| Note 6. Notes Payable | Note 6. Notes Payable Commitment Note and Convertible Note, Equity Line with 10% Interest Rate On August 24, 2017, IronClad entered into an Investment Agreement to establish an equity line of funding for the potential future issuance and purchase of IronClads shares of Class A common stock. See Note 8. Commitment Note, $82,500 with 10% Interest Rate. The Commitment Note was included as a financing fee expense at the date of the transaction. The Commitment Note was to finance the $100,000 cost of the commitment fee to the counterparty of the Investment Agreement and was accordingly included in the financing fee expenses for the period ended September 30, 2017. The amount of the commitment fee could be reduced by $35,000 or $17,500 if a registration statement registering the shares that would be issued under the equity line became effective within 90 or 135 days, respectively, of August 24, 2017. The registration statement was declared effective on December 18, 2017 a period less than 135 days (but more than 90 days) after August 24, 2017. Consequently, the principal balance of the commitment fee was reduced by $17,500 and $100,000 of financing fee expenses originally recognized in the three-month period ended September 30, 2017 were adjusted to reflect a lower $82,500 financing fee expense. During the three-month period ended June 30, 2019, $2,102 of regular interest and $42,116 of default interest was expensed. During the three-month period ended June 30, 2018, $4,114 of regular interest was expensed. Convertible Note, Initial Consideration: $165,000 First Tranche with 10% Interest Rate. The Convertible Note also had an embedded beneficial conversion feature (BCF) based on a stated conversion price of $1.00 per share. The market price of a share of IronClads common stock at the time of the first borrowing under the note was $3.50 thus establishing an intrinsic value of $2.50 on that date. The Company received the first borrowing for $165,000 under the Convertible Note on August 24, 2017 and net cash proceeds of $150,000 were received after deducting for the original issue discount and lender transaction costs of $15,000. An additional $12,000 of costs was incurred by IronClad directly relating to the note. Both the $15,000 and the $12,000 were recorded as discount amounts on the $165,000 note payable and were amortized as interest expenses over the life of the borrowing. The maturity date of this borrowing under the note was seven months from its funding date which was March 24, 2018. Between March 26, 2018 and February 25, 2019, the note holder exercised its rights under the conversion provisions and through the operation of seven conversion elections were issued, in total, 4,588,586 shares of stock which effectively repaid the loan balance. Additionally, between March 14, 2019 and March 28, 2019, the note holder elected to convert approximately $37,698 of accrued interest into 7,683,614 shares of Class A common stock. The dates, shares issued and principal amounts repaid at each conversion event are as follows: Conversion Date Principal Outstanding Principal Reduction Shares Issued Exercise Price 12/31/2017 $165,000 3/26/2018 $155,000 $(10,000) 9,958 $1.00425 06/01/18 $135,000 $(20,000) 32,219 $0.62 07/17/2018 $115,000 $(20,000) 61,538 $0.325 8/23/2018 $105,000 $(10,000) 73,260 $0.1365 09/14/18 $85,000 $(20,000) 236,686 $0.0845 02/06/19 $45,000 $(40,000) 2,051,282 $0.0195 02/25/19 $- $(45,000) 2,123,643 $0.02119 Total 4,588,586 The valuation of the BCF related to the $165,000 borrowing on the Convertible Note and with an intrinsic value of $2.50 per share (based on a $3.50 closing price less the $1.00 per share conversion price) was approximately $424,407 using a Black-Scholes valuation model. That amount was recorded as a contra-note payable amount (similar to the recorded OID and transaction costs), but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the note payable. The amount of the beneficial conversion feature formally recorded was $138,000 ($165,000 net of $27,000) and was amortized as interest expense over the life of the loan. Derivative Liabilities on Commitment and Convertible Notes (above). The valuation of the derivative liability related to the $82,500 borrowing on the Convertible Note and with an intrinsic value of $0.70 per share (based on a $1.67 closing price less the $0.97 per share present value of the conversion price) was approximately $79,138 using a Black-Scholes valuation model. That amount was recorded as a new contra-note payable amount (similar to the recorded OID and transaction costs), but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the note payable. This results in a net liability value of $3,362. The amount was amortized as interest expense over an estimated remaining three month life of the already matured loan. The valuation of the derivative liability related to the $165,000 (reduced to $155,000) borrowing on the Convertible Note and with an intrinsic value of $0.70 per share (based on a $1.67 closing price less the $0.97 per share present value of the conversion price) was