RELATED PARTIES

 

Related party notes payable consist of the following:

 

		March 31,  2021				December 31, 2020
Convertible Notes Payable with Detached Free-standing Warrants		$	500,000			$	-
Conventional Non-Convertible Notes Payable			41,810				11,810
Unamortized Debt Discount			(484,658	)			-
Net Related Party Notes Payable		$	57,152			$	11,810
Current Portion			(41,810	)			(11,810	)
Net Long-Term Portion		$	15,342			$	-

 

Total interest expense for related party notes was $3,847 and $30,705 for the three month period ended March 31, 2021 and 2020, respectively.

 

Related Party Convertible Notes Payable with Warrants

 

The Company has eight convertible notes payable to related parties, each with detached free-standing warrants to purchase the Company’s common stock at $3 per share, that have a total principal balance of $500,000 as of March 31, 2021. The notes, secured by the Company’s patents and patents applications, include interest at 12%, are convertible at $3 per share of the Company’s common stock and are due 24 months after issuance. The note holders may elect to have the interest paid in cash monthly or have the interest accrue and be payable on the maturity date. Interest elected to be accrued will be paid in cash or may be converted into shares of our common stock under the same terms as the principal amount on the maturity date. The notes contain both voluntary and automatic conversion features. The notes will be convertible at any time, by the holders, beginning on the date of issuance. However, the holders may not convert any outstanding amounts due under the note if at the time of such conversion the amount of common stock issued for the conversion, when added to other shares of Company common stock owned by the holders or which can be acquired by holders upon exercise or conversion of any other instrument, would cause the holder to own more than 4.9% of the Company’s outstanding common stock. Beginning on the issuance date, the outstanding principal amount of the note, and any accrued interest, will automatically convert into shares of the Company’s common stock if the Company’s common stock closes at or above $6 per share for five (5) consecutive trading days while listed on NASDAQ. The Company evaluated the convertible notes payable for derivative embedded and beneficial conversion features. The Company determined that there were beneficial conversion features to record. The total beneficial conversion feature debt discount of $212,219 is amortized over the life of the convertible notes payable. The debt discount amortization expense recorded as amortization of interest – beneficial conversion feature in the consolidated statements of operations was $6,361 for the three month period ended March 31, 2021. As of March 31, 2021 these notes carry outstanding warrants of 250,000. The relative fair market value of the related stock warrants granted during the three month period ended March 31, 2021 and 2020 was $287,781 and none, respectively. The unamortized discount at March 31, 2021 and December 31, 2020 is $278,800 and none, respectively. Stock warrants amortization expense recorded as interest expense was $8,981 for the three month period ended March 31, 2021.

 

Related Party Non-convertible Notes Payable

 

The Company has two and one non-convertible notes payable to related parties that have a principal balance of $41,810 and $11,810 as of March 31, 2021 and December 31, 2020, respectively. These notes carry interest rates at 0%. The outstanding note payable with a balance of $11,810 as of March 31, 2021 had a due date of December 31, 2012 and is currently in default.

 

NON-RELATED PARTIES

 

Non-related party notes payable consist of the following:

 

		March 31, 2021				December 31, 2020
Convertible Notes Payable with Detached Free-standing Warrants		$	600,000			$	-
Convertible Notes Payable			56,683				56,683
Conventional Non-Convertible Notes Payable			42,500				42,500
Notes Payable with Detached Free-standing Warrants			5,000				5,000
Unamortized Debt Discount			(592,328	)			-
Net Non-Related Party Notes Payable		$	111,855			$	104,183
Current Portion			(79,183	)			(79,183	)
Net Long-Term Portion		$	32,672			$	25,000

 

Total interest expense for non-related party notes was $5,141 and $6,123 for the three month periods ended March 31, 2021 and 2020, respectively.

 

Convertible Notes Payable with Warrants

 

The Company has eight convertible notes payable to non-related parties, each with detached free-standing warrants to purchase the Company’s common stock at $3 per share, that have a total principal balance of $600,000 as of March 31, 2021. The notes, secured by the Company’s patents and patents applications, include interest at 12%, are convertible at $3 per share of the Company’s common stock and are due 24 months after issuance. The note holders may elect to have the interest paid in cash monthly or have the interest accrue and be payable on the maturity date. Interest elected to be accrued will be paid in cash or may be converted into shares of our common stock under the same terms as the principal amount on the maturity date. The notes contain both voluntary and automatic conversion features. The notes will be convertible at any time, by the holders, beginning on the date of issuance. However, the holders may not convert any outstanding amounts due under the note if at the time of such conversion the amount of common stock issued for the conversion, when added to other shares of Company common stock owned by the holders or which can be acquired by holders upon exercise or conversion of any other instrument, would cause the holder to own more than 4.9% of the Company’s outstanding common stock. Beginning on the issuance date, the outstanding principal amount of the note, and any accrued interest, will automatically convert into shares of the Company’s common stock if the Company’s common stock closes at or above $6 per share for five (5) consecutive trading days while listed on NASDAQ. The Company evaluated the convertible notes payable for derivative embedded and beneficial conversion features. The Company determined that there were beneficial conversion features to record. The total beneficial conversion feature debt discount of $268,400 is amortized over the life of the convertible notes payable. The debt discount recorded as amortization of interest – beneficial conversion feature in the consolidated statements of operations was $3,181 for the three month period ended March 31, 2021. As of March 31, 2021, these notes carry outstanding warrants of 300,000. The relative fair market value of the related stock warrants granted during the three month period ended March 31, 2021 and 2020 was $331,600 and none, respectively. The unamortized discount at March 31, 2021 and December 31, 2020 was $327,109 and none, respectively. Stock warrants amortization expense recorded as interest expense was $4,491 for the three month period ended March 31, 2021.

 

Convertible Notes Payable

 

The Company has three convertible notes payable to non-related parties that have a principal balance of $56,683 as of March 31, 2021 and December 31, 2020. These notes carry interest rates ranging from 5% - 12% and have due dates ranging from 2/19/2013 – 3/06/2022. Two of the three notes are currently in default. These notes carry conversion prices ranging from $1.99- $10.7619 per share. The Company evaluated these convertible notes payable for derivative embedded 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 prior to 2020.

 

During the three months 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 $166,750 which was used for the deduction of non-related party convertible notes payable principal of $83,953 and accrued interest of $82,797. The Company recorded a non-related party gain on loan extinguishment of approximately $103,000.

 

During the three months ended March 31, 2020, the Company 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.

 

Non-convertible Notes Payable

 

The Company has three non-convertible notes payable to non-related parties that have a principal balance of $42,500 as of March 31, 2021 and December 31, 2020. These notes carry interest rates ranging from 5% - 10% and have due dates ranging from 12/25/2013 - 6/06/2022. Two of the three notes are currently in default.

 

Notes Payable with Warrants

 

The Company has one note payable with detached free-standing warrants to a non-related party that has a principal balance of $5,000 as of March 31, 2021 and December 31, 2020. 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.