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NOTES PAYABLE – RELATED PARTY
 12 Months Ended
Dec. 31, 2023
Debt Disclosure [Abstract]  
NOTES PAYABLE – RELATED PARTY

NOTE 7. NOTES PAYABLE – RELATED PARTY

 

Convertible Notes Payable

 

Between February 22, 2016, and April 24, 2017, the Company borrowed $1,000,000 from FRH Group, a founder and principal shareholder. The Company executed Convertible Promissory Notes, due between April 24, 2019, and June 30, 2019. The Notes are convertible into common stock initially at $0.10 per share but may be discounted under certain circumstances, but in no event will the conversion price be less than $0.05 per share. The Notes carry an interest rate of 6% per annum, which is due and payable at maturity. The parties have extended the Notes’ maturity date to June 30, 2021.

 

At December 31, 2020, the current portion of convertible notes payable and accrued interest was $1,000,000 and $256,908, respectively. There was no non-current portion of convertible notes payable and accrued interest.

 

At December 31, 2019, the current portion of convertible notes payable and accrued interest was $1,000,000 and $196,908, respectively. There was no non-current portion of convertible notes payable and accrued interest.

 

At December 31, 2020, there was no non-current portion of the Notes payable and accrued interest.

 

The Company will pay the Notes’ outstanding principal amount, together with interest at 6% per annum, in cash on the Maturity Date to this Note’s registered holder. In the event the Company does not make, when due, any payment, when due, of principal or interest required to be made, the Company will pay, on demand, interest on the amount of any overdue payment of principal or interest for the period following the due date of such payment, at a rate of ten percent (10%) per annum.

 

On February 22, 2016, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of One Hundred Thousand and 00/100 Dollars ($100,000) on February 28, 2018 (the “Original Maturity Date”). The initial conversion rate will be $0.10 per share or 1,000,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events as set forth below. For example, the Company’s common stock’s fair market value is less than $0.10 per share. In that case, the conversion price shall be discounted by 30%, but in no event will the conversion price be less than $0.05 per share with a maximum of 2,000,000 shares if FRH Group converts the entire Note subject to adjustments in certain events. No fractional Share or scrip representing a fractional Share will be issued upon conversion of the Notes.

 

On May 16, 2016, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of Four Hundred Thousand and 00/100 Dollars ($400,000) on May 31, 2018 (the “Original Maturity Date”). The initial conversion rate will be $0.10 per share or 4,000,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events as set forth below. For example, the Company’s common stock’s fair market value is less than $0.10 per share. In that case, the conversion price shall be discounted by 30%, but in no event will the conversion price be less than $0.05 per share with a maximum of 8,000,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events. No fractional Share or scrip representing a fractional Share will be issued upon conversion of the Notes.

 

On November 17, 2016, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of Two Hundred and Fifty Thousand and 00/100 Dollars ($250,000) on November 30, 2018 (the “Original Maturity Date”). The initial conversion rate would be $0.10 per share or 2,500,000 shares if the entire Note were converted, subject to adjustments in certain events as set forth below. For example, the Company’s common stock’s fair market value is less than $0.10 per share. In that case, the conversion price shall be discounted by 30%, but in no event will the conversion price be less than $0.05 per share with a maximum of 5,000,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events. No fractional Share or scrip representing a fractional Share will be issued upon conversion of the Notes.

 

On April 24, 2017, the Company issued and promised to pay a convertible note to FRH Group for the principal sum of Two Hundred and Fifty Thousand and 00/100 Dollars ($250,000) on April 24, 2019 (the “Original Maturity Date”). The initial conversion rate will be $0.10 per share or 2,500,000 shares if FRH Group converts the entire Note, subject to adjustments in certain events as set forth below. For example, the Company’s common stock’s fair market value is less than $0.10 per share. In that case, the conversion price shall be discounted by 30%, but in no event will the conversion price be less than $0.05 per share with a maximum of 5,000,000 shares if the entire Note was converted, subject to adjustments in certain events. No fractional Share or scrip representing a fractional Share will be issued upon conversion of the Notes.

 

 

NOTE 7. Notes Payable – Related Party (continued)

 

Convertible Notes Payable (continued)

 

FRH Group Note Summary

 

Date of Note:  2/22/2016   5/16/2016   11/17/2016   4/24/2017 
Original Amount of Note:  $100,000   $400,000   $250,000   $250,000 
Outstanding Principal Balance:  $-   $-   $-   $- 
Conversion Date (1):   02/22/2021    02/22/2021    02/22/2021    02/22/2021 
Interest Rate:   6%   6%   6%   6%
Date to which interest has been paid:   Accrued    Accrued    Accrued    Accrued 
Conversion Rate on February 22, 2021:  $0.10   $0.10   $0.10   $0.10 
Floor Conversion Price:  $0.05   $0.05   $0.05   $0.05 
Number Shares Converted for Original Note:   1,000,000    4,000,000    2,500,000    2,500,000 
Number Shares Converted for Interest:   29,117    111,000    61,792    55,000 

 

(1) Note Extension – On February 22, 2021, the Company entered into an Assignment of Debt Agreement (the “Agreement”) with FRH and FRH Group Corporation. The Company eliminated all four FRH Group convertible notes, including interest, of $1,256,908, in return for the issuance of 12,569,080 of unregistered common stock of the Company (the “Shares”) to FRH. Following the Agreement, FRH assigned the Shares to FRH Group Corporation, an entity also owned by Mr. Hong.

 

Cares Act – Paycheck Protection Program (PPP Note)

 

On May 01, 2020, the Company received proceeds of Fifty-Thousand Six Hundred and Thirty-Two ($50,632) from the Promissory Note (“PPP Note”) under the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The funding of the PPP Note is conditioned upon approval of the Company’s application by the Small Business Administration (SBA) and Bank of America (“Bank”), receiving confirmation from the SBA that the Bank may proceed with the PPP Note. Suppose the SBA does not confirm the PPP Note’s forgiveness, or only partly confirms forgiveness of the PPP Note, or the Company fails to apply for PPP Note forgiveness. In that case, the Company will be obligated to repay the Bank the total outstanding balance remaining due under the PPP Note, including principal and interest (the “PPP Note Balance”). In such case, Bank will establish the terms for repayment of the PPP Note Balance in a separate letter to be provided to the Company, which letter will set forth the PPP Note Balance, the amount of each monthly payment, the interest rate (not above a fixed rate of one percent (1.00%) per annum), the term of the PPP Note, and the maturity date of two (2) years from the funding date of the PPP Note. No principal or interest payments will be due before the Deferment Period, which is ten months from the end of the covered period. The Company plans to apply for PPP Note forgiveness. The PPP Note outstanding balance is $20,651 as of December 31, 2023.

 

SBA Loan

 

On May 22, 2020, the Company received hundred and forty-four thousand nine hundred and 00/100 Dollars ($144,900). The installment payments will include the principal and interest of $707 monthly and begin Twelve (12) months from the promissory note date. The principal and interest balance will be payable Thirty (30) years from the promissory Note date. Interest will accrue at 3.75% per annum and only on $144,900 funds advanced from May 22, 2020, the advance date. The SBA loan outstanding balance is $122,689 as of December 31, 2023.

 

AJB Note

 

On January 27, 2022, the Company signed a promissory note (‘AJB Note’) with AJB Capital Investments, LLC (‘AJB Capital’), a Delaware limited liability company, for the principal amount of $550,000 with a maturity date of July 27, 2022, and a coupon of 10%. As part of the AJB Note, the Company entered into a securities purchase agreement, where AJB Capital will receive equity equal to US $155,000 of the Company’s common stock. The Company issued 2,214,286 common stock valued at $71,521 upon issuance of the Note (the “Shares”) and 1,000,000 3-year cash warrants (‘Warrants’) priced at $0.30. The Warrants and the Shares, collectively known as the ‘Incentive Fee,’ are issued upon execution of the agreement. The Company paid off the loan in February 2023.

 

On December 27, 2023, the Company redeemed the Warrants on the following terms:

 

i)the Company shall pay $100,000 to the Purchaser concurrently with its execution and delivery of this letter agreement (this “Letter Agreement”);

 

ii)the Company shall pay $100,000 to the Purchaser on or before January 26, 2024 (the “Second Repayment”); and

 

the Company shall issue to the Purchaser 5,000,000 restricted shares of the Company’s Common Stock (the “Shares”) on January 2, 2024 (the “Share Issuance”).

 

Economic Injury Disaster Loan (EIDL)

 

The Small Business Administration offers the Economic Injury Disaster Loan program. The CARES Act changed the program to provide an emergency grant of up to $10,000 per business, which is forgivable like the PPP Note. The Company doesn’t have to repay the grant. On May 14, 2020, the Company received $4,000 in EIDL grants. The Company has recorded it as other income since the EIDL grant is forgivable.