| Convertible Note Payable | 10. CONVERTIBLE NOTE PAYABLE On January 18, 2018, the Board of Directors
of the Company approved a non-public offering of up to $1,000,000 aggregate principal amount of its 12% Senior Secured Convertible
Notes. The notes are convertible, in whole or in part, into shares of the Company’s common stock, at any time at a rate of
$0.65 per share with fractions rounded up to the nearest whole share, unless paid in cash at the Company’s election. The
notes bear interest at a rate of 12% per annum and interest payments will be made on a quarterly basis. The notes mature January
15, 2020. The notes are governed by a Securities Purchase
Agreement and are secured by all the assets of the Company pursuant to a Security and Pledge Agreement. In addition to the issuance
of the notes in the offering, the Company’s Board of Directors approved, as part of the offering, the issuance of warrants
to purchase one share of the Company’s common stock for 50% of the number of shares of common stock issuable upon conversion
of each note. Each warrant is immediately exercisable at $0.75 per share, contains certain anti-dilution down-round features and
expires on January 15, 2023. If the Company ever defaults on the loan the warrants to be issued will increase from 50% of the number
of shares of common stock issuable upon conversion to 100%. On January 22, 2018, the Company entered into
a SPA and Security and Pledge Agreement with its first investor in the offering and issued a note to the investor in the principal
amount of $500,000. Subscription funds were received by the Company from the investor on February 7, 2018. In addition to the note,
the Company issued to the investor 384,615 warrants. The warrants are considered equity instruments based on the Company’s
adoption of ASU 2017-11. The proceeds received upon issuing the note
and warrants were allocated to each instrument on a relative fair value basis. The initial fair value of the warrants was $838,404
determined using the Black-Scholes valuation model with the following assumptions: expected term of 2.5 years; risk free interest
rate of 2.1%; and volatility of 142%. The effective conversion rate resulted in a Beneficial Conversion Feature greater than the
proceeds received. Thus, the discount was limited to the proceeds received of $500,000 and was amortized to interest expense using
the effective interest method over the term of the note. On March 7, 2019, the Board of Directors of
the Company approved Amendment No. 1 to the 12% Senior Secured Convertible Promissory Note and the Warrant Agreement, each issued
January 22, 2018, respectively, to the note holder. The amendments (i) extend the maturity date of the note to March 1, 2021 and
extend the term of the warrants to March 6, 2024, (ii) lower the conversion price of the note and the exercise price of the warrants
to $0.20 and $0.30, respectively, and (iii) add an adjustment to the conversion and exercise price of the note and warrants, respectively,
in the event the Company does not achieve certain milestones during calendar 2019. The fair value of the warrants is $25,162 determined
using the Black-Scholes valuation model with the following assumptions: expected term of 2.5 years; risk free interest rate of
2.6%; and volatility of 127%. The effective conversion rate resulted in a discount of $23,956 and is amortized to interest expense
using the effective interest method over the term of the note. The Company recognized a loss on extinguishment of debt of $221,232
related to the decrease in conversion price. On January 1, 2020, the Company failed to achieve
certain milestones during calendar 2019 and, as such, the conversion/exercise prices of the note and warrants were adjusted to
$0.10 and $0.15, respectively. For the year ended December 31, 2019 and 2018
interest expense paid to the investor amounted to $44,877 and $56,384, respectively. The Company also accrued $15,123 and $0 in
interest expense as of December 31, 2019 and 2018, respectively. For year ended December 31, 2019 and 2018 the Company also amortized
to interest expense $53,755 and $234,932, respectively. The unpaid principal balance of the note is
$500,000 at December 31, 2019 and December 31, 2018 and the remaining unamortized discount is $14,038 and $265,068, respectively. On January 22, 2019, the Company entered into
a Securities Purchase Agreement and Security and Pledge Agreement with a single investor and issued a Secured Convertible Promissory
Note to the investor in the principal amount of $55,000. In addition to the note, the Company issued to the investor 36,667 warrants.
Each warrant is immediately exercisable at $0.75 per share, contains certain anti-dilution down-round features and expires on January
22, 2024. If the Company ever defaults on the loan the warrants to be issued will increase from 50% of the number of shares of
common stock issuable upon conversion to 100%. The warrants are considered equity instruments based on the Company’s adoption
of ASU 2017-11. The proceeds received upon issuing the note
and warrants were allocated to each instrument on a relative fair value basis. The initial fair value of the warrants was $3,217
determined using the Black-Scholes valuation model with the following assumptions: expected term of 2.5 years; risk free interest
rate of 2.6%; and volatility of 128%. The effective conversion rate resulted in a discount of $3,039 and is amortized to interest
expense using the effective interest method over the term of the note. For the year ended December 31, 2019 interest
expense paid to the investor amounted to $0. The unpaid principal balance of the note and accrued interest is $55,000 and $2,584,
respectively, at December 31, 2019, the remaining unamortized discount is $194. For the year ended December 31, 2019 the Company
also amortized to interest expense $2,846 from the amortization of the discount. This note and accrued interest is due to a related
party. On March 7, 2019, the Board of Directors of
the Company approved a non-public offering of up to $500,000 aggregate principal amount of its 12% Senior Secured Convertible Notes.
The notes are convertible, in whole or in part, into shares of the Company’s common stock, at any time at a rate of $0.20
per share with fractions rounded up to the nearest whole share, unless paid in cash at the Company’s election. The notes
bear interest at a rate of 12% per annum and interest payments will be made on a quarterly basis. The notes mature March 1, 2021.
