| NOTE PAYABLE | NOTE
5 – NOTE PAYABLE During
August 2017, Dragon Acquisitions, a related entity owned by William Delgado, and an individual lender entered into a promissory note
agreement for $20,000 as well as $2,000 in interest to accrue through maturity on August 31, 2018 for a total of $22,000 due on August
31, 2018. The lender has extended the maturity date to December 31, 2021. Dragon Acquisitions assumed payment of a payable of the Company
and the Company took on the note. The Company defaulted on the note at maturity in August 2018. The $20,000 note remained outstanding
at September 30, 2021 and December 31, 2020 through the date of this report. On
December 22, 2017, the Company entered into a financing agreement with Parabellum, an accredited investor, for $1.2 million, which was
then amended in 2020 and increased to $2,550,000. Under the terms of the agreement, the Company is to receive milestone payments based
on the progress of the Companys lawsuit (see Note 6) for damages against Grupo Rontan Metalurgica, S.A (the Lawsuit).
Such milestone payments consist of (i) an initial purchase price payment of $300,000, which the Company received on December 22, 2017,
(ii) $150,000 within 30 days of the Lawsuit surviving a motion to dismiss on the primary claims, (iii) $100,000 within 30 days of the
close of all discovery in the Lawsuit and (iv) $650,000 within 30 days of the Lawsuit surviving a motion for summary judgment and challenges
on the primary claims. As part of the agreement, the Company shall pay the investor an investment return of 100% of the litigation proceeds
to recoup all money invested, plus 27.5% of the total litigation proceeds received by the Company. As of September 30, 2021 and December
31, 2020, and through the date of this report, the $2,550,000 note remains outstanding. On
December 23, 2017 (the Effective Date) the Company entered into a $485,000, 7% interest rate, demand promissory note with
Vox Business Trust, LLC (Vox). The note was in settlement of the amounts accrued under a consulting agreement (see Note
6), consisting of $200,000 owed for retainer payments through December 2017, as well as $285,000 owed to Vox when the Resolution Progress
Funding was met on December 22, 2017. As part of the agreement, Vox may not demand payment prior to the date of the Resolution Funding
Date. The
Company shall make mandatory prepayment in the following amounts and at the following times –
● $1,000
on the Effective Date.
● $50,000
on the date on which the judge presiding over the lawsuit issues a ruling or decision in which the lawsuit survives a motion to dismiss.
● $50,000
on the date on which discovery closes with respect to the lawsuit.
● $100,000
on the date on which the judge presiding over the lawsuit issues a ruling or decision in which the lawsuit survives a motion for summary
judgement on the claims. Under
the terms of the Vox note consulting agreement (see Note 6), any unpaid consulting fees subsequent to December 2017 causes a default
on the note with unpaid consulting fees to be added to the principal of the note. During the three and nine-month period ended September
30, 2021, consulting fees totaling $30,000 and $90,000 were added to the note principal and are included in the note balance of $896,500,
as of September 30, 2021, and $806,500 as of December 31, 2020. Through the date of this report, monthly consulting fees have not been
repaid and continue to be added to the principal balance of the note. The note remains in default. However, Vox has voluntarily refrained
from making demand prior to the resolution funding date. On
December 26, 2017 (the Effective Date), the Company entered into a $485,000, 7% interest rate, demand promissory note with
RLT Consulting, Inc. (RLT), a related party. The note was in settlement of the amounts accrued under a consulting agreement
(see Note 6), consisting of $200,000 owed for retainer payments through December 2017, as well as $285,000 owed to RLT when resolution
progress funding was met on December 22, 2017. As part of the agreement, RLT may not demand payment prior to the date of the resolution
funding date. The Company also agreed to grant 5,000,000 shares within 90 days of the resolution progress funding date and 10,000,000
shares within 90 days of the resolution funding date. The 5,000,000 shares were issued on March 13, 2018. The Company shall make mandatory
prepayment in the following amounts and at the following times –
● $1,000
on the Effective Date.
● $50,000
on the date on which the judge presiding over the lawsuit issues a ruling or decision in which the lawsuit survives a motion to dismiss.
● $50,000
on the date on which discovery closes with respect to the lawsuit.
● $100,000
on the date on which the judge presiding over the lawsuit issues a ruling or decision in which the lawsuit survives a motion for summary
judgement on the claims. Under
the terms of the RLT note consulting agreement (see Note 6), any unpaid consulting fees subsequent to December 2017 causes a default
on the note with unpaid consulting fees to be added to the principal of the note. During the three and nine-month period ended September
30, 2021, consulting fees totaling $30,000 and $90,000, respectively, were added to the note principal and are included in the note balance
of $889,500 as of September 30, 2021 and $799,500 as of December 31, 2020. Through
the date of this report, monthly consulting fees have not been repaid and continue to be added to the principal balance of the note.
