Notes Payable

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Notes Payable

Note 5. Notes Payable

June 2018 Note

On June 1, 2018, the Company entered into a note purchase agreement with an accredited investor, pursuant to which the Company issued an unsecured promissory note in the amount of $3,600 (the “June 2018 Note”) for consideration of $3,000. The outstanding balance was to be made in nine equal monthly installments beginning August 1, 2018, with an initial maturity date of April 1, 2019, with no prepayment penalty. Upon an event of default, the outstanding balance of the promissory note would immediately increase by 120% and become immediately due and payable. Prior to 2020, this note was amended 5 times.

During the year ended December 31, 2020, the Company issued 93,078,492 shares of its common stock upon the conversion of $929 in outstanding principal, reducing the outstanding principal balance to $0 as of December 31, 2020.

December 2020 Note

On December 8, 2020, the Company entered into a securities purchase agreement pursuant to which it issued a convertible promissory note (the “December 2020 Note”) in the principal amount of $230 which is convertible, at the option of the holder, into shares of common stock at a conversion price equal to 70% of the lowest price for a share of common stock during the ten trading days immediately preceding the applicable conversion. The Company received consideration of $200 for the convertible promissory note. The note bears interest at a rate of 8% per annum and matures in twelve months.

The Company determined that the embedded conversion feature of the convertible promissory note meets the definition of a beneficial conversion feature and a derivative liability which is accounted for separately. The Company measured the beneficial conversion feature’s intrinsic value on December 8, 2020 and determined that the beneficial conversion feature was valued at $200 which was recorded as a debt discount, and together with the original issue discount of $30, in the aggregate of $230, is being amortized over the life of the loan. The Company measured the derivative liability’s fair value on December 8, 2020 and determined that the derivative liability was valued at $555 which exceeded the intrinsic value of the beneficial conversion feature by $355 and resulted in the Company recording non-cash interest expense of $355.

On June 15, 2021, the holder converted $120 of principal into 4,761,905 shares of common stock. As a result of this conversion, $172 of derivative liability was settled and $30 was recorded as loss on settlement of debt. As of June 30, 2021, this note had a principal balance of $110, accrued interest of $10 and unamortized debt discount of $74.

As of June 30, 2021, the fair value of the remaining derivative liability was $107 and for the three and six months ended June 30, 2021 the Company recorded a gain of $35 and a loss of $33, respectively, from the change in fair value of derivative liability as non-operating expense in the consolidated statements of operations. As of December 31, 2020, the fair value of the derivative liability was $246. The Company valued the derivative liability using the Black-Scholes option pricing model using the following assumptions as of June 30, 2021 and December 31, 2020, respectively: 1) stock prices of $0.047 and $0.04, 2) conversion prices of $0.038 and $0.025, 3) remaining lives of .44 and 0.94 years, 4) dividend yields of 0%, 5) risk free rates of 0.05% and 0.10%, and 6) volatility of 144.43% and 167.36%.

March 2021 Note

On March 5, 2021, the Company entered into a securities purchase agreement, pursuant to which the Company issued a convertible promissory note in the original principal amount of $13,210 (the “March 2021 Note”). The March 2021 Note is convertible, at the option of the Investor, into shares of common stock of the Company at a conversion price equal to 70% of the lowest price for a share of common stock during the ten trading days immediately preceding the applicable conversion (the “Conversion Price”); provided, however, in no event shall the Conversion Price be less than $0.04 per share. The March 2021 Note bears interest at a rate of 8% per annum and will mature in twelve months.

The March 2021 Note will be funded in tranches, with the initial tranche of $1,210 funded on March 5, 2021 for consideration of $1,000. Six subsequent tranches (five tranches, each for $1,200 and one tranche for $6,000) will be funded upon the notice of effectiveness of a Registration Statement on Form S-1 covering the common stock issuable in connection with the March 2021 Note. Further, the final tranche requires the mutual agreement of the Company and Investor. Until such time as Investor has funded the subsequent tranches, the Company will hold a series of Investor Notes that offset any unfunded portion of the March 2021 Note.

