Convertible Notes Payable | NOTE 4: CONVERTIBLE NOTES PAYABLE Convertible notes payable consists of the following 2018 2017 Convertible notes payable 1) Originated in October 2014 $ 75,000 $ 125,000 2) Originated in September 2017 985,000 - 3) Originated in October 2018 110,000 - 4) Originated in October 2018 220,000 - 1,390,000 125,000 Debt discount and debt issuance cost (1,070,523 ) - 319,477 125,000 Less current portion of convertible notes payable 161,227 125,000 Long-term convertible notes payable $ 158,250 $ - During the year ended December 31, 2018 and 2017, the Company recognized interest expense of $43,394 and $0, and amortization of debt discount, included in interest expense of $236,144 and $0, respectively. 1) Non-interest bearing convertible note held by Blue Citi LLC (“Blue Citi”) for the original principal of $125,000, payable on demand and convertible at the option of the holder into common shares at the conversion price of $0.00005 per share. The outstanding principal for the convertible note was $75,000 and $125,000 as of December 31, 2018 and December 31, 2017. During the year ending December 31, 2018, Blue Citi converted $50,000 of this convertible note into 1,000,000,000 shares of common stock. The embedded conversion feature in this note created a BCF totaling approximately $7,800,000 as of December 31, 2018. 2) Convertible note held by Blue Citi for a total principal of $985,000 as of December 31, 2018. The note (i) accrues interest at the rate of 8% per annum; (ii) can be converted into shares of our common stock at a 10% discount to the lowest trading price during the ten consecutive trading days immediately preceding the date of conversion (40% discount upon an event of default under the note), and (iii) is due and payable upon the 18-month anniversary of its issuance. In September 2018, this convertible note was issued to Blue Citi in connection with a restructuring (the “Convertible Note Restructuring”) of previously outstanding convertible notes with Blue Citi. Immediately prior to the issuance of this note, various convertible notes totaling $810,000 were outstanding with Blue Citi, along with associated accrued interest total $19,680. The Company evaluated the terms of the conversion features of this convertible note in accordance with ASC 815, Derivatives and Hedging Expected term 15-18 months Expected stock price volatility 291-355 % Weighted-average risk-free interest rate 2.63-2.86 % Expected dividend $ 0.00 On the issuance date, the fair value of the derivative liability for the note that became convertible amounted to $1,399,179. $976,667 of the value assigned to the derivative liability was recognized as a debt discount on the convertible note which will be amortized over the life of the convertible note while the balance of $422,512 was recognized as a “day 1” derivative loss. During the year ended December 31, 2018, $1,877,152 was recorded as the change in fair value of the derivative liability within the consolidated statement of operations. As of December 31, 2018 a derivative liability totaling $3,276,331 was recorded. 3) Convertible note held by SMEA2Z, LLC for a total principal of $220,000 as of December 31, 2018. The note (i) accrues interest at the rate of 8% per annum; (ii) can be converted into shares of our common stock at a 30% discount to the lowest trading price during the twenty consecutive trading days immediately preceding the date of conversion, and (iii) is due and payable upon the 9-month anniversary of its issuance, and (iv) has an original issue discount of $20,000. The Company evaluated the terms of the conversion features of this convertible note in accordance with ASC 815, Derivatives and Hedging Expected term 7-9 months Expected stock price volatility 164-211 % Weighted-average risk-free interest rate 2.56-2.58 % Expected dividend $ 0.00 On the issuance date, the fair value of the derivative liability for the note that became convertible amounted to $367,781. $200,000 of the value assigned to the derivative liability was recognized as a debt discount on the convertible note which will be amortized over the life of the convertible note while the balance of $167,781 was recognized as a “day 1” derivative loss. During the year ended December 31, 2018, $420,943 was recorded as the change in fair value of the derivative liability within the consolidated statement of operations. As of December 31, 2018 a derivative liability totaling $788,724 was recorded. 4) Convertible note held by AFT Funding Group, LLC for a total principal of $210,000 as of December 31, 2018. The note (i) accrues interest at the rate of 8% per annum; (ii) can be converted into shares of our common stock at a 30% discount to the lowest trading price during the twenty consecutive trading days immediately preceding the date of conversion, and (iii) is due and payable upon the 9-month anniversary of its issuance, and (iv) has an original issue discount of $10,000. The Company evaluated the terms of the conversion features of this convertible note in accordance with ASC 815, Derivatives and Hedging Expected term 7-9 months Expected stock price volatility 167-214 % Weighted-average risk-free interest rate 2.56 % Expected dividend $ 0.00 As of December 31, 2018 a liability totaling $394,958 was recorded and is included in long-term liabilities. This derivative liability was recorded with $110,000 of the value recognized as a debt discount on the convertible note which will be amortized over the life of the convertible note, and the remaining balance of $79,377 included in the change in fair value of the derivative liability within the consolidated statement of operations as of December 31, 2018. |