The note remains in default. However, RLT has voluntarily refrained from making demand prior to the resolution funding date. RLT was
granted a first priority security interest in the litigation proceeds and is pari passu to Parabellum and Vox. To that end, they share
in the litigation in a priority position to proceed to repay the note. During
April 2018, the Company entered into a two-month $36,000 note payable with $31,000 in proceeds paid directly to a third-party vendor
for expenses. The note did not bear interest and included a $5,000 original issue discount. During June 2018, the Company defaulted
on the note. The lender has extended the maturity date to December 31, 2021. The Company paid $25,000 in April 2021. As of December
31, 2020 an September 30, 2021 and through the date of this report, the note remained outstanding. During
May 2018, the Company entered into an Investment Return Purchase Agreement with an accredited investor (the Purchaser)
for proceeds of $200,000 (the Investment Agreement). Under the terms of the Investment Agreement, the Company agreed to
pay the Purchaser the $200,000 proceeds plus a 10% return, or $20,000 (the Investment Return) within three (3) months from
the date of the Investment Agreement. Such Investment Return shall be paid earlier if the Company secures funding totaling $500,000 within
90 days from the date of the Investment Agreement. The lender has extended the maturity date to December 31, 2021. In addition, the Company
agreed to issue to the Purchaser 2,000,000 warrants to purchase common stock of the Company at an exercise price of $0.01 per share,
exercisable for a period of three (3) years. As of September 30, 2021 and December 31, 2020, and through the date of this report, the
$200,000 principal and $20,000 Investment Return remained outstanding. During
June 2018, the Company entered in to a one-year $300,000 non-convertible note with an accredited investor with $150,000 original issue
discount (OID) for net proceeds of $150,000. As part of the note agreement, the Company also agreed to issue the investor
5,000,000 warrants at an exercise price of $0.01, exercisable for a period of three (3) years. The Company defaulted on the note at maturity
in June 2019. The note contains a default interest rate of 10% plus a 5% penalty of the outstanding balance of the note. The note holder
has voluntarily refrained from making demand for repayment under the default provisions of the note, which would require the Company
to pay the holder 130% of the outstanding principal and interest accrued at the default rate. The remaining principal and accrued interest
of the note was paid in full on March 10, 2021. The
June 2018 note bears a personal guarantee by William Delgado, the Chief Executive Officer of the Company. As further security for the
note, Mr. Delgado has also pledged the 1,000,000 Convertible Preferred Shares of the Company that he owns, as well as 5,000,000 common
shares of another public company in which Mr. Delgado is a director and Chief Financial Officer. On
May 12, 2020, the Company obtained a Paycheck Protection Program (PPP) loan in the
amount of $103,125 pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). Interest on the
loan is at the rate of 1% per year, and all loan payments are deferred until December 12, 2020, at which time the balance is payable
in $5,805 monthly installments through May 12, 2022, if not forgiven in accordance with the CARES Act and the terms of the promissory
note executed by the Company in connection with the loan. The promissory note contains events of default and other provisions customary
for a loan of this type. As required, the Company used the PPP loan proceeds for payroll, healthcare benefits, and utilities. The program
provided that the use of PPP Loan amount shall be limited to certain qualifying expenses and may be partially or wholly forgiven in accordance
with the requirements set forth in the CARES Act. Convertible
Notes Payable On
June 7, 2021, the Company and Geneva Roth Remark Holdings, Inc., entered into a security purchase agreement (SPA) for an
8% promissory note in the aggregate principal of $251,625, with a maturity date of June 7, 2022. The note included a original issuance
discount (OID) of $22,875, for a purchase price of $228,750. The interest was applied as a one time interest charge upon
the issuance date, in the amount of $20,130, recognized in accrued interest. The month payments will include the outstanding principal
and accrued interest, in 10 monthly payments of $27,175, with the first payment on July 30, 2021. Upon an event of default, as set forth
in the agreement, the holder shall have the right to convert the outstanding balance of the note into shares of common stock of the Company,
with a conversion rate based on 75% of the lowest trading price of the common stock for the 5 trading days prior to the conversion date.
In addition, upon default, the interest increases to 22%, and any outstanding principal and accrued interest shall be increased by 150%.
