CONVERTIBLE NOTES | NOTE 11. CONVERTIBLE NOTES The following table provides a summary of the activity of the Company's unsecured, convertible, promissory notes: Principal Balance 12/31/2018 New Notes Notes assigned or exchanged Notes converted Principal Balance 12/31/2019 Less: Discount Balance Net Principal Balance 12/31/2019 October 2016 Notes $ 330,000 $ - $ - $ - $ 330,000 $ - $ 330,000 St. George Notes 1,099,233 (172,500 ) - (309,070 ) 617,663 - 617,663 BayBridge Notes 62,500 - 1,160,000 (281,900 ) 940,600 (408,333 ) 532,267 Bellridge Notes 455,000 510,000 (226,000 ) (243,000 ) 496,000 (382,500 ) 113,500 Power Up Notes 225,000 149,500 - (267,680 ) 106,820 (26,566 ) 80,254 EMA Note 75,000 - (75,000 ) - - - - Widjaja Note - 330,000 - - 330,000 (1 ) 329,999 GS Capital Notes - 178,568 75,000 (84,068 ) 169,500 (44,167 ) 125,333 $ 2,246,733 $ 995,568 $ 934,000 $ (1,185,718 ) $ 2,990,583 $ (861,567 ) $ 2,129,016 Principal Balance 12/31/2019 New Notes/Adjustments Notes assigned or exchanged Notes converted Principal Balance 6/30/2020 Less: Discount Balance Net Principal Balance 6/30/2020 October 2016 Notes $ 330,000 $ - $ - $ - $ 330,000 $ - $ 330,000 St. George Notes 617,663 - - - 617,663 - 617,663 BayBridge Notes 940,600 - - - 940,600 (33,333 ) 907,267 Bellridge Notes 496,000 - - (45,000 ) 451,000 (127,500 ) 323,500 Power Up Notes 106,820 - - - 106,820 - 106,820 Widjaja Note 330,000 - - - 330,000 - 330,000 GS Capital Notes 169,500 - - - 169,500 (5,417 ) 164,083 Penumbra Note - 250,000 - - 250,000 - 250,000 $ 2,990,583 $ 250,000 $ - $ (45,000 ) $ 3,195,583 $ (166,250 ) $ 3,029,333 October 2016 Convertible Notes On October 5, 2016, the Company entered into a securities purchase agreement with a private investor for the private placement of convertible notes with a principal value of $330,000. At Closing, the Company sold and issued these convertible notes in exchange for $330,000 of gross proceeds. The convertible notes matured on December 31, 2017 and bear interest at a rate of 6% per annum, subject to increase to 24% per annum upon the occurrence and continuance of an event of default. Principal and accrued interest on the convertible notes is payable upon demand, the default interest rate has not been designated by the investor. Outstanding principal and accrued interest on the convertible notes were $330,000 and $75,000, respectively as of June 30, 2020. Subsequent to the date of this report, the October 2016 Convertible Notes were assigned to BD 1. Refer to the Debt Assignments Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging estimate of the fair value of the embedded derivative liability based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions identified below. The aggregate derivative value of the notes was $558,000 as of December 31, 2019. This value was derived from Management's fair value assessment using the following assumptions: annual volatility of 46%, present value discount rate of 12%, and a dividend yield of 0%. At June 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, St. George Convertible Note On September 8, 2017, the Company entered into a securities purchase agreement with St. George Investments, LLC ("St. George") for the private placement of $1,725,000 principal amount of the Company’s original issue discount convertible notes. On September 11, 2017, the Company sold and issued a $1.7 million principal convertible note to St. George in exchange for $1.5 million of proceeds and paid $20,000 in financing costs. The original issue discount of $225,000, and the financing costs, will be charged to interest expense, ratably, over the life of the note. This note matured on March 11, 2019. The note does not bear interest in the absence of an event of default. The note is due upon demand and an interest rate has not been designated by St. George. Beginning six months after the issuance of the note, St. George may request that the Company make monthly partial redemptions of the note up to $150,000 per month. If St. George does not request the full $150,000 redemption amount in any one month, the unused portion of such monthly redemption amount can be added to future monthly redemption amounts; however, in no event, can the amount requested for any one month exceed $275,000. Redemption amounts are payable by the Company in cash. Beginning ten months after the issuance of the convertible note, cash redemption payments by the Company will be subject to a 15% redemption premium. Also beginning six months after the issuance of the convertible note, the Company has the option (subject to customary equity conditions) to pay redemption amounts in the form of shares of common stock. Payments in the form of shares would be calculated using a variable conversion price equal to the lower of (i) 85% of the average VWAP for the shares over the prior five trading days or (ii) the closing bid price for the shares on the prior trading day. On May 1, 2018, effective as of April 3, 2018, the Company agreed to amend the variable conversion price formula outlined in the securities purchase agreement. As amended, payments in the form of shares would be calculated using a variable conversion price equal to the lower of (i) 60% of