| Convertible Promissory Note | 11. Convertible Promissory Note On February 25, 2020, the Company entered into
a agreement with Leonite Capital LLC, a Delaware limited liability company (“Leonite”), pursuant to which the Company
issued to Leonite a secured convertible promissory note in the aggregate principal amount of $544,425 to be paid in tranches. As
additional consideration for the purchase of the note, (i) the Company issued to Leonite 450,000 common shares, and (ii) the Company
issued to Leonite a five-year warrant to purchase 900,000 common shares at an exercise price of $0.10 per share (subject to adjustment),
which may be exercised on a cashless basis. The note carries an original issue discount
of $44,425 to cover Leonite’s legal fees, accounting fees, due diligence fees and/or other transactional costs incurred in
connection with the purchase of the note. Therefore, the purchase price of the note was $500,000. As of March 31, 2020, the Company
has recorded $198,715, $182,500 principal and $16,215 original issue discount. Furthermore, the Company issued 450,000 shares of
common stock valued at $121,390 and a debt-discount related to the warrants valued at $59,110. The Company amortized $11,677 of
financing costs related to the shares and warrants for the three months ended March 31, 2020. The remaining net balance of the
note at March 31, 2020 is $12,715 comprised of principal of $183,538 and net of unamortized debt discount of $170,823. The note bears interest at the rate of the
greater of 10.2% per annum. Any amount of principal or interest on the note which is not paid by the maturity date shall bear interest
at the rate at the lesser of 24% per annum or the maximum legal amount permitted by law (the “Default Interest”). Beginning on March 18, 2020 and on the same
day of each and every calendar month thereafter throughout the term of the note, the Company shall make monthly payments of interest
only due under the note to Leonite at the Stated Rate as set forth above. The Company shall pay to Leonite on an accelerated basis
any outstanding principal amount of the note, along with accrued, but unpaid interest, from: (i) net proceeds of any future financings
by the Company, but not its subsidiaries, whether debt or equity, or any other financing proceeds, except any transaction having
a specific use of proceeds requirement that such proceeds are to be used exclusively to purchase the assets or equity of an unaffiliated
business and the proceeds are used accordingly; (ii) net proceeds from any sale of assets of the Company or any of its subsidiaries
other than sales of assets in the ordinary course of business or receipt by the Company or any of its subsidiaries of any tax credits
existing prior to the date of the note; and (iii) net proceeds from the sale of any assets outside of the ordinary course of business
or securities in any subsidiary. The note will mature 18 months from the issue
date, or August 25, 2021, at which time the principal amount and all accrued and unpaid interest, if any, and other fees relating
to the note, will be due and payable. Unless an event of default as set forth in the note has occurred, the Company has the right
to prepay principal amount of, and any accrued and unpaid interest on, the note at any time prior to the maturity date at 100%
of the principal amount plus any accrued and unpaid interest plus the lesser of (i) nine months of unaccrued interest or (ii) all
unaccrued interest through the remainder of the term. The note contains customary events of default,
including in the event of (i) non-payment, (ii) a breach by the Company of its covenants under the securities purchase agreement
or any other agreement entered into in connection with the securities purchase agreement, or a breach of any of representations
or warranties under the note, or (iii) the bankruptcy of the Company. The note also contains a cross default provision, whereby
a default by the Company of any covenant or other term or condition contained in any of the other financial instrument issued by
the Company to Leonite or any other third party after the passage all applicable notice and cure or grace periods that results
in a material adverse effect shall, at Leonite’s option, be considered a default under the note, in which event Leonite shall
be entitled to apply all rights and remedies under the terms of the note. Under the note, Leonite has the right at any
time at its option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of
the note into fully paid and non-assessable common shares of the Company. The number of common shares to be issued upon each conversion
of the note shall be determined by dividing the conversion amount by the applicable conversion price then in effect. The conversion
amount is the sum of: (i) the principal amount of the note to be converted plus (ii) at Leonite’s option, accrued and unpaid
interest, plus (iii) at Leonite’s option, Default Interest, if any, plus (iv) Leonite’s expenses relating to a conversion,
plus (v) at Leonite’s option, any amounts owed to Leonite. The conversion price shall be $0.09 per share (subject to adjustment
as further described in the note for common share distributions and splits, certain fundamental transactions, and anti-dilution
adjustments), provided that at any time after any event of default under the note, the conversion price shall immediately be equal
to the lesser of (i) the fixed conversion price ($0.09); (ii) 60% of the lowest bid price during the twenty one consecutive trading
day period immediately proceeding the trading that the Company receives a Notice of Conversion or (iii) the discount to market
based on subsequent financing. Notwithstanding the foregoing, in no event
shall Leonite be entitled to convert any portion of the note in excess of that portion of the note upon conversion of which the
sum of (1) the number of common shares beneficially owned by Leonite and its affiliates (other than common shares which may be
deemed beneficially owned through the ownership of the unconverted portion of the note or the unexercised or unconverted portion
of any other security of the Company subject to a limitation on conversion or exercise analogous to the limitations contained in
the note, and, if applicable, net of any shares that may be deemed to be owned by any person not affiliated with Leonite who has
purchased a portion of the note from Leonite) and (2) the number of common shares issuable upon the conversion of the portion of
the note with respect to which the determination of this proviso is being made, would result in beneficial ownership by Leonite
and its affiliates of more than 4.99% of the outstanding common shares of the Company. Such limitations on conversion may be waived
(up to a maximum of 9.99%) by Leonite upon, at its election, not less than 61 days’ prior notice to the Company, and the
provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by Leonite,
as may be specified in such notice of waiver). This note shall give Leonite a senior secured
obligation of the Company, with first priority over all current and future indebtedness of the Company and any subsidiary. Calculation of beneficial conversion feature
Allocated proceeds of Convertible Promissory Note $ 198,715
Conversion Price $ 0.09
Number of shares of Common Stock that would be issued upon conversion of Convertible Promissory Note 2,027,778
Conversion price $ 0.098
FMV of Common Stock $ 0.27
Per Share Intrinsic Value of Beneficial Conversion Feature $ 0.1762
Calculated Beneficial Conversion Feature $ 357,302 In accordance to ASC 470-20-30 |
