| CONVERTIBLE NOTES PAYABLE | NOTE 7 —
CONVERTIBLE NOTES PAYABLE February Convertible Note s - Walleye
Opportunities Master Fund Ltd On
February 21, 2023, the Company entered into a securities purchase agreement (the “February Purchase Agreement”) with certain
institutional buyers. Pursuant to the February Purchase Agreement, the Company issued senior convertible notes in the aggregate principal
amount of $4,000,000, which notes shall be convertible into shares of common stock at the lower of (a) 120% of the closing price of the
common stock on the day prior to closing, or (b) a 10% discount to the lowest daily volume weighted average price (“VWAP”)
reported by Bloomberg of the common stock during the 10 trading days prior to the conversion date . On
February 21, 2023, the initial investor under the February Purchase Agreement purchased a senior convertible promissory note (the “February
Note”) in the original principal amount of $2,500,000 and a warrant to purchase 29,434,850 shares of the Company’s common
stock. The maturity date of the February Note is February 21, 2024 (the “Maturity Date”) .
The February Note bears interest at a rate of 5% per annum. The February Note carries an original issue discount of 2%. The Company may
not prepay any portion of the outstanding principal amount, accrued and unpaid interest or accrued and unpaid late charges on principal
and interest, if any, except as specifically permitted by the terms of the February Note. The Company also issued a warrant to the initial
investor that is exercisable for shares of the Company’s common stock at a price of $0.0389 per share and expires five years from
the date of issuance. The terms of the February convertible note were amended
pursuant to the March 2024 note (discussed below). The amendment changes the conversion price to $0.03 and extends the maturity date to
December 1, 2024. April Convertible Note - Walleye
Opportunities Master Fund Ltd Pursuant
to the February Purchase Agreement, on April 10, 2023, an investor purchased a senior convertible promissory note (the “April Note”)
in the original principal amount of $1,500,000 and the Company issued warrants for the purchase of up to 17,660,911 shares of the Company’s
common stock to the investor. The April Note bears interest at a rate of 5% per annum. The April Note carries an original issue discount
of 2%. The Company may not prepay any portion of the outstanding principal amount, accrued and unpaid interest or accrued and unpaid late
charges on principal and interest, if any, except as specifically permitted by the terms of the April Note .
The April Note is convertible into shares of common stock at $0.03 per share. May Convertible Notes - Walleye
Opportunities Master Fund Ltd On May 26, 2023, the Company entered into that certain
Securities Purchase Agreement (the “May Purchase Agreement”) with certain institutional investors (the “May Investors”),
pursuant to which the May Investor purchased a senior convertible promissory note in the aggregate original principal amount of $1,714,285.71
(the “May Note”) and warrants to purchase 44,069,041 shares of the Company’s common stock (the “May Warrants”). The
May Note matures 12 months after issuance and bears interest at a rate of 5% per annum, as may be adjusted from time to time in accordance
with Section 2 of the May Note. The May Note has an original
issue discount of 30%. The Company may not prepay any portion of the outstanding principal amount, accrued and unpaid interest or accrued
and unpaid late charges on principal and interest, if any, except as specifically permitted by the terms of the May Note. The May Note
is convertible into shares of common stock at $0.0389 per share. At any time, the Company shall have the right to redeem
all, but not less than all, of the amount then outstanding under the May Note (the “Company Optional Redemption Amount”) on
the Company Optional Redemption Date (as defined in the Note) (a “Company Optional Redemption”). The portion of the May Note
subject to a Company Optional Redemption shall be redeemed by the Company in cash at a price equal to the greater of (i) 10% premium to
the amount then outstanding under the May Note to be redeemed, and (ii) the equity value of our common stock underlying the May Note.
