NOTE 5: DEBT

Notes Payable

As of September 30, 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, original issuance discount of $12,500, accrues interest at 6% per annum, unsecured and convertible 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. As of September 30, 2022 and December 31, 2021, the balance on the convertible note payable was $57,396 and $53,514, respectively. The fair value of the discount conversion feature on the remaining principal balance was $3,882 as of September 30, 2022 and is included in the note principal balance.

During August 2019, the Company issued a convertible note payable in the amount of $157,500, due in one-year, original issuance discount of $7,500, accrues interest at 6% per annum, unsecured and convertible 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. As of September 30, 2022 and December 31, 2021, the balance on the convertible note payable was $204,070 and $190,360, respectively. The fair value of the discount conversion feature on the remaining principal balance was $13,710 as of September 30, 2022 and is included in the note principal balance.

During January 2020, the Company issued a convertible note payable in the amount of $138,000, due in one-year, original issuance discount of $3,000, accrues interest at 8% per annum, unsecured and convertible 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. As of September 30, 2022 and December 31, 2021, the balance on the convertible note payable was $229,600 and $220,369, respectively. The fair value of the discount conversion feature on the remaining principal balance was $9,231 as of September 30, 2022. During the nine months ended September 30, 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, due in one-year, original issuance discount of $40,000, accrues interest at 5% per annum, unsecured and convertible 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.  As of September 30, 2022 and December 31, 2021, the balance on the convertible note payable was $168,673 and $161,497, respectively. The fair value of the discount conversion feature on the remaining principal balance was $7,175 as of September 30, 2022. During the nine months ended September 30, 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, due in one-year, original issuance discount of $22,500, accrues interest at the rate of 5% per annum, unsecured and convertible 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. As of September 30, 2022 and December 31, 2021, the balance on the convertible note payable was $410,236 and $393,788, respectively. The fair value of the discount conversion feature on the remaining principal balance was $16,448 as of September 30, 2022. During the nine months ended September 30, 2022 and 2021, the Company recognized $0 and $6,411 in debt discount amortization expense, respectively.

As a result of the conversion options on the above mentioned convertible debt, during the nine months ended September 30, 2022, the Company recognized $50,446 in fair value losses and recognized $207,089 in fair value gains during the nine months ended September 30, 2021.