The conversion price of the notes is also subject to adjustments if the Company does not achieve certain milestones during the
calendar year 2019. The notes are governed by a Securities Purchase
Agreement and are secured by all the assets of the Company pursuant to a Security and Pledge Agreement. Funding is subject to the
occurrence of certain milestones, as stated in the SPA. In addition to the issuance of the notes in the offering, the Company’s
Board of Directors approved, as part of the offering, the issuance of warrants to purchase one share of the Company’s common
stock for 50% of the number of shares of common stock issuable upon conversion of each note. Each warrant is immediately exercisable
at $0.30 per share and expires five years from the issuance date. The exercise price of the warrants is also subject to adjustments
if the Company does not achieve certain milestones during the calendar year 2019. On March 6, 2019, the Company entered into
SPAs and Security and Pledge Agreements with its first two investors in the offering and issued notes to the investors in the aggregate
principal amount of $100,000. Subscription funds were received by the Company from the investors on March 6, 2019. In addition
to the notes, the Company issued to the investors an aggregate of 250,000 warrants. Each warrant is immediately exercisable at
$0.30 per share, contains certain anti-dilution down-round features and expires on March 6, 2024. If the Company ever defaults
on the loan the warrants to be issued will increase from 50% of the number of shares of common stock issuable upon conversion to
100%. The warrants are considered equity instruments based on the Company’s adoption of ASU 2017-11. On January 1, 2020, the Company failed to achieve
certain milestones during calendar 2019 and, as such, the conversion/exercise prices of the note and warrants were adjusted to
$0.10 and $0.15, respectively. The proceeds received upon issuing the notes
and warrants were allocated to each instrument on a relative fair value basis. The initial fair value of the warrants was $12,646
determined using the Black-Scholes valuation model with the following assumptions: expected term of 2.5 years; risk free interest
rate of 2.5%; and volatility of 127%. The effective conversion rate resulted in a discount of $11,226 and is amortized to interest
expense using the effective interest method over the term of the notes. The unpaid principal balance of the notes is
$100,000, accrued interest is $3,025 and the balance of the unamortized discount is $2,037 at December 31, 2019. Interest expense
paid to the investors amounted to $6,838 for the year ended December 31, 2019. For the year ended December 31, 2019, the Company
also amortized to interest expense $9,189 from the amortization of the discount. On August 2, 2019, the Company entered into
a Securities Purchase Agreement with an investor for the purchase of a 12% Secured Convertible Note in the principal amount of
up to $125,000. The note is convertible, in whole or in part, into shares of the Company’s common stock, at any time at a
rate of $0.08 per share with fractions rounded up to the nearest whole share, unless paid in cash at the Company’s election.
The note bears interest at a rate of 12% per annum and interest payments will be made on a quarterly basis. The note matures August
2, 2021. $75,000, $25,000 and $25,000 subscription funds were received by the Company from the investor on August 2, 2019, September
6, 2019, and October 16, 2019, respectively. In addition to the note, the Company issued to the investor an aggregate of 781.250
warrants. The warrants are considered equity instruments based on the Company’s adoption of ASU 2017-11. The proceeds received upon issuing the note
and warrants were allocated to each instrument on a relative fair value basis. The initial fair value of the warrants was $71,035
determined using the Black-Scholes valuation model with the following assumptions: expected term of 2.5 years; risk free interest
rate of 1.6%; and volatility of 132%. The effective conversion rate resulted in a discount of $104,941 and is amortized to interest
expense using the effective interest method over the term of the note. The unpaid principal balance of the notes is
$125,000, the accrued interest is $3,649 and the balance of the unamortized discount is $86,646 at December 31, 2019. Interest
expense paid to the investor amounted to $1,652 for the year ended December 31, 2019. For the year ended December 31, 2019, the
Company also amortized to interest expense $18,295 from the amortization of the discount. This note is payable to and the
interest expense was paid to a related party. On August 29, 2019, the Company entered into
a Securities Purchase Agreement with an investor for the purchase of a Convertible Promissory Note in the principal amount of up
to $105,000. The Note is not convertible within 180 days of receipt of funds for the first closing and is then convertible, in
whole or in part, into shares of the Company’s Common Stock at a rate of $0.20 per share. Upon an “Event of Default,”
as defined in the note, the conversion price becomes the “Variable Conversion Price” which is defined in the note as
“60% multiplied by the Marked Price.” “Market Price” is defined in the note as “the lowest one (1)
Trading Price (as defined in the note) for the common stock during the twenty-five (25) Trading Day period ending on the last complete
Trading Day prior to the Conversion Date.” The note bears interest at a rate of 10% per annum with principal and accrued
and unpaid interest payable one year from the receipt of funds for each tranche under the note. Subscription funds of $30,000 were
received by the Company from the investor on September 6, 2019 for which the Company paid a purchase price of $35,000. In addition
to the notes, the Company issued to the investor an aggregate of 175,000 warrants. The warrants are considered equity instruments
based on the Company’s adoption of ASU 2017-11. The proceeds received upon issuing the notes
and warrants were allocated to each instrument on a relative fair value basis. The initial fair value of the warrants was $15,868
determined using the Black-Scholes valuation model with the following assumptions: expected term of 2.5 years; risk free interest
rate of 1.4%; and volatility of 132%. The effective conversion rate resulted in a discount of $10,378 and is amortized to interest
expense using the effective interest method over the term of the notes. The unpaid principal balance of the notes is
$35,000, accrued interest is $1,112 and the balance of the unamortized discount is $3,764 at December 31, 2019. For the year ended
December 31, 2019 the Company also amortized to interest expense $6,615 from the amortization of the discount. There is an
additional discount of $5,000 on the note resulting from the difference between the purchase price and the subscription funds received.
For the year ended December 31, 2019 $3,187 has been amortized to interest expense leaving an unamortized balance of $1,813 as
of December 31, 2019. |