the lowest VWAP for the shares during the prior five trading days or (ii) the closing bid price for the shares on the prior trading day. All principal and accrued interest on the convertible note is convertible at any time, in whole or in part, at the option of St. George into shares of common stock at a fixed conversion price of $4.00 per share. The convertible note contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the Note; and (ii) bankruptcy or insolvency of the Company. Upon the occurrence of an event of default, the convertible note will begin to bear interest at the rate of 22% per annum. In addition, upon the occurrence of an event of default, St. George has the option to increase the outstanding balance of the convertible note by 25%. The default provisions have not been designated by St. George. In connection with the closing under the securities purchase agreement, the Company issued 37,500 unregistered shares of common stock to St. George as an origination fee. The closing stock price on the date of close was $1.70 resulting in an interest expense of $64,000 being recorded as of the date of close. The convertible note may not be converted, and shares of common stock may not be issued pursuant to the convertible note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the outstanding shares of common stock. As of June 30, 2020, cash payments of $192,000 had been made on the convertible note, and $916,000 had been converted into 1.2 billion shares of the Company's common stock. The remaining balance on the note was $618,000 as of June 30, 2020.The following table summarizes the conversion activity of this note: Conversion Period Principal Converted Interest Converted Common Shares Issued Q1 2018 $ 75,000 $ - 187,500 Q2 2018 316,600 - 2,082,778 Q3 2018 102,500 - 3,142,333 Q4 2018 112,500 - 10,437,046 Q1 2019 106,750 - 58,503,244 Q2 2019 59,320 - 86,636,364 Q3 2019 89,000 - 457,222,222 Q4 2019 54,000 - 540,000,000 $ 915,670 $ - 1,158,211,487 Subsequent to the date of this report, the debt with St. George was assigned to BD 1. Refer to the Debt Assignments Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging The aggregate derivative value of the notes was $553,000 as of December 31, 2019. This value was derived from Management's fair value assessment using the following assumptions: annual volatility of 45%, present value discount rate of 12%, and a dividend yield of 0%. At June 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $ 553,000 for the six months ended June 30 , 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated as of June 30 , 2020. BayBridge Convertible Note Between September 7, 2018 and August 22, 2019, the Company, entered into several securities exchange agreements with BayBridge Capital Fund LP ("BayBridge). Pursuant to the terms of the exchange agreements, BayBridge agreed to surrender and exchange an several outstanding promissory notes with an aggregate principal balance of $1,050,000, and aggregate accrued interest of $97,000, for convertible notes with an aggregate principal amount of $1,430,000 and aggregate original issue discounts of $283,000. As of June 30, 2020, aggregate principal of $489,400 and interest of $12,710 had been converted into 1 billion shares of common stock and no cash payments of principal or interest had been made on these exchange notes. The principal and accrued interest balances on the exchange notes, as of June 30, 2020, were $940,600 and $119,300, respectively. The following table summarizes the conversion activity of these notes: Conversion Period Principal Converted Interest Converted Common Shares Issued Q4 2018 $ 207,500 $ 4,303 16,008,198 Q1 2019 90,500 3,278 47,400,806 Q2 2019 88,500 2,079 141,822,223 Q3 2019 86,000 2,261 616,247,346 Q4 2019 16,900 789 176,886,700 $ 489,400 $ 12,710 998,365,273 Subsequent to the date of this report, the debt with Baybridge was assigned to BD 1. Refer to the Debt Assignments Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging At December 31, 2019, the aggregate derivative liability associated with was $932,000. This value was derived from Management's fair value assessment using the following assumptions: annual volatility of 46%, present value discount rate of 12%, and a dividend yield of 0%. At June 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, the six months ended June 30 , 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated as of June 30 , 2020. Bellridge Convertible Notes On July 25, 2018, the Company, entered into a securities exchange agreement with Bellridge Capital, LP ("Bellridge"). Pursuant to the terms of the exchange agreement, the investor agreed to surrender and exchange a promissory note with a principal balance of $275,000 and accrued interest of $20,000. In exchange, the Company issued to the investor an unsecured convertible note with an aggregate principal amount of $300,000. The original issue discount of $5,000 was charged to interest expense upon issuance. The exchange note is not secured, has an interest rate of 12% per annum, and matured on January 25, 2019. From and after the date of issuance of this note and then at any time until the note is fully paid, the investor had the