Convertible Loans Payable

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Convertible Loans Payable

Note 10. Convertible Loans Payable

As of March 31, 2023 and December 31, 2022, the balance of convertible loans payable net of discount was $116,821 and $73,664, respectively.

During the year ended December 31, 2022, the Company issued one convertible loan in the aggregate amount of $178,000. The note bears interest at 8% per annum and all matured within one year. The conversion features in the note met the definition of a derivative and required bifurcation and liability classification, at fair value. The fair value of the derivative liability as of the date of issuance was $175,025 and was recorded as a discount of the notes.

During the year ended December 31, 2021, the Company issued two convertible loans in the aggregate amount of $404,000. The notes bear interest at 8% per annum and all mature within one year. On October 21, 2021, the Maturity Date of the $304,000 loan was extended from March 25, 2022 to April 21, 2022. The embedded beneficial conversion features in the notes meet the definition of a derivative and requires bifurcation and liability classification, at fair value. The fair value of the derivative liability as of the date of issuance was $746,672 and was recorded as a discount of the notes. During the year ended December 31, 2022, the remaining balance of these loans was fully repaid or converted.

	Amount
Balance of notes payable, net on December 31, 2021	$	176,703
Issuances of debt		178,000
Cash settlement of debt		(150,000	)
Debt discount		(175,025	)
Conversions		(50,000	)
Amortization of debt discount		93,986
Balance of notes payable, net on December 31, 2022	$	73,664
Amortization of debt discount		43,157
Balance of convertible loan payables, net of discounts on March 31, 2023 (Unaudited)	$	116,821

Derivative Liability

The Company issued debts that consist of the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Due to the fact that the number of shares of common stock issuable could exceed the Company’s authorized share limit, the equity environment is tainted, and all additional convertible debentures and warrants are included in the value of the derivative liabilities. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion options and warrants and shares to be issued were recorded as derivative liabilities on the issuance date and revalued at each reporting period.

Based on the various convertible notes described above, the fair value of applicable derivative liabilities on notes and change in fair value of derivative liability are as follows as of March 31, 2023 and December 31, 2022:

	Total
Balance as of December 31, 2021	$	354,160
Change Due to Issuances		175,026
Change due to exercise / redemptions		(110,507	)
Change in fair value		(234,654	)
Balance as of December 31, 2022	$	184,025
Change in fair value		(30,593	)
Balance of derivative liability as of March 31, 2023 (Unaudited)	$	153,432

A summary of quantitative information with respect to valuation methodology and significant unobservable inputs used for the Company’s derivative liabilities that are categorized within Level 3 of the fair value hierarchy for the periods ended March 31, 2023 and December 31, 2022 is as follows:

	March 31, 2023			December 31, 2022
		(Unaudited)
Stock price	$	0.04		$	0.04 – 0.19
Exercise price	$	0.03		$	0.02 - 0.10
Contractual term (in years)		0.58			0.68 – 1.00
Volatility (annual)		182	%		140% – 1,313%
Risk-free rate		4.64	%		0.51% - 4.73%

The foregoing assumptions are reviewed quarterly and are subject to change based primarily on management’s assessment of the probability of the events described occurring. Accordingly, changes to these assessments could materially affect the valuations.

Financial Liabilities Measured at Fair Value on a Recurring Basis

Financial liabilities measured at fair value on a recurring basis are summarized below and disclosed on the balance sheet under Derivative liability – warrants and derivative liabilities:

		Fair Value measured at March 31, 2023 (Unaudited)
		Quoted prices in		Significant other		Significant		Fair value at
		active markets		observable inputs		unobservable inputs		March 31,
		(Level 1)		(Level 2)		(Level 3)		2023
Derivative liability	$	—	$	—	$	153,432	$	153,432
Total	$	—	$	—	$	153,432	$	153,432

	Fair value measured at December 31, 2022
	Quoted prices in		Significant other		Significant		Fair value at
	active markets		observable inputs		unobservable inputs		December 31
	(Level 1)		(Level 2)		(Level 3)		2022
Derivative liability	$	—	$	—	$	184,025	$	184,025
Total	$	—	$	—	$	184,025	$	184,025

There were no transfers between Level 1, 2 or 3 during the three months ended March 31, 2023 and 2022.

During the three months ended March 31, 2023 and 2022, the Company recorded gains of $30,593 and $243,653, respectively, from the change in fair value of derivative liability.