NOTE 5: DEBT

Notes Payable

As of March 31, 2022 and December 31, 2021, the Company had outstanding notes payable to former affiliates of the Company of $413,185 and $413,185, respectively. The notes payable are unsecured, bear no interest and are due on demand.

Convertible Debt

In accordance with ASC 480, Distinguishing Liabilities from Equity, the Company evaluates its hybrid convertible debt instruments with unconditional obligations allowing settlement by issuing a variable number of its equity shares to determine proper classification and accounting. The Company classifies the following hybrid convertible debt instruments as a liability upon being convertible at the option of the holders due to the conversion terms being based on fixed monetary amounts known at inception, in this case, settlement with a variable number of the Company’s equity shares. As such, conversion option and are carried as a liability at fair value at each balance sheet date with a re-measurement reported as a change in fair value of share-settled debt in other (income) expense in the accompanying condensed statements of operations.

During May 2019, the Company issued a convertible note payable in the amount of $262,500, due in one year from the date of issuance, with an original issuance discount of $12,500, accrues interest at a default rate of 16% per annum, is unsecured and is convertible after 180 days into shares of the Company’s common stock at a discount of 65% of the lowest trading price for the Company’s common stock during the ten trading days immediately preceding the conversion. During April 2020, the note became convertible at the option of the holder and between May and July 2020 the Company issued a total of 16,355,821 shares of common stock for the conversion of $175,000 in note principal and accrued interest.

As of March 31, 2022 and December 31, 2021, the balance on the convertible note payable was $59,565and $53,514 respectively. The fair value of the discount conversion feature on the remaining principal balance was $6,051 as of March 31, 2022 and is included in the note principal balance. During the three months ended March 31, 2022 and 2021, the Company recognized $0 and $0 in debt discount amortization expense, respectively.

During August 2019, the Company issued a convertible note payable in the amount of $157,500. The convertible note payable is due one year from the date of issuance, has an original issuance discount of $7,500, accrues interest at a default rate of 16% per annum, is unsecured and is convertible after 180 days into shares of the Company’s common stock at a discount of 65% of the lowest trading price for the Company’s common stock during the ten trading days immediately preceding the conversion. During April 2020, the note became convertible at the option of the holder and during August and September 2020, the Company issued a total of 7,616,146 shares of common stock for the conversion of $50,000 in note principal.

As of March 31, 2022 and December 31, 2021, the balance on the convertible note payable was $212,425 and $190,360, respectively. The fair value of the discount conversion feature on the remaining principal balance was $22,065 as of March 31, 2022 and is included in the note principal balance. During the three months ended March 31, 2022 and 2021, the Company recognized $0 and $0 in debt discount amortization expense, respectively.

During January 2020, the Company issued a convertible note payable in the amount of $138,000. The convertible note payable is due one year from the date of issuance, has an original issuance discount of $3,000, accrues interest at the rate of 8% per annum, has a default rate of 22% per annum, is unsecured and is convertible after 180 days into shares of the Company’s common stock at a discount of 65% of the lowest trading price for the Company’s common stock during the ten trading days immediately preceding the conversion. During July 2020, the note became convertible at the option of the holder.

The fair value of the discount conversion feature on the remaining principal balance was $21,073 as of March 31, 2022. As of March 31, 2022 and December 31, 2021, the balance on the convertible note payable was $241,442 and $220,369, respectively. During the three months ended March 31, 2022 and 2021, the Company recognized $0 and $222 in debt discount amortization expense, respectively.

During February 2020, the Company issued a convertible note payable in the amount of $440,000. The convertible note payable is due one year from the date of issuance, has an original issuance discount of $40,000, accrues interest at the rate of 5% per annum, has a default interest rate of 24% per annum, is unsecured and is convertible after 180 days into shares of the Company’s common stock at a discount of 65% of the lowest trading price for the Company’s common stock during the ten trading days immediately preceding the conversion. During August 2020, the note became convertible at the option of the holder. During March 2021, the note holder elected to convert principal of $75,000 into 11,895,321 shares of the Company’s common stock.

The fair value of the discount conversion feature on the remaining principal balance was $17,257 as of March 31, 2022. As of March 31, 2022 and December 31, 2021, the balance on the convertible note payable was $178,754 and $161,497, respectively. During the three months ended March 31, 2022 and 2021, the Company recognized $0 and $5,918 in debt discount amortization expense, respectively.

During April 2020, the Company issued a convertible note payable in the amount of $247,500. The convertible note payable is due one year from the date of issuance, has an original issuance discount of $22,500, accrues interest at the rate of 5% per annum, has a default rate of 24% per annum, is unsecured and is convertible after 180 days into shares of the Company’s common stock at a discount of 65% of the lowest trading price for the Company’s common stock during the ten trading days immediately preceding the conversion. During October 2020, the note became convertible at the option of the holder.

The fair value of the discount conversion feature on the remaining principal balance was $37,446 as of March 31, 2022. As of March 31, 2022 and December 31, 2021, the balance on the convertible note payable was $431,234 and $393,788, respectively. During the three months ended March 31, 31, 2022 and 2021, the Company recognized $0 and $5,548 in debt discount amortization expense, respectively.

During the three months ended March 31, 2022 and 2021, the Company recognized $103,892 in fair value losses and $29,528 in fair value gains as a result of the conversion options on the above mentioned convertible debt, respectively.