Related Parties

 

The Company has convertible notes payable to related parties that have a principal balance of $70,000 and $161,000 as of March 31, 2020 and December 31, 2019, respectively. These notes carry interest rates of 10% and are due on demand. Each note carries a variable conversion price per share at March 31, 2020. The Company evaluated these convertible notes payable for derivative embedded conversion features and beneficial conversion features. The Company determined that there were both derivative embedded conversion features and beneficial conversion features to record. The conversion features were either fully amortized upon grant or over the life of the convertible notes payable. The conversion features were fully amortized as of March 31, 2020 and December 31, 2019. During the three months ended March 31, 2020 and 2019, derivative embedded conversion feature amortization expense related to these convertible notes payable of $0 and $28,000, respectively, was accounted for as interest expense in the condensed consolidated statements of operations. During the three months ended March 31, 2020, the Company entered into a Debt Conversion and Common Stock Purchase Plan with a related party, under which the Company agreed to issue 5,204,327 shares of its common stock in exchange for a reduction of four convertible notes payable to related parties. The amount of the debt reduction and, therefore the purchase price of the shares was $143,119 which was used for the deduction of related party convertible notes payable principal of $91,000 and accrued interest of $52,119.

 

The Company has a non-convertible notes payable to related parties principal balance of $11,810 and $328,423 as of March 31, 2020 and December 31, 2019, respectively. The principal balance consist of one zero interest note payable with a due date of December 31, 2012. This note is currently in default. During the  three months ended March 31, 2020, the Company converted eight non-convertible notes payable to related parties that had a principal balance of $316,613. During the three months ended March 31, 2020, the Company entered into Debt Conversion and Common Stock Purchase Plans with four related parties, under which the Company agreed to issue 11,388,204 shares of its common stock in exchange for a reduction of eight non-convertible notes payable to related parties. The amount of the debt reduction and, therefore the purchase price of the shares was $549,311 which was used for the deduction of related party non-convertible notes payable principal of $316,613 and accrued interest of $232,698. The Company recorded a related party gain on loan extinguishment and forgiveness of approximately $66,000.

 

The Company has a notes payable with detached free-standing warrants to related parties principal balance of none and $280,119 as of March 31, 2020 and December 31, 2019, respectively. These notes carried interest rates ranging from 7% - 10% and had due dates ranging from 08/05/2015 – 03/30/2020. The exercise price for each note payable with detached free-standing warrants ranged from $0.001 - $0.016. As of March 31, 2020 and December 31, 2019, these notes carried outstanding detached free-standing warrants of none and 15,103,261, respectively. The unamortized discount at March 31, 2020 and December 31, 2019 is none and $8,656, respectively. During the three month period ended March 31, 2020 and 2019, stock warrants amortization expense recorded as interest expense was $8,656 and $6,982, respectively. The reason for the increase in stock warrants expense was directly related to the timing of funds borrowed and the related amortization of its stock warrants. The relative fair market value of the related stock warrants granted during the three month period ended March 31, 2020 and 2019 was none and $22,665, respectively. During the three months ended March 31, 2020, the Company entered into Debt Conversion and Common Stock Purchase Plans with two related parties, under which the Company agreed to issue 20,015,299 shares of its common stock in exchange for a reduction of 24 notes payable with detached free-standing warrants to related parties. The amount of the debt reduction and, therefore the purchase price of the shares was $320,858 which was used for the deduction of related party notes payable with detached free-standing warrants principal of $280,119 and accrued interest of $40,739. The Company recorded a related party gain on loan extinguishment and forgiveness of approximately $34,000.

 

Total interest expense for related party notes was $30,705 and $20,805 for the three month period ended March 31, 2020 and 2019, respectively.

 

Related party notes payable consist of the following:

 

		March 31, 2020				December 31, 2019
Convertible Notes Payable		$	70,000			$	161,000
Conventional Non-Convertible Notes Payable			11,810				328,423
Notes Payable with Detached Free-standing Warrants			-				280,119
Unamortized Discount			-				(8,656	)
Net Related Party Notes Payable		$	81,810			$	760,886

 

Non-Related Parties

 

The Company has convertible notes payable to non-related parties that have a principal balance of $81,683 and $143,136 as of March 31, 2020 and December 31, 2019, respectively. These notes carry interest rates ranging from 5% - 30% and have due dates ranging from 11/08/2012 - 3/06/2022. Three of the four notes are currently in default. These notes carry conversion prices ranging from $0.06- $0.3235688 per share. The Company evaluated these convertible notes payable for derivative embedded conversion features and beneficial conversion features. The Company determined that there were beneficial conversion features to record. The conversion features were either fully amortized upon grant or over the life of the convertible notes payable. The conversion features were fully amortized as of March 31, 2020 and December 31, 2019. During the three months ended March 31, 2020 and 2019, beneficial conversion feature amortization expense related to these convertible notes payable of $0 and $5,356, respectively, was accounted for as amortization of interest - beneficial conversion feature expense in the condensed consolidated statements of operations. During the three month period ended March 31, 2020, the Company entered into Debt Conversion and Common Stock Purchase Plans with six non-related parties, under which the Company agreed to issue 1,667,490 shares of its common stock in exchange for a reduction of eleven convertible notes payable to non-related parties. The amount of the debt reduction and, therefore the purchase price of the shares was $166,749 which was used for the deduction of non-related party convertible notes payable principal of $83,952 and accrued interest of $82,797. The Company recorded a non-related party gain on loan extinguishment or forgiveness of approximately $56,000. During the three months ended March 31, 2020, the Company also entered into a non-related party convertible note payable agreement to convert a high interest rate convertible non-related party note payable with a principal balance of $25,000 and accrued interest due of $22,500 to a non-related party convertible note payable of $47,500 that accrues interest at 5%. The note conversion rate is $0.06 per common share. The Company recorded a loss on non-related party debt extinguishment of $11,697.

 

The Company has non-convertible notes payable to non-related parties that have a principal balance of $17,500 and $21,438 as of March 31, 2020 and December 31, 2019, respectively. These notes carry interest rates ranging from 9% - 10% and have due dates ranging from 12/27/2013 - 11/11/2015. All outstanding notes are currently in default. During the three month period ended March 31, 2020, the Company entered into a Debt Conversion and Common Stock Purchase Plan with a non-related party, under which the Company agreed to issue 675,610 shares of its common stock in exchange for a reduction of his non-convertible non-related party note payable. The amount of the debt reduction and, therefore the purchase price of the shares was $67,561 which was used for the deduction of non-related party non-convertible notes payable principal of $3,938 and accrued interest of $63,623. The Company recorded a non-related party gain on loan extinguishment or forgiveness of approximately $14,000.

 

The Company has one note payable with detached free-standing warrants to a non-related party that has a principal balance of $5,000 and $5,000 as of March 31, 2020 and December 31, 2019, respectively. This note carries an interest rate of 10% and had a due date of 9/11/2014. This note is currently in default. The detached free-standing warrants for this note payable were not exercised by the note holder and expired on May 16, 2019.

 

Total interest expense for non-related party notes was $6,123 and $13,670 for the three month period ended March 31, 2020 and 2019, respectively.

 

Non- related party notes payable consist of the following:

 

		March 31, 2020				December 31, 2019
Convertible Notes Payable		$	81,683			$	143,136
Conventional Non-Convertible Notes Payable			17,500				21,438
Notes Payable with Detached Free-standing Warrants			5,000				5,000
Unamortized Beneficial Conversion Feature			-				-
Net Non-Related Party Notes Payable		$	104,183			$	169,574