The equity value of our common stock underlying the May Note is calculated using the greatest closing sale price of our common stock on
any trading day immediately preceding such redemption and the date we make the entire payment required. The Company may exercise its right
to require redemption under the May Note by delivering a written notice thereof by electronic mail and overnight courier to all, but not
less than all, of the holders of May Note. The May Warrants are exercisable for shares of the
Company’s common stock at a price equal to 120% of the closing sale price of the common stock on the trading day ended immediately
prior to the closing date (the “May Warrant Exercise Price”) and expire five years from the date of issuance. The May Warrant
Exercise Price is subject to customary adjustments for stock dividends, stock splits, recapitalizations and the like. August
2023 Note - Coventry Enterprises, LLC On
July 31, 2023 (the “August Note Original Issue Date”), the Company entered into a securities purchase agreement (the “August
Purchase Agreement”) with an accredited investor (the “August Investor”), pursuant to which the August Investor purchased
a senior convertible promissory note in the original principal amount of $500,000 (the “August Note”). In addition, as an
additional inducement to the August Investor for purchasing the August Note, the Company issued 21,000,000 shares of its common stock
to the August Investor at the closing. These shares are being valued at the closing stock price on the date of grant with the relative
fair value accounted for as a debt discount. The transactions contemplated under the August Purchase Agreement closed on August 4, 2023. The August Note matures on
July 31, 2024 and bears interest at a rate of 10% per annum (the “Guaranteed Interest”), carries an original issue discount
of 15% and has a default conversion price of 90% per share of the lowest VWAP during the 20 trading day period before the conversion.
The August Note requires monthly payments of $78,571.42, beginning December 31, 2023. The Company may prepay any portion of the outstanding
principal amount and the guaranteed interest at any time and from time to time, without penalty or premium, provided that any such prepayment
will be applied first to any unpaid collection costs, then to any unpaid fees, then to any unpaid Default Rate interest (as defined in
the August Note), and any remaining amount shall be applied first to any unpaid guaranteed interest, and then to any unpaid principal
amount. The August Investor was granted
a right of first refusal as the exclusive party with respect to any Equity Line of Credit transaction or financing (an “Additional
Financing”) that the Company enters into during the 24-month period after the August Note Original Issue Date. In the event the
Company enters into an Additional Financing, the Company must provide notice to the August Investor not less than 10 trading days in advance
of the proposed entry. If the August Investor accepts all usual and customary terms set forth in the Additional Financing notice, the
August Investor must, within 20 trading days of receipt of the notice, prepare all relevant documents in respect thereof for execution
and delivery by the Company, provided, however, that the Company’s outside counsel must prepare the relevant registration statement
to be filed with the United States Securities and Exchange Commission no later than 45 days after the Company receives the documents. The August Note sets forth
certain standard events of default (each such event, an “August Note Event of Default”), which, upon such August Note Event
of Default, the principal amount and the guaranteed interest then outstanding under the August Note becomes convertible into shares of
the Company’s common stock pursuant to a notice provided by the August Investor to the Company. At any time after the occurrence
of an August Note Event of Default, the outstanding principal amount and the outstanding guaranteed interest then outstanding on the August
Note, plus accrued but unpaid Default Rate (as defined in the August Note) interest, liquidated damages and other amounts owing in respect
thereof through the date of acceleration, shall become immediately due and payable at the August Investor’s option, in cash or in
shares of the Company’s common stock at 120% of the outstanding principal amount of the August Note and accrued and unpaid interest,
plus other amounts, costs, expenses and liquidated damages due in respect of the August Note. October
2023 Note - GS Capital Partners On October 26, 2023,
the Company entered into a Securities Purchase Agreement (the “ October Purchase October Investor On the First Closing
Date, the Company issued 800,000 restricted shares of Common Stock to the Purchaser as additional consideration for the purchase of the
First Note (the “First Note Commitment Shares”). Upon the closing of the Second Note, the Company will issue additional commitment
shares in an amount calculated based on the price per share of the Common Stock at the time of funding of such Second Note (the “Second
Note Commitment Shares,” and together with the First Note Commitment Shares, the “Commitment Shares”). In addition