As a result of the Company failing to meet certain registration requirements under the March 2021 Note, the outstanding balance of the March 2021 Note was automatically increased by 5% on each of July 3, 2021 and August 2, 2021. Further, in such event, for each 30 days thereafter (September 1, 2021 being the next trigger date) up to an additional two times that the Registration Statement is not effective, the outstanding balance of the March 2021 Note will automatically be increased by an additional 5%.

The Company determined that the embedded conversion feature of the convertible promissory note meets the definition of a beneficial conversion feature. The Company measured the beneficial conversion feature’s intrinsic value on March 5, 2021 and determined that the beneficial conversion feature was valued at $1,000 which was recorded as a debt discount, and together with the original issue discount of $210, in the aggregate of $1,210, is being amortized over the life of the loan.

Derivative Liabilities

The Company’s activity in its derivative liability was as follows for the six months ended June 30, 2021:

Balance of derivative liability at December 31, 2020	$	246
Settlement upon conversion		(172	)
Change in fair value recognized in non-operating expense		33
Balance of derivative liability at June 30, 2021	$	107

The Company did not have any derivative liability activity during the six months ended June 30, 2020.

Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. As the stock price increases for each of the related derivative instruments, the value to the holder of the instrument generally increases, therefore increasing the liability on the Company’s balance sheet. Additionally, stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments. The simulated fair value of these liabilities is sensitive to changes in the Company’s expected volatility. Increases in expected volatility would generally result in higher fair value measurement. A 10% change in pricing inputs and changes in volatilities and correlation factors would not result in a material change in our Level 3 fair value.

The following table summarizes the Company’s derivative liability as of June 30, 2021:

	June 30, 2021
	Level 1		Level 2		Level 3		Fair Value
Liabilities
Derivative liability	$	-	$	-	$	107	$	107

The following table summarizes the Company’s derivative liability as of December 31, 2020:

	December 31, 2020
	Level 1		Level 2		Level 3		Fair Value
Liabilities
Derivative liability	$	-	$	-	$	246	$	246

U.S. Small Business Administration-Paycheck Protection Plan

On April 16, 2020, we entered into a promissory note with Aquesta Bank for $108 (the “PPP Loan”) in connection with the Paycheck Protection Program (“PPP”) offered by the U.S. Small Business Administration (the “SBA”). The PPP Loan had terms including an interest rate of 1% per annum, with monthly installments of $6 commencing on November 1, 2021 through its maturity on April 1, 2023. The principal amount of the PPP Loan is forgiven if the loan proceeds are used to pay for payroll costs, rent and utilities costs over the 24-week period after the loan is made. Not more than 40% of the forgiven amount may be used for non-payroll costs. In addition, in July 2020, the Company received $3 from the SBA as a COVID-19 Economic Injury Disaster Loan Advance (the “EIDL Advance”)

On April 1, 2021, the Company received notice of forgiveness from the SBA in the amount of $108 in relation to the PPP Loan as the Company used all proceeds from the PPP Loan to maintain payroll and other allowable expenses. Further, pursuant to an SBA Procedural Notice in December 2020, the EIDL Advance was also forgiven. The Company has concluded that the PPP Loan and EIDL Advance represent, in substance, a government grant that is forgiven in its entirety. As such, in accordance with International Accounting Standards (“IAS”) 20, “Accounting for Government Grants and Disclosure of Government Assistance,” the Company has recognized the entire PPP Loan and EIDL Advance amount of $111 as grant income, which is included in other non-operating income (expense) in the consolidated statement of operations for the year ended December 31, 2020.

Notes payable consisted of the following:

	As of June 30, 2021
	Principal		Discount			Net
December 2020 Note	$	110	$	(74	)	$	36
March 2021 Note		1,210		(1,006	)		204
Total notes payable	$	1,320	$	(1,080	)	$	240

	As of December 31, 2020
	Principal		Discount			Net
Total notes payable-December 2020 Note	$	230	$	(225	)	$	5

During the three months ended June 30, 2021 and 2020, the Company recorded accretion of debt discount of $208 and $456, respectively.

During the six months ended June 30, 2021 and 2020, the Company recorded accretion of debt discount of $270 and $877, respectively.