PROMISSORY NOTE AND CONVERTIBLE PROMISSORY NOTE | JP Carey Convertible Note dated March 30, 2017 and assignments On April 7, 2017, the Company entered into a Settlement Agreement with Joseph Canouse (the “Agreement”). The Company and Mr. Canouse had been in a dispute regarding what amount, if any, was owed pursuant to a consulting agreement between the parties signed in April 2014. In December 2016, Mr. Canouse obtained a judgment in state court in Georgia and the right to garnish the Company’s bank accounts. Pursuant to the Settlement Agreement, the Company agreed to issue an 8% Convertible Note in the principal amount of $82,931 (the “Note”). The Note was issued to J.P. Carey Inc., an entity controlled by Mr. Canouse. Although the Note is dated March 30, 2017, it was issued on April 7, 2017. The note maturity date was September 30, 2017. In return for the issuance of the Note, Mr. Canouse filed a Consent Motion to Withdraw Judgment, dismiss all garnishments, and cease all collection activities. The Note is convertible into common stock, subject to Rule 144, at any time after the issue date at the lower of (i) the closing sale price of the common stock on the trading day immediately preceding the closing date, and (ii) 50% of the lowest sale price for the common stock during the twenty-five (25) consecutive trading days immediately preceding the conversion date or the closing bid price, whichever is lower. Mr. Canouse does not have the right to convert the Note, to the extent that he would beneficially own in excess of 4.99% of our outstanding common stock. The note defines several events that constitute default including failure to pay principal and interest by the maturity date of September 30, 2017 and failure to comply with the exchange act. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the Note becomes immediately due and payable. The Company defaulted by not paying the principal and interest on September 30, 2017 and has been recording interest at the 24% default rate. The Company also defaulted by being late with filing the Form 10-K on May 29, 2020. During the year ended December 31, 2019: The Company incurred $51,980 in interest related to the note. J.P. Carey converted $1,002 of principal into 120,000 shares of the Company’s common stock at a price of $0.0084. J.P. Carey assigned $10,000 of the note to World Market Ventures, LLC and assigned $6,000 of the note to Anvil Financial Management LTD LLC. The assignments carry the same conversion rights as the original note. World Market Ventures converted $6,000 of principal into 120,000 shares of the Company’s common stock at a price of $0.05. Anvil converted $6,000 of principal into 120,000 shares of the Company’s common stock at a price of $0.05. At December 31, 2019, the J.P. Carey note balance including accrued interest of $51,980 was $121,910 including the portion assigned to World Market Ventures of $4,000. During the six months ended June 30, 2020: The Company incurred $11,517 in interest related to the note through June 30, 2020. J.P. Carey converted $30,929 of principal and $18,021 of interest into 1,642,162 shares of the Company’s common stock at a price of $0.029. World Market Ventures converted the remaining balance of $4,000 of principal into 72,595 shares of the Company’s common stock at a price of $0.0551. On April 6, 2020 JP Carey assigned $35,000 of the note to Green Coast Capital International. The assignment carries the same conversion rights as the original note. During the six months ended June 30, 2020 Green Coast converted $24,245 of principal into 859,283 shares of common stock of the Company at an average price of $0.029 and the Company incurred $414 of interest on the assigned note. As of June 30, 2020 the assigned note had a principal balance of $10,755 and an interest balance of $414. At June 30, 2020, the J.P. Carey note principal balance was $0 and accrued interest was $45,477. The accrued interest has been accounted for as a derivative liability due to the variable conversion price. Green Coast Capital International Securities Purchase Agreement and Convertible Note dated April 8, 2020 On April 8, 2020, the Company entered into a Securities Purchase Agreement (the “SPA”) whereby the Company agreed to sell to the holder convertible notes in amounts up to $150,000. The note holder shall be entitled to a pro rata share of 20% of the net revenues (excluding Brightcove) derived from subscriptions and other sales of Fan Pass, Inc., a wholly owned subsidiary of the Company. The 20% pays out two times the initial investment and continues at 5% for a period of five years. On April 8, 2020 the Company issued a 0% note to Green Coast under this SPA with a maturity date of October 8, 2020 and received $35,000 in cash. The Note is convertible into common stock, subject to Rule 144, at any time after the issue date at the $0.02 as quoted on the exchange where the stock is traded. The holder does not have the right to convert the note, to the extent that the holder would beneficially own in excess of 4.9% of our outstanding common stock. The note defines several events that constitute default including failure to pay principal and interest by the maturity date and failure to comply with the exchange act. