CONVERTIBLE NOTES AND DERIVATIVE LIABILITIES

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

CONVERTIBLE NOTES AND DERIVATIVE LIABILITIES

NOTE 9. CONVERTIBLE NOTES AND DERIVATIVE LIABILITIES

The following tables set forth the components of the Company’s, convertible debentures as of September 30, 2021 and December 31, 2020: 

	September 30, 2021			December 31, 2020
Principal value of convertible notes	$	1,037,083		$	1,662,000
Note discount		(192,007	)		(664,442	)
Total convertible notes, net current	$	845,076		$	997,558

During the year ended December 31, 2020, the Company issued a total of 24 notes to accredited investors of which $582,500 was in the form of unsecured 5% convertible notes, and $595,500 was in unsecured 8% convertible notes, and $1,000,500 at 10%. Under the terms of each convertible note, the investors received the right to convert their WHAT to common stock commencing the year after the date of issuance ranging from 55%-75%, respectively, of the lowest closing price for the Company’s common stock measured 20 business days prior to conversion. One of the noteholders also received 153,940 “returnable” shares in connection with issuance of the convertible notes. These shares are returnable to the Company if the underlying convertible note ($160,000) is redeemed before the passage of 180 days. During the three months ended September 30, 2020 the Company repaid the $160,000 Note, received the 153,940 shares back from the noteholder, and converted a $100,000 note plus accrued interest into 135,000 Common Shares of the Company.

During the year ended December 31, 2020 the Company recorded $257,345 in interest expense on these Notes and amortized $1,690,933 of note discount which was charged to interest expense. As of December 31, 2020, there was $35,048 in accrued interest on these notes, and $664,442 in unamortized note discount related to these notes. As of the date of this Report, there was one note for $100,000 that was past due its maturity date. The Company has not received any notice of default on these notes and continues to accrue interest on these notes past the maturity date.

During the year ended December 31, 2020 the Company issued 4,067,332 common shares upon the conversion of $1,984,000 in convertible notes and recorded a gain of $566,408.

September 30, 2021 Activity

During the nine-month period ended September 30, 2021, the Company received proceeds from convertible notes of $427,083.

During the nine months ended September 30, 2021 the Company recorded $64,540 in interest expense on its convertible notes and amortized $767,414 of note discount which was charged to interest expense. As of September 30, 2021, there was $43,900 in accrued interest on these notes, and $192,007 in unamortized note discount related to these notes. As of the date of this Report, there was one note for $100,000 that was past due its maturity date. The Company has not received any notice of default on these notes and continues to accrue interest on these notes past the maturity date.

During the nine months ended September 30, 2021, the Company issued 30,581,678 common shares upon the conversion of $1,105,500 in convertible notes and recorded a loss on conversion of $1,226,489.

As of September 30, 2021, derivative liabilities were valued using a probability-weighted average Black-Scholes-Merton pricing model with the following assumptions: 

	September 30, 2021
Exercise Price	$	0.01342 – 0.0345
Stock Price	$	.032-0.05
Risk-free interest rate		.08-.09%
Expected volatility		128.50%-227.10%
Expected life (in years)		0.50 - 1.00
Expected dividend yield		0%
Fair Value:	$	982,429

The risk-free interest rate was based on rates established by the Federal Reserve Bank. The Company uses the historical volatility of its common stock to estimate the future volatility for its common stock. The expected life of the conversion feature of the notes was based on the remaining term of the notes. The expected dividend yield was based on the fact that the Company has not customarily paid dividends in the past and does not expect to pay dividends in the future.

During the nine months ended September 30, 2021, the Company recognized a gain of $2,694,220 as “Change in the fair value of the derivative liability” on its Consolidated Statements of Operations.