Related Parties

The Company has convertible notes payable to related parties that have a principal balance of $1,485,189 and $161,000 as of June 30, 2020 and December 31, 2019, respectively. These notes carry interest rates of 10% and are due on demand. The notes carry fixed and variable conversion prices per share at June 30, 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 June 30, 2020 and December 31, 2019. During the six months ended June 30, 2020 and 2019, beneficial conversion feature amortization expense related to these convertible notes payable of $1,485,189 and none, respectively, was accounted for as amortization of interest - beneficial conversion feature expense in the condensed consolidated statements of operations. During the six months ended June 30, 2020 and 2019, derivative embedded conversion feature amortization expense related to these convertible notes payable of $0 and $56,100 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 156,474 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 June 30, 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 342,399 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 has a notes payable with detached free-standing warrants to related parties principal balance of none and $280,119 as of June 30, 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 $0.03 - $0.53. As of June 30, 2020 and December 31, 2019, these notes carried outstanding detached free-standing warrants of none and 454,097, respectively. The unamortized discount at June 30, 2020 and December 31, 2019 is none and $8,656, respectively. During the six-month period ended June 30, 2020 and 2019, stock warrants amortization expense recorded as interest expense was $8,656 and $15,093, respectively. The relative fair market value of the related stock warrants granted during the six-month period ended June 30, 2020 and 2019 was none and $35,030, 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 601,783 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.

Total interest expense for related party notes was $42,161 and $43,235 for the six-month period ended June 30, 2020 and 2019, respectively.

Related party notes payable consist of the following: 

Non-Related Parties

The Company has convertible notes payable to non-related parties that have a principal balance of $56,683 and $143,136 as of June 30, 2020 and December 31, 2019, respectively. These notes carry interest rates ranging from 5% - 30% and have due dates ranging from 2/20/2013 – 3/06/2022. Three of the four notes are currently in default. These notes carry conversion prices ranging from $1.99 - $10.76 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 June 30, 2020 and December 31, 2019. During the six months ended June 30, 2020 and 2019, beneficial conversion feature amortization expense related to these convertible notes payable of none 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 50,135 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 of approximately $68,000. 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 $2 per common share. The Company recorded a loss on non-related party debt extinguishment of $11,697. On June 9, 2020, the holder of a $25,000 convertible promissory note with interest at 30% and accrued interest of $61,875 replaced the carrying amount of the note and its conversion features with a new non-convertible note totaling $47,500 that bears interest at 5%. The Company recorded a gain on non-related party debt extinguishment of $61,875.

The Company has non-convertible notes payable to non-related parties that have a principal balance of $84,165 and $21,438 as of June 30, 2020 and December 31, 2019, respectively. These notes carry interest rates ranging from 1% - 10% and have due dates ranging from 12/27/2013 - 6/6/2022. Two of the four 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 20,313 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 of $39,000. On May 12, 2020, the Company received proceeds of $41,665 from a commercial bank under the SBA Payroll Protection Loan Program. The loan requires interest at 1% and 18 monthly payments of principal and interest beginning December 5, 2020. Provisions of the SBA Payroll Protection Loan Program allow for portions or all the loan balance to be forgiven should certain criteria be met.  The Company expects that it will meet the criteria for the full of amount of loan forgiveness.

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 June 30, 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 $10,885 and $28,762 for the six month period ended June 30, 2020 and 2019, respectively.

Non- related party notes payable consist of the following: