| Schedule of Convertible Notes Payable |
The Company has the following
notes payable as of September 30, 2017 and December 31, 2016:
| Note |
|
Note Date |
|
Maturity Date |
|
Interest Rate |
|
|
Original Borrowing |
|
|
Balance at
September 30, 2017
|
|
|
Balance at
December 31, 2016
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
| Note payable (a) |
|
Various |
|
August 4, 2018 |
|
|
12 |
% |
|
$ |
600,000 |
|
|
$ |
680,268 |
|
|
$ |
680,268 |
|
| Note payable (b) |
|
June 19, 2017 |
|
February 19, 2018 |
|
|
5 |
% |
|
$ |
110,250 |
|
|
|
110,250 |
|
|
|
- |
|
| Note payable (c) |
|
August 21, 2017 |
|
March 21, 2018 |
|
|
5 |
% |
|
$ |
110,250 |
|
|
|
110,250 |
|
|
|
- |
|
| Total notes payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
900,768 |
|
|
|
680,268 |
|
| Debt discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(114,302 |
) |
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total notes payable, net of debt discount |
|
|
|
|
|
|
|
|
|
$ |
786,466 |
|
|
$ |
680,268 |
|
| (a) |
The Company entered into a series of unsecured loan agreement with Oceanside Strategies, Inc. (“Oceanside”) a third party-lender, in the aggregate principal amount of $600,000 through December 31, 2015. The loans bear interest at rates ranging from 5% to 12% per annum and were due on demand. |
| |
|
| |
On April 3, 2016, the Company issued an unsecured convertible note payable to Oceanside in the amount of $680,268 (this amount includes $600,000 principal amount and $80,268 accrued and unpaid interest). This note superseded and replaced all previous notes and current liabilities due to Oceanside for sums Oceanside loaned to the Company in 2014 and 2015. This note bears interest at the rate of 12% per annum, compounded annually. In consideration for Oceanside’s agreement to convert the prior notes from current demand notes and extend the maturity date to December 4, 2016, the Company granted Oceanside the right to convert up to 30% of the amount of such note into shares of the Company’s common stock at $0.07 per share and issued 2,429,530 share purchase warrants, exercisable at $0.07 per share until April 4, 2019. |
| |
|
| |
Effective December 30, 2016, the Company
entered into an extension agreement with Oceanside to extend the maturity date of the Note to August 4, 2017. All other terms of
the Note remain unchanged. In consideration for Oceanside’s agreement to extend the maturity date to August 4, 2017, the
Company issued Oceanside 2,429,530 share purchase warrants, exercisable at $0.08 per share until December 29, 2019.
Effective August 4, 2017, the Company
entered into an extension agreement with Oceanside to extend the maturity date of the Note to August 4, 2018. All other terms of
the Note remain unchanged. In consideration for Oceanside’s agreement to extend the maturity date to August 4, 2018, the
Company issued Oceanside 1,316,800 share purchase warrants, exercisable at $0.15 per share until August 3, 2022. As a result, Company
expensed the entire fair value of the warrants granted of $170,853 as part of loss on debt extinguishment. The fair value of the
warrants at grant date was determined using the Black-Scholes Option Pricing model with the following assumptions: stock price
of $0.15 per share, life of 3 years; risk free interest rate of 1.36%; volatility of 230%, and dividend yield of 0%.
|
| |
|
| (b) |
On June 19, 2017, the Company issued an unsecured convertible note to Lucas Holdings in the amount of $105,000 in exchange for 50,000 shares of common stock and a three-year warrant to acquire 330,000 shares of the Company’s common stock with an exercise price of $0.30 per share. The “Maturity Date” is February 18, 2018. A one-time interest charge of five percent (5%) (“Interest Rate”) is to be applied on the Issuance Date to the original principal amount. In addition, there is a 5% Original Issue Discount. The note is convertible to common shares at a conversion price of $0.25 per share. |
| |
|
| |
Upon issuance of the note, the Company
accounted for an original issue discount of $10,000 which consisted of (i) the 5% original issue discount of $5,000, and (ii) the
fixed interest of 5% which aggregated $5,250. The original issue discount of $10,250 has been added to the note balance and will
be accreted to interest expense over the life of the note, resulting in a net amount due the holder of $110,250 at maturity. In
addition, the (iii) the fair value of the 50,000 common shares of $12,500 issued to the holder, (iv) the relative fair value of
the warrants of $40,180, and (v) a beneficial conversion feature of $47,320 were considered as additional valuation discount and
will be amortized as interest expense over the life of the note.
The aggregate fair value of the original
issue discount and the equity securities issued upon inception of the note of $110,250 has been recorded as a valuation discount.
As of September 30, 2017, $46,350 of this amount was amortized as interest expense, resulting in an unamortized balance of $63,900
at September 30, 2017.
|
| |
|
| (c) |
On August 28, 2017, the Company issued
an unsecured convertible note to Lucas Holdings in the amount of $105,000. The “Maturity Date” is March 28, 2018. A
one-time interest charge of five percent (5%) (“Interest Rate”) is to be applied on the Issuance Date to the original
principal amount. In addition, there is a 5% Original Issue Discount. The note is convertible to common shares at a conversion
price of $0.10 per share.
Upon issuance of the note, the Company
recorded a debt discount of $64,600 which consisted of (i) the 5% original issue discount of $5,000, (ii) the fixed interest of
5% which aggregated $5,250 and (iii) a beneficial conversion feature of $54,350 and will be amortized as interest expense over
the life of the note.
|
As of September 30, 2017,
$14, 198 of this amount was amortized as interest expense, resulting in an unamortized balance of $50,402 at September 30, 2017.
Total interest expense for
convertible notes payable for the nine months ended September 30, 2017 and 2016 was $61,056 and $58,576, respectively. Total interest
expense for convertible notes payable for the three months ended September 30, 2017 and 2016 was $20,576 and $20,576, respectively.
|