to the Commitment Shares, the Company agreed to issue 7,500,000 shares of Common Stock to the Purchaser (the “Returnable Shares”)
for each Note. Each issuance of Returnable Shares is subject to recalculation based on the price per share of Common Stock at the time
of funding for each Note, such that the economic value of each set of Returnable Shares shall be equal to the value of the initial set
of Returnable Shares. For example, if on the Second Closing Date, the closing price of the Common Stock is 50% of the closing price of
the Common Stock on the First Closing Date, the Company will be required to issue 15,000,000 Returnable Shares on the Second Note Closing
Date. The Returnable Shares must be returned to the Company unless each Note enters into an uncured default during its term, or the Company
is otherwise unable to repay each Note on or prior to maturity. ClearThink
Financing On February 12, 2024,
the Company and ClearThink Capital LLC (“ClearThink”) entered into a (i) Securities Purchase Agreement (the “SPA”)
and (ii) STRATA Purchase Agreement (the “STRATA Agreement” and together with the SPA, collectively, the “ClearThink
Agreements”). SPA Pursuant to the SPA,
the Company agreed to sell, and ClearThink agreed to purchase, two (2) separate 12% convertible notes of the Company (the first such
note, the “First Note Tranche,” the second such note, the “Second Note Tranche,” and collectively, the “ClearThink
Notes”) in the aggregate principal amount of $440,000 (each such ClearThink Note being in the amount of $220,000.00 and containing
an original issue discount of $20,000, resulting in the purchase price of each such ClearThink Note being $200,000.00), which are convertible
Common Stock. In addition, the Company agreed to issue 3,100,000 shares of restricted Common Stock (the “Commitment Shares”)
to ClearThink as additional consideration for the First Note Tranche and as an inducement for the Investor to enter into the STRATA Agreement; provided however The First Note Tranche
was issued on February 12, 2024 and the Second Note Tranche shall be issued within three (3) days after the Company’s filing of
the Resale Registration Statement. While any of the
securities issued or issuable under the SPA are outstanding, upon any issuance by the Company or any of its subsidiaries of any security,
or amendment to a security that was originally issued before the SPA Closing Date, with any term that the Investor reasonably believes
is more favorable to the Investor of such security or with a term in favor of
the Investor of such security that the Investor reasonably believes was not similarly provided to ClearThink in the ClearThink Note,
(i) the Company shall notify the Investor of such additional or more favorable term within one (1) business day of the issuance and/or
amendment (as applicable) of the respective security, and (i) such term, at Investor's option, shall become a part of the transaction
documents with the Investor (regardless of whether the Company complied with the notification provision herein). The types of terms contained
in another security that may be more favorable to the Investor of such security include, but are not limited to, terms addressing prepayment
rate, interest rates, and original issue discounts, conversion or exercise prices warrant coverage and pricing, commitment shares and
similar terms and conditions. The ClearThink Note contains a principal amount of
$220,000 (the “Principal”) with guaranteed interest (the “Interest”) at a rate of twelve percent (12%) per calendar
year from the date of issuance. All Principal and Interest, along with any and all other amounts, shall be due and owing on November 12,
2024 (the “Maturity Date”), with a lump-sum interest payment equal to $26,400 payable on the SPA Closing Date, which is added
to the principal balance and payable by the Company on the Maturity Date or upon acceleration or by prepayment or otherwise, notwithstanding
the number of days which the Principal is outstanding. Unless the Investor elects to convert the Note into shares of Common Stock, Principal
payments shall be made in four installments, each in the amount of $50,000 commencing on the one hundred eightieth (180 th Trillium Financing On February 15, 2024, the Company entered into a Securities
Purchase Agreement (the “Trillium Agreement”) with Trillium Partners L.P. (“Trillium”), whereby the Company issued
and sold to Trillium (i) a promissory note (the “Trillium Note”) in the aggregate principal amount of $580,000 (which includes
$87,500 of Original Issue Discount) (the “Trillium Principal”), convertible into Common Stock, upon default, upon the terms
and subject to the limitations and conditions set forth in such Trillium Note, and (ii) 4,000,000 restricted shares of Common Stock (the
“Commitment Shares”). Although the
Agreement was dated and signed on February 15, 2024, it did not become effective
until the conditions set forth in Section 6 and Section 7 of the Agreement were
satisfied, which occurred on February 22, 2024 (the “ Closing Date”). The maturity date of the Trillium Note is January