The Company is required at have authorized and reserved four times the number of shares that is actually issuable upon full conversion
of the note, which was initially 29,494,505 shares. While the note is still outstanding the Company shall not, without written consent
of the holder, issue any variable convertible instruments with a convertible price that varies with the market price of the Companys
common stock, nor shall the Company without the holders written consent, sell, lease or otherwise dispose of any significant portion
of its assets outside the ordinary course of business. In
connection with the note, the Company issued 2,096,875 warrants, exercisable each at $0.03, with a 3-year term. The warrants and the
OID resulted in a debt discount of $105,875, which will be amortized using the effective interest method over the life of the note.
The warrants were evaluated to be classified as a liability, as based on the various convertible notes outstanding with variable
conversion rates it cannot be determined if there are sufficient authorized shares available during the contract period. The Company
estimated the fair value of the warrant using the Black Scholes pricing model. The key valuation assumptions used consist, in part,
of the price of the Companys common stock of $0.03 at issuance date, a risk-free interest rate of 0.79% and expected
volatility of the Companys common stock of 143,5%, resulting in a fair value of $83,000. As of September 30, 2021, and through
the date of this report, the principal balance of $197,274.00 is outstanding. On
March 25, 2021, the Company and GS Capital Partners LLC entered into a security purchase agreement for a Prime rate plus 8% Convertible
Note in the aggregate principal of $2,285,714. The note shall be paid in one or more tranches. The maturity for each tranche shall be
twelve-month period from advance date. The holder has the right at any time to convert all or any part of the outstanding principal into
shares of common stock of the Company. The conversion price shall be a fixed conversion price of $0.06, which upon a default event, shall
be equal to the lesser of (i) the fixed conversion price; (ii) or 70% of the lowest intraday price during the 21 days preceding the conversion
request. On April 1, 2021, the Company received the first tranche of $1,000,000. Upon the receipt of the first tranche, the Company issued
20,000,000 warrants, exercisable at $0.10, with a 10-year term and contain full-ratchet anti-dilution protection provisions, with a fair
value of $917,000. The Company also issued 4,000,000 shares of common stock as commitment shares to the noteholder, with a fair value
of $184,000. On May 24, 2021, the Company received the second tranche from GS Capital Partners LLC, for $796,000 less an OID of
$99,500. On July 21, 2021 the Company received the balance of the second tranche for $346,857 less an OID of $48,357. As of September
30, 2021, and through the date of this report, the principal balance of the two tranches totaling $2,285,714 is outstanding. On
January 15, 2021, the Company and Power Up Lending Group entered into a securities purchase agreement for a 10% convertible note in
the aggregate principal of $88,500 due on January 15, 2022. The conversion price is equal to the variable conversion price which is
defined as 61% of the market price for the lowest two trading dates during a fifteen-day trading period ending on the latest
complete trading date prior to the conversion date. The conversion feature meets the definition of a derivative and therefore
requires bifurcation and will be accounted for as a derivative liability on the date the note becomes convertible. On July 13, 2021,
the Company paid off the note, plus accrued interest and redemption fees, for a total payment of $130,078. On
February 25, 2021, the Company and Leonite Capital LLC entered into a securities purchase agreement for a prime rate plus 8% convertible
note in the aggregate principal of $2,285,714. The note shall be paid in one or more tranches. The maturity for each tranche shall be
twelve-month period from advance date. The holder has the right at any time to convert all or any part of the outstanding principal into
shares of common stock of the Company. The conversion price shall be a fixed conversion price of $0.06, which upon a default event, shall
be equal to the lesser of (i) the fixed conversion price; (ii) or 70% of the lowest intraday price during the 21 days preceding the conversion
request. On
March 1, 2021, the Company received the first tranche of $1,000,000. In connection with the first tranche, the Company issued 10,000,000
warrants, exercisable at $0.10, with a 10-year term and contain full-ratchet anti-dilution protection provisions, with a fair value of
$507,000. The Company also issued 4,000,000 shares of common stock as commitment shares to the noteholder, with a fair value of $204,000.
