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NOTES PAYABLE | NOTE 4.NOTES PAYABLE In April 2020, the Company received $39,500 in payroll protection program loans (“PPP”). These loans provide for certain funding based on previous employment which in part may be forgivable under certain conditions. No payment is due during the deferral period which ends the earlier of the date of SBA forgiveness or ten months after the last day of the covered period. The remaining portion needs to be repaid over 2 years and carries a 1% annual interest rate. These loans require no collateral nor personal guarantees. The loan was forgiven in its entirety in February 2021 and has been included in other income in the accompanying statement of operations. Related Party Notes Payable On December 1, 2021, the Company entered into a settlement agreement with the related party to repay the then remaining balance of $231,500 plus $18,370 in accrued interest. Under the terms of the agreement, the total is to be settled in cash of $125,620 divided into two payments and 2,000,000 shares of Company common stock at a conversion price of $0.062 per share. Cash payments totaling $158,875, were made in 2021, with the remaining principal balance of $57,875 paid in January 2022. Interest expense totaled $78 and $2,837 for the three months ended March 31,2022 and 2021, respectively. Convertible Promissory Notes We adopted ASU 2020-06 on January 1,2022 using the modified retrospective method of transition. This resulted in an increase in convertible promissory notes of $379,355, by eliminating remaining debt discount related to beneficial conversion features on outstanding notes as of January 1, 2022.See Note 2. On September 3, 2021, the Company entered into a forbearance agreement with one of its lenders. As additional consideration for entering into the forbearance agreement, the Company has agreed to issue the lender the number of shares equal to $100,000 on January 15,2022 at a 25% discount based upon the previous 15-day average closing price. Effective after January 15, 2022, if the Company enters into an agreement with a third-party investor for consideration per share less than the $0.50 fixed price per share of the notes, the Company agrees to amend and restate the notes to reduce the conversion price. On January 20, 2022, the conversion price was reset to $0.025 for the remaining outstanding notes. The terms of the forbearance agreement have been treated as a modification to the existing notes and are being amortized over the remaining term of the notes. Amortization of $80,000 related to the stock consideration has been recorded in 2021 as interest expense. On March 25, 2022, the Company amended the forbearance agreement. Under the amendment, the maturity dates of the outstanding notes were changed to October 1, 2022. In addition, the Company will issue 8,000,000 shares of its common stock at a fair market value of $0.0357 per share based on the quoted stock price as of the amendment date, 4,000,000 which is in lieu of the discounted shares equal to $100,000 stated in the original agreement. The Company will also make six monthly payments of $30,000. The Company made a good faith payment of $30,000 in February 2022 and its first payment under the amendment in March 2022. The terms of the forbearance agreement have been accounted for as an extinguishment of debt resulting in a loss of $205,600 which has been recorded as other expense in the accompanying statement of operations and within accrued liabilities within the accompanying balance sheet at March 31, 2022. During the three months ended March 31, 2022, the Company issued convertible promissory notes to certain investors totaling $615,000 with net proceeds of $494,220. Original issue discount totaling $61,500, loan costs totaling $59,280 and the fair value of warrants issued to third party advisors of $50,000 have been recorded as a discount on the notes. The notes accrue interest at 12% per annum and have an initial conversion price of $0.025 subject to adjustment and mature one year from issuance. As additional consideration for the financings, the Company issued the lenders five-year warrants to purchase a total of 6,000,000 shares of common stock at $0.025 per share, and five-year trigger warrants to purchase a total of 25,000,000 shares of common stock at $0.025 per share, subject to price adjustments for certain actions, including dilutive issuances. The relative fair value of the warrants totaling $142,996 has been recorded as a discount on the notes. The trigger warrants may only be exercised if the convertible promissory notes are not paid in full at the maturity dates. The warrants do not provide for registration rights. See Note 8. During the three months ended March 31, 2022, the subsequent issuance of convertible promissory notes with certain terms and warrant exercises triggered a conversion price reset on the pre-existing convertible promissory notes to $0.025 per share. The aggregate of convertible promissory notes is as follows:
The Net Notes balance at March 31, 2022 is comprised of the following:
The Net Notes balance at December 31, 2021 is comprised of the following:
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