15, 2025 (the “Trillium Maturity Date”) and a one-time interest charge of ten percent (10%) or $58,000 (the “Trillium
Interest Rate”) shall be applied to the Trillium Principal on the date of issuance. The Company has the right to prepay the Trillium
Note in full at any time with no prepayment penalty. Accrued, unpaid Trillium Interest and outstanding Trillium Principal, subject to
adjustment, shall be paid in seven payments, each in the amount of $91,142.86 (a total payback to the Holder of $638,000). At any time following an Event of Default (as defined
in the Trillium Note), Trillium has the right to convert all or any part of the outstanding and unpaid amount of the Trillium Note into
fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the date of issuance, or any shares of capital stock
or other securities of the Company into which such Common Stock shall hereafter be changed or reclassified at the conversion price determined
as provided herein (a “Conversion”), provided, that such Conversion or Conversions do not result in Trillium beneficially
owning more than 9.99% of the outstanding shares of Common Stock. Pursuant
to the Trillium Note, beginning on the fifth month anniversary of the Issuance Date, and for the next six months after, the Company will
make a total of seven (7) equal monthly payments of $91,142.85. In the event that the Company defaults and misses a payment, then the
Investor will be able to do a “default conversion. The conversion price (the “Trillium Conversion Price”) is equal to
the lower of: (i) the Fixed Conversion Price of $0.03; (ii) the Variable Conversion Price (70% of the lowest trade for the twenty days
prior to conversion); and (iii) the Alternative Conversion Price (lowest price os any common stock during the period thirty days prior
to a default). The
Company agreed to initially reserve from its authorized and unissued Common Stock, 72,000,000 shares of Common Stock (the “Reserve
Amount”), which Reserve Amount shall be increased from time to time in accordance with the terms of the Trillium Note. Under the terms of the Trillium Agreement, the Company
agreed to use its best efforts to effect the registration and the sale of the Commitment Shares and the Conversion Shares (collectively,
the “Registerable Securities”) by filing with the SEC an amendment to its Registration Statement on Form S-1 (as initially
filed with the SEC on November 3, 2023 as amended on December 15, 2023) with respect to such Registrable Securities. March 2024 Financing Walleye Opportunities Master
Fund Ltd. On
February 17, 2023, the Company entered into a Securities Purchase Agreement (the “Prior Agreement”) with Walleye Opportunities
Master Fund Ltd. (the “March Investor”) for the sale of up to $4,000,000 in aggregate principal amount of senior convertible
promissory notes and warrants to acquire shares Common Stock. The initial closing under the Prior Agreement occurred on February 21, 2023,
when the Company issued to the March Investor (i) a senior convertible promissory note in the principal amount of $2,500,000 (the “Existing
Note”) and (ii) warrants to purchase up to 29,434,850 shares of Common Stock (the “Existing Warrant”). On March 25, 2024 (the “Issue Date”),
the Company and March Investor entered into a Securities Purchase Agreement (the “March Purchase Agreement”), whereby: (i)
the Company issued to the March Investor (a) a convertible note in the aggregate principal amount of $666,666 (the “March 2024 Note”),
and (b) a warrant initially exercisable to acquire up to 22,222,220 shares of Common Stock at an exercise price of $0.03 per share (the
“March 2024 Warrant”); and (ii) the parties agreed to amend and restate the Existing Note and Existing Warrant as discussed
below. March 2024 Note At any time on or after the Issue Date, the March
Investor shall be entitled to convert any portion of the outstanding Conversion Amount (as defined in the March 2024 Note) into validly
issued, fully paid and non-assessable shares of Common Stock at a conversion price equal to $0.03 per share, subject to adjustment as
set forth in the March 2024 Note. Interest accruing on the March 2024 Note is payable
to the March Investor in shares of Common Stock; provided, however, that the Company may pay any such interest in cash or in a combination
of cash and shares of Common Stock. The March 2024 Note bears interest at a rate of 5% per annum, as may be adjusted from time to time,
and matures on October 1, 2024 (the “March Note Maturity Date”); provided, however, that the March Note Maturity Date may
be extended at the option of the Investor as provided in the March 2024 Note. The
Company shall have the right to redeem all, but not less than all, of the amount then outstanding under the March 2024 Note at any time.
Any redemption shall be made by the Company in cash at a price equal to the greater of (i) 120% of the Conversion Amount (as defined in
the March 2024 Note), and (ii) the product of (1) the Conversion Rate (as defined in the March 2024 Note) with respect to the Conversion
Amount being redeemed multiplied by (2) the greatest closing sale price of the Common Stock on any trading day immediately preceding the
date such redemption payment is made .