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the note becomes immediately due and payable. Under certain default events the Company may incur a penalty of 20% to 50% of the note principal. Further, if the Company fails to comply with the exchange act the conversion price is the lowest price quoted on the trade exchange during the delinquency period. Upon certain default events the conversion price may change. Therefore the embedded conversion option is bifurcated and treated as a derivative liability. On the date of issuance, the Company recorded a derivative liability of $228,000, resulting in derivative expense of $193,000 and a discount against the note of $35,000 to be amortized into interest expense through the maturity date. During the six months ended June 30, 2020, the Company amortized $16,208 of the discount. As of June 30, 2020, and the note is carried at $16,208, net of an unamortized discount of $18,792. The Company defaulted by being late with filing the Form 10-K on May 29, 2020. The Company accrued $736 of interest at the default rate of 24% for the period from May 29, 2020 to June 30, 2020. At June 30, 2020, the Green Coast note principal balance was $35,000 and accrued interest was $736. JP Carey Securities Purchase Agreement and Convertible Note dated May 20, 2020 On May 20, 2020, the Company entered into a Securities Purchase Agreement (the “SPA”) whereby the Company agreed to sell to the holder convertible notes in amounts up to $60,000. The note holder shall be entitled to a pro rata share of 20% of the net revenues (excluding Brightcove) derived from subscriptions and other sales of Fan Pass, Inc., a wholly owned subsidiary of the Company. The 20% pays out two times the initial investment and continues at 5% for a period of five years. On May 20, 2020 the Company issued a 0% note to JP Carey under this SPA with a maturity date of January 1, 2021 and received $60,000 in cash in three closings; $30,000 on April 9, 2020, $15,000 on May 13, 2020, and $15,000 on May 20,2020. The Note is convertible into common stock, subject to Rule 144, at any time after the issue date at the $0.02 as quoted on the exchange where the stock is traded. The holder does not have the right to convert the note, to the extent that the holder would beneficially own in excess of 4.9% of our outstanding common stock. The note defines several events that constitute default including failure to pay principal and interest by the maturity date and failure to comply with the exchange act. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the note becomes immediately due and payable. Under certain default events the Company may incur a penalty of 20% to 50% of the note principal. Further, if the Company fails to comply with the exchange act the conversion price is the lowest price quoted on the trade exchange during the delinquency period. Upon certain default events the conversion price may change. Therefore the embedded conversion option is bifurcated and treated as a derivative liability. On the date of issuance, the Company recorded a derivative liability of $233,000, resulting in derivative expense of $173,000 and a discount against the note of $60,000 to be amortized into interest expense through the maturity date. During the six months ended June 30, 2020, the Company amortized $11,114 of the discount. As of June 30, 2020, and the note is carried at $11,114, net of an unamortized discount of $48,886. The Company defaulted by being late with filing the Form 10-K on May 29, 2020. The Company accrued $1,262 of interest at the default rate of 24% for the period from May 29, 2020 to June 30, 2020. At June 30, 2020, the JP Carey note principal balance was $60,000 and accrued interest was $1,262. JP Carey Convertible Note dated June 11, 2020 On June 11, 2020, the issued a 0% note to JP Carey with a maturity date of January 15, 2021 and received $10,000 in cash. The Note is convertible into common stock, subject to Rule 144, at any time after the issue date at the $0.01 as quoted on the exchange where the stock is traded. The holder does not have the right to convert the note, to the extent that the holder would beneficially own in excess of 9.9% of our outstanding common stock. The note defines several events that constitute default including failure to pay principal and interest by the maturity date and failure to comply with the exchange act. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the note becomes immediately due and payable. Under certain default events the Company may incur a penalty of 20% to 50% of the note principal. Further, if the Company fails to comply with the exchange act the conversion price is the lowest price quoted on the trade exchange during the delinquency period. Upon certain default events the conversion price may change. Therefore the embedded conversion option is bifurcated and treated as a derivative liability. On the date of issuance, the Company recorded a derivative liability of $63,000, resulting in derivative expense of $53,000 and a discount against the note of $10,000 to be amortized into interest expense through the maturity date. During the six months ended June 30, 2020, the Company amortized $848 of the discount. As of June 30, 2020, and the note is carried at $848, net of an unamortized discount of $9,152. At June 30, 2020, the JP Carey note principal balance was $10,000 and accrued interest was $0. As discussed above, the Company determined that the conversion options embedded in certain convertible debt meet the definition of a derivative liability. During the six months end June 30, 2020, the Company estimate the fair value of the conversion options at the date of issuance, and at June 30, 2020, using Monte Carlo simulations and the following range of assumptions: Volatility 167.83 – 355.11% Risk Free Rate 0.14% - 0.24% Expected Term 0.25 – 0.62 The following is a summary of activity related to the embedded conversion options derivative liabilities for the six months ended June 30, 2020. Balance, December 31, 2019 $ - Initial derivative liabilities charged to operations 419,000 Initial derivative liabilities recorded as debt discount 105,000 Change in fair value expense (income) (52,000 ) Balance, June 30, 2020 $ 472,000 |