received, although one of the 2023 Convertible Notes establishes a fixed conversion price of $.50 per share and two of the 2024 Convertible Notes have a fixed conversion price of $.005 per share.
     
  ● As of the year ended December 31, 2024, there were no derivative liabilities.

 

As of December 31, 2024, $183,982 notes that were issued in fiscal year 2023 were outstanding.