Upon the occurrence of an Event of Default under the March 2024 Note, the Investor may require the Company to redeem all or any portion
of the March 2024 Note, regardless of whether such Event of Default has been cured. March 2024 Warrant The March 2024 Warrant (i) is exercisable for the
purchase of up to 22,222,220 shares of Common Stock at an exercise price of $0.03 per share, subject to customary adjustments, and (ii)
expires five years from the date of issuance. Registration Rights Agreement On the Issue Date, the Company and the March Investor
entered into a registration rights agreement (the “RRA”), pursuant to which the Company agreed to file with the SEC, within
45 days after the Issue Date, a registration statement covering the resale of all securities issuable to the March Investor under the
March Purchase Agreement. Amended and Restated
Note In connection with
the March Purchase Agreement, the Company and March Investor amended and restated the Existing Note as set forth in that certain Amended
and Restated Convertible Note dated March 25, 2024 (the “A&R Note). At any time, the March Investor shall be entitled to convert
any portion of the outstanding Conversion Amount (as defined in the A&R Note) into validly issued, fully paid and non-assessable
shares of Common Stock at a conversion price equal to $0.03 per share, subject to adjustment as set forth in the A&R Note. Interest accruing
on the A&R Note is payable to the March Investor in shares of Common Stock; provided, however, that the Company may pay any such
interest in cash or in a combination of cash and shares of Common Stock. The A&R Note bears interest at a rate of 5% per annum and
matures on December 1, 2024 (the “A&R Note Maturity Date”); provided, however, that the A&R Note Maturity Date may
be extended at the option of the as provided in the A&R Note). The Company shall
have the right to redeem all, but not less than all, of the amount then outstanding amount under the A&R Note at any time. Any redemption
shall be made by the Company in cash at a price equal to the greater of (i) 120% of the Conversion Amount (as defined in the A&R
Note), and (ii) the product of (1) the Conversion Rate (as defined in the A&R Note) with respect to the Conversion Amount being redeemed
multiplied by (2) the greatest closing sale price of our Common Stock on any trading day immediately preceding the date such redemption
payment is made. Amended and Restated
Warrant In
connection with the Purchase Agreement, the Company and March Investor agreed to amend and restate the Existing Warrant as set forth in
that certain Amended and Restated Warrant to Purchase Common Stock dated March 25, 2024 (the “A&R Warrant). The A&R Warrant
is exercisable for the purchase of up to 22,222,220 shares of Common Stock at an exercise price of $0.03 per share, subject to customary
adjustments, and (ii) expires five years from the Issue Date . The Company accounted for
the above Convertible Notes according to ASC 815. For the derivative financial instruments that are accounted for as liabilities, the
derivative liability was initially recorded at its fair value and is being re-valued at each reporting date, with changes in the fair
value reported in the statements of operations. For the warrants that were
issued with each tranche of funding, the Company uses a weighted-average Black-Scholes-Merton option pricing model to value the warrants
at inception and then calculates the relative fair value for each loan. The
Company deducts the total value of all discounts (OID, value of warrants, discount for derivative) from the calculated derivative liability
with any difference accounted for as a loss on debt issuance. For the three months ended
March 31, 2024, the Company recognized a total loss of the issuance of convertible debt of $252,376. The following table
summarizes the convertible notes outstanding as of March 31, 2024:
Schedule of convertible notes outstanding
Note Holder Date Maturity Date Interest Balance Additions Repayments Balance
Walleye Opportunities Fund 2/21/2023 12/1/2024 5 436,316 — — 436,316
Walleye Opportunities Fund 4/10/2023 4/10/2024 5 1,500,000 — — 1,500,000
Walleye Opportunities Fund 5/26/2023 5/26/2024 5 1,714,286 — — 1,714,286
Coventry Enterprises, LLC 7/31/2023 7/31/2024 10 500,000 — (460,715) (1) 39,285
GS Capital Partners 10/26/2023 7/26/2024 12 330,000 — — 330,000
Clearthink Capital Partners 2/12/2024 11/12/2024 12 — 220,000 — 220,000
Trillium Partners LP 2/22/2024 1/15/2025 10 — 580,000 — 580,000
Walleye Opportunities Fund 3/25/2024 12/1/2024 5 — 666,666 — 666,666
Total $ 4,480,602 $ 1,466,666 $ (460,715) $ 5,486,553
Less debt discount $ (1,701,403) (1,717,702)
Convertible notes payable, net $ 2,779,199 $ 3,768,851
(1) $314,284
was repaid in cash, $146,430 was forgiven along with $50,000 of accrued interest. A summary of the
activity of the derivative liability for the notes above is as follows:
Schedule of activity of derivative liability
Balance at December 31, 2023 $ 598,306
Increase to derivative due to new
issuances 523,186
Decrease to derivative due to mark to market (27,551 )
Decrease to derivative due to modification of
conversion terms (598,306 )
Balance at March 31, 2024 $ 495,635 |