The warrants and the commitment shares resulted in a debt discount of $1,000,000, which will be amortized using the effective interest
method over the life of the convertible note, and the excess of $101,000 recognized as interest expense at issuance. The warrants were
evaluated to be classified as a liability, as based on the various convertible notes outstanding with variable conversion rates it cannot
be determined if there are sufficient authorized shares available during the contract period. As of September 30, 2021, and through the
date of this report, the principal balance totaling $1,142,875 is outstanding. The note is due on February 25, 2022. On
April 7, 2020, the Company and Auctus Fund, LLC entered into a securities purchase agreement for a 12% convertible promissory in the
aggregate principal of $197,000 due on February 7, 2021. The noteholder agreed to an extension of the maturity date to May 31, 2021
for a settlement amount of $344,548, including interest. The note is convertible into shares of the Companys common stock. The
conversion price shall equal the lessor of (i) Current Market Price, or (ii) Variable Market price as defined as Market Price less a
50% discount price. The conversion feature meets the definition of a derivative and therefore requires bifurcation and was accounted
for as a derivative liability on the date the note became convertible. As of September 30, 2021, and through the date of this
report, the principal and interest balance totaling $232,460 is outstanding. The Company has a verbal agreement with Auctus to
extend the maturity of the note. On
May 20, 2020, the Company and GS Capital Partners, LLC entered into a 10% convertible note in the aggregate principal of $165,000 due
on February 20, 2021. The note can be converted into shares of common stock of the Company at any time after the issue date, at a price
of $0.01 per share. During the first three months ended June 30, 2021, the noteholder converted $50,000 of principal plus accrued interest
into 5,368,493 shares of common stock. The remaining principal and accrued interest of the note was paid in full on March 10, 2021. On
June 29, 2020, the Company and Power Up Lending Group entered into a securities purchase agreement for a 10% Convertible Promissory Note
in the aggregate principal of $53,000 due on June 29, 2021. The note can be converted (180) days following the date of the note. The
conversion price is equal to the Variable Conversion price which is defined as 61% of the Market Price for the lowest two trading dates
during a fifteen-day trading period ending on the latest complete trading date prior to the Conversion date. The conversion feature meets
the definition of a derivative and therefore requires bifurcation and was accounted for as a derivative liability on the date the note
became convertible. On January 15, 2021 the Company, paid off the convertible note payable. On
August 5, 2020, the Company and Adar Alef, LLC entered into a security agreement for an 8% convertible note in the aggregate principal
of $150,000 due August 5, 2021. The note is convertible into shares of the Companys common stock at any time after the 9 th
On
August 17, 2020, the Company and Harbor Gates Capital, LLC entered into a securities agreement for a 10% Convertible Note in the aggregate
principal of $165,000 due August 17, 2021. The note carries original issue discount or $15,000. The note can be converted (180) days
following the issuance date of the note. The conversion price is equal to the Variable Conversion price which is defined as 60% of the
Market Price for the lowest two trading dates during a fifteen-day trading period ending on the latest complete trading date prior to
the Conversion date. The conversion feature meets the definition of a derivative and therefore requires bifurcation and was accounted
for as a derivative liability on the date the note became convertible. The Note and accrued interest totaling $272,250.00 paid by the
Company on May 28,2021 On
August 25, 2020, the Company and Power Up Lending Group entered into a securities purchase agreement for a 10% Convertible Note in the
aggregate principal of $103,000 due on August 25, 2021. The note can be converted (180) days following the date of the note. The conversion
price is equal to the Variable Conversion price which is defined as 61% of the Market Price for the lowest two trading dates during a
fifteen-day trading period ending on the latest complete trading date prior to the Conversion date. The conversion feature meets the
definition of a derivative and therefore requires bifurcation and was accounted for as a derivative liability on the date the note became
convertible. On February 25, 2021, the Company estimated the fair value of the conversion feature derivative embedded in the debenture
at issuance at $151,000, based on weighted probabilities of assumptions. The key valuation assumptions used consist, in part, of the
price of the Companys common stock of $0.06 at issuance date; a risk-free interest rate of 0.06% and expected volatility of the
Companys common stock, of 162.43%, and the various estimated reset exercise prices weighted by probability. This plus the fair
value of the warrants resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and
the excess amount of $48,000 was immediately expensed as interest expense. On February 24, 2021 the convertible note and accrued interest,
with a redemption fee for a total of $151,311, was paid off by the CEO of the Company. On
October 6, 2020, the Company and Power Up Lending Group entered into a securities purchase agreement for a 10% Convertible Note in the
aggregate principal of $75,000 due on August 25, 2021. The note can be converted (180) days following the date of the note. The conversion
price is equal to the Variable Conversion price which is defined as 61% of the Market Price for the lowest two trading dates during a
fifteen-day trading period ending on the latest complete trading date prior to the Conversion date. The conversion feature meets the
definition of a derivative and therefore requires bifurcation and was accounted for as a derivative liability on the date the note became
convertible. On March 6, 2021, the Company estimated the fair value of the conversion feature derivative embedded in the debenture at
issuance at $81,198, based on weighted probabilities of assumptions. The key valuation assumptions used consist, in part, of the price
of the Companys common stock of $0.04 at issuance date; a risk-free interest rate of 0.07% and expected volatility of the Companys
common stock, of 171.53%, and the various estimated reset exercise prices weighted by probability. This resulted in the calculated fair
value of the debt discount being greater than the face amount of the debt, and the excess amount of $6,198 was immediately expensed as
interest expense. On April 9, 2021, the convertible note and accrued interest, with a redemption fee, for a total of $110,120, was paid
off by the Company on April 9, 2021. On
May 10, 2019, the Company and GHS Investments LLC entered into a securities agreement for a 10% Convertible Note in the aggregate principal
of $335,000 due on February 10, 2020. The note carries original issue discount or $35,000. The note is convertible into shares of common
stock of the Company. The Conversion Price shall mean 60% multiplied by the Market Price (as defined herein), representing
a discount rate of 40%. Market Price means the lowest Traded Price for the Common Stock during the twenty (20) Trading
Day period ending on the latest complete Trading Day prior to the Conversion Date. The Company is required to maintain a common share
reserve of not less than three times the number of shares that is actually issuable upon full conversion of the note. The purchaser will
also receive warrants to purchase 5,000,000 shares of GDSI common stock at $.01/share. Warrants will have a three-year term to exercise.