right to convert any outstanding and unpaid principal into shares of the Company's common stock at a variable conversion price equal to the lesser of (i) a price equal to $0.20, or (ii) 80% of the lowest traded price for the shares over the prior ten trading days. This Exchange Note was fully converted during the year ended December 31, 2019. On September 14, 2018, the “Company, issued a new $150,000 convertible note in a private placement to Bellridge. The note is not secured, contains no registration rights, has an interest rate of 12% per annum, matured on September 14, 2019, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. All principal and interest on the note are due upon demand. On October 18, 2018, as discussed in Note 9, Global assigned one of its notes to Bellridge. The note had an outstanding principal balance of $250,000 and an accrued interest balance of $26,000. The note matured on October 18, 2019, and all principal and interest is due upon demand. On October 22, 2019, the Company and Bellridge entered into an exchange agreement to convert the remaining principal and interest of $226,000 and $51,000, respectively, on the Bellridge notes, into a new note with a principal balance of $450,000. The note is not secured, contains no registration rights, has an interest rate of 10% per annum, matures on October 22, 2020, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. All principal and interest on the note are due upon maturity. Bellridge shall have the option to convert all or a portion of the amounts outstanding under the note, into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to the lesser of (i) $0.0005 or (ii) 70% of the lowest traded price for the shares over the prior ten-day On October 22, 2019, the Company and Bellridge entered into a convertible promissory note with a principal balance of $60,000, in exchange for proceeds of $40,000. The note is not secured, contains no registration rights, has an interest rate of 10% per annum, matures on October 22, 2020, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. All principal and interest on the note are due upon maturity. Bellridge shall have the option to convert all or a portion of the amounts outstanding under the note, into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to the lesser of (i) $0.0005 or (ii) 70% of the lowest traded price for the shares over the prior ten-day Shares of common stock may not be issued pursuant to any of these notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the outstanding shares of Common Stock. As of June 30, 2020, an aggregate principal of $533,000 and interest of $32,000, on the Bellridge convertible notes had been converted into 1.6 billion shares of common stock and no cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of June 30, 2020 were $451,000 and $84,000, respectively. The following table summarizes the conversion activity of these notes: Conversion Period Principal Converted Interest Converted Common Shares Issued Q3 2018 $ 137,500 $ 2,104 3,716,105 Q4 2018 107,500 4,000 7,554,399 Q1 2019 65,615 4,507 38,696,339 Q2 2019 47,385 3,874 68,142,087 Q3 2019 89,000 9,779 529,061,862 Q4 2019 41,000 5,404 464,037,300 Q2 2020 45,000 2,133 471,328,800 $ 533,000 $ 31,801 1,582,536,892 Subsequent to the date of this report, the debt with Bellridge was partially converted into common stock and the remainder was assigned to BD 1. Refer to the Note Conversions and Debt Assignments sections of Note 16. Subsequent Events for further discussion. Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging At December 31, 2019, the aggregate derivative liability associated with these notes was $744,000. This value was derived from Management's fair value assessment using the following assumptions: annual volatility of 42%, present value discount rate of 12%, and a dividend yield of 0%. At June 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, PowerUp Convertible Notes During 2018 and 2019, the Company entered into six securities purchase agreements with Power Up Lending Group, LTD ("Power Up"), for the private placement of three convertible notes with an aggregate principal amount of $376,000 Beginning in six months after issuance, Power Up shall have the option to convert all or a portion of the amounts outstanding under the convertible note, into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to 65% of the average of the three lowest closing bid prices for the shares over the prior ten-day Shares of common stock may not be issued pursuant to any of these notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the outstanding shares of Common Stock. As of June 30, 2020, three of the notes had been converted in full. The aggregate principal and interest converted was $267,680 and $9,000, respectively, into 578.8 million shares of common stock. No cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of June 30, 2020 were $107,000 and $14,000, respectively. The following table summarizes the conversion activity of these notes: Conversion Period Principal Converted Interest Converted Common Shares Issued Q1 2019 $ 182,500 $ 7,300 95,014,902 Q2 2019 42,500 1,700 47,155,556 Q3 2019 14,600 - 155,824,176 Q4 