The Convertible Note is personally guaranteed by William Delgado, CEO. The conversion feature meets the definition of a derivative and
therefore requires bifurcation and was accounted for as a derivative liability on the date the note became convertible. As of September
30, 2021, and December 31, 2020, and through the date of this report, the principal balance totaling $833,760 including approximately
an additional $225,000 added to principal for an open-ended extension of the due date of the note, is outstanding. In relation to the
extension, the Company is required to issue 1,000,000 warrants each month, and pay $25,000 per month. As of September 30, 2021 the Company
has issued 21,000,000 warrants, with a fair value of $891,000 at issuance, with are classified in warrant liability. During
January 2015, the Company entered into a one-year $78,750 convertible note payable with LG Capital Funding (LG). The note bears
interest at 8% per annum and is convertible at any time at the option of LG into shares of our common stock at a conversion price
equal to a 40% discount of the lowest closing bid price for 20 prior trading days including the notice of conversion date. The
embedded derivative liability associated with the conversion option of the note was bifurcated from the note and recorded at its
fair value on the date of issuance and at each reporting date. The note requires the Company to reserve four times the potential
number of shares of common stock issuable upon conversion, or 18,866,092 shares and 157,874,360 shares at September 30, 2021, and
December 31, 2020, respectively. The Company defaulted on the note in January 2016. Additionally, as a result of declines in the
fair value of the Companys common stock, from time to time the Company did not have sufficient authorized shares to maintain
this required four times share reserve. Accordingly, the note holder had the right to accelerate the repayment of the note and
unpaid interest. In addition, LG has the right to require that additional shares and/or monies be paid in connection with the
defaults. During December 2017, in settlement of default, the Company and LG entered into a Convertible Note Redemption Agreement
under which the Company was to repay $68,110, $39,921 in unpaid principal outstanding at December 31, 2017, and $28,189 in accrued
interest, in five payments through April 2018. Through April 2018, the Company repaid $6,500 of principal under the Convertible Note
Redemption Agreement. The Company defaulted on the Convertible Note Redemption Agreement in April 2018 and the $28,189 in accrued
interest was converted to principal. As of September 30, 2021, and December 31, 2020, and through the date of this report, the
principal balance totaling $48,610 is outstanding and remains in default. During
January 2015, the Company entered into a two-year convertible note payable for up to $250,000 with JMJ Financial (JMJ), of which $110,000
was funded between January and April 2015. The note was issued with an original issue discount of 10% of amounts funded, had a one-time
12% interest charge as it was not repaid within 90 days of the funding date, and is convertible at any time at the option of JMJ into
shares of our common stock at the lesser of $0.075 per share or 60% of the average of the trading price in the 25 trading days prior
to conversion. The embedded derivative liability associated with the conversion option of the note was bifurcated from the note and recorded
at its fair value on the date of issuance and at each reporting date. The note requires the Company to reserve 26,650,000 shares of common
stock. JMJ had the option to finance additional amounts up to the balance of the $250,000 during the term of the note. The Company defaulted
on the note during January 2017. During December 2017, in settlement of default, the Company and JMJ entered into a Repayment Agreement
under which the Company was to repay $84,514, $69,070 in unpaid principal outstanding at December 31, 2017, and $15,444 in accrued interest,
in four payments through May 2018. Through May 2018, the Company repaid $25,000 of principal under the Repayment Agreement. The Company
defaulted on the Repayment Agreement in May 2018 and the $15,444 in accrued interest was converted to principal. As of September 30,
2021, and December 31, 2020, and through the date of this report, the principal balance totaling $59,514 is outstanding and remains in
default. |