2019 28,080 - 280,800,000 $ 267,680 $ 9,000 578,794,634 Subsequent to the date of this report, the debt with Power Up was assigned to BD 1. Refer to the Debt Assignments Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging At December 31, 2019, the aggregate derivative liability associated with these notes was $117,000. This value was derived from Management's fair value assessment using the following assumptions: annual volatility of 46%, present value discount rate of 12%, and a dividend yield of 0%. At June 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Widjaja Convertible Note On January 11, 2019, the Company entered into a note purchase with Jason Widjaja (“Widjaja”), for the private placement of a $330,000 convertible promissory note, in exchange for $330,000 of gross proceeds. The note is unsecured, bears interest at 12% per annum, matures on January 11, 2020, and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. Principal and interest on the note will be payable upon maturity. At any time after inception of the note, until fully paid, Widjaja shall have the option to convert all or a portion of amounts outstanding under the note into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to 80% of the lowest closing bid price for the shares over the prior five trading days immediately preceding the conversion date. As of June 30, 2020, no principal and no interest had been converted into shares of common stock and no cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of June 30, 2020 were $330,000 and $58,000, respectively. Subsequent to the date of this report, the debt with Widjaja was assigned to BD 1. Refer to the Debt Assignments Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging The derivative value of the notes was $167,000 as of December 31, 2019. This value was derived from Management's fair value assessment using the following assumptions: annual volatility of 46%, present value discount rate of 12%, and a dividend yield of 0%. At June 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, GS Capital Convertible Note On February 22, 2019, the Company sold and issued to GS Capital Partners, LLC (“GS”) a $108,000 aggregate principal amount unsecured convertible promissory note in exchange for $75,000 of gross proceeds, $6,000 in financing costs, and $27,000 of premium associated with the assignment of a note from a former investor. On August 26, 2019, the Company sold and issued to GS, an additional unsecured convertible promissory note in the amount of $70,500. These notes are unsecured, bear interest at 8% per annum, matures twelve months from the date of issuance, and contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the note, and (ii) bankruptcy or insolvency of the Company. Principal and interest on the note will be payable upon maturity. There are no registration rights applicable to the note. At any time after inception of the note until fully paid, GS shall have the option to convert all or a portion of amounts outstanding under the note into shares of the Company's common stock. Conversions into common stock shall be calculated using a variable conversion price equal to 65% of the average of the three lowest closing bid price for the shares over the prior ten day trading period immediately preceding the conversion. As of June 30, 2020, principal of $84,000 and interest of $6,000 had been converted into 473.4 million shares of common stock and no cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of June 30, 2020 were $170,000 and $16,000, respectively. The following table summarizes the conversion activity of these notes: Conversion Period Principal Converted Interest Converted Common Shares Issued Q2 2019 $ 15,000 $ 763 17,321,692 Q3 2019 57,718 4,284 335,425,736 Q4 2019 11,350 719 120,697,800 $ 84,068 $ 5,766 473,445,228 Subsequent to the date of this report, the debt with GS was assigned to BD 1. Refer to the Debt Assignments Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging The aggregate derivative value of these notes was $182,000 as of December 31, 2019. This value was derived from Management's fair value assessment using the following assumptions: annual volatility of 46%, present value discount rate of 12%, and a dividend yield of 0%. At June 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Penumbra Convertible Note On June 9, 2020, the Company issued to Penumbra Solar Technologies, Inc. (“Penumbra”) a $250,000 aggregate principal amount convertible promissory note. The Company has received $250,000 of gross proceeds from the offering of the note. The aggregate principal amount (together with accrued interest) will mature on June 9, 2021. The note bears interest at a rate of 6% per annum. The interest rate increases to 18% in the event of a default. The note is convertible, at the holder’s option, into shares of the Company’s Common Stock at a conversion price equal to $0.0001 per share. However, the holder will not have the right to convert any portion of the note if the holder, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to its conversion. Subsequent to the date of this report, this debt with Penumbra was assigned to Crowdex Investment, LLC (“Crowdex”). |