approximately $158,276 using a Black-Scholes valuation model. That amount was recorded as a new contra-note payable amount (similar to the recorded OID and transaction costs), but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the note payable. Since the undiscounted (and unconverted) amount of the note was $155,000 the derivative valuation was recorded as $155,000. The amount was amortized as interest expense over an estimated remaining three month life of the already matured loan. During the three-month period ended June 30, 2019, $0 of regular interest and $0 of derivative liability was expensed because all amounts owed relating to the note were converted as of March 1, 2019. During the three-month period ended June 30, 2018, $7,400 of regular interest, $0 of original issue discount and $155,000 of beneficial conversion was expensed. Convertible Note, Second Tranche, $82,500 with 10% Interest Rate. The maturity date of this borrowing under the Convertible Note was also defined to be seven months from its borrowing date which was May 24, 2018. The market price of a share of IronClads common stock at the time of funding was $4.40 making the intrinsic value of the derivative $3.40. The valuation of the BCF was estimated to be approximately $289,000 and was capped at $69,000, the otherwise undiscounted amount of the note payable. Between March 14, 2019 and April 22, 2019, the holder of the note elected to convert $82,500 of principal into 18,630,240 shares of Class A common stock. The dates, shares issued and principal amounts repaid at each conversion event are as follows: Conversion Date Principal Outstanding Principal Reduction Shares Issued Exercise Price 12/31/18 $82,500 3/14/2019 $77,500 $(5,000) 889,284 $.0056225 03/25/19 $53,500 $(24,000) 5,351,171 $0.004485 03/27/19 $49,500 $(4,000) 891,862 $0.004485 03/28/19 $45,500 $(4,000) 891,862 $0.004485 04/12/19 $22,500 $(23,000) 5,361,305 $0.00429 04/16/19 $17,517 $(4,983) 1,161,539 $0.00429 04/22/19 $- $(17,517) 4,083,217 $0.00429 Total 8,024,179 During the three month period ended June 30, 2019, $406 of regular interest, $0 of original issue discount, and $0 of derivative liability was expensed. During the three month period ended June 30, 2018, $3,764 of regular interest, $20,916 of original issue discount and $23,443 of derivative liability was expensed. Convertible Note, Third Tranche, $82,500 with 10% Interest Rate. The valuation of the BCF related to the $82,500 borrowing on the Convertible Note and with an intrinsic value of $0.85 per share (based on a $1.85 closing price less the $1.00 per share conversion price) is approximately $109,861 using a Black-Scholes valuation model. That amount was recorded as a contra-note payable amount (similar to the recorded OID and transaction costs), but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the note payable. The amount of the beneficial conversion feature formally recorded was $69,000 ($82,500 net of $13,500) and was amortized as interest expense over the life of the loan. During the three-month period ended June 30, 2019, $2,080 of regular interest, $0 of original issue discount, $0 of beneficial conversion and $0 of derivative liability and $134,308 of default interest was expensed. During the three-month period ended June 30, 2018, $3,525 of regular interest, $5,930 of original issue discount and $29,205 of beneficial conversion was expensed. Convertible Notes, Post Maturity Derivative Liabilities. The valuation of the derivative liability related to the $82,500 borrowing on the Convertible Note and with an intrinsic value of $0.6912 per share is approximately $57,024 using a Binomial pricing model. That amount was recorded as a contra-note payable amount (similar to the recorded OID and transaction costs). The amount was amortized as interest expense over an estimated remaining three month life of the already matured loan. At June 30, 2018 the prior periods derivative liabilities were remeasured, as the notes were still outstanding, the derivative liability was revalued using a binomial pricing model. At period end the total valuation of new derivative liabilities related to three loans was approximately $262,086 for individual valuation amounts of $67,531, $120,993 and $73,561. There was no corresponding revaluation at June 30, 2019 because the underlying notes had been converted to common stock and were no longer outstanding. Fiscal Year Ended March 31, 2018 Notes Convertible Note, $88,000 with 12% Interest Rate. The note matured on October 30, 2018 and interest costs accrued on the unpaid principal balance at 12% annually until October 30, 2018, and after that if not paid at maturity interest accrued annually at 22% until the principal amount and all interest accrued and unpaid were paid. The holder of the note, at its sole election, could convert the note into shares of common stock of the Company at any time during the period beginning on the date which was one hundred and eighty days following the date of the note (dated January 25, 2018) and ending on the later of i) the maturity date, or ii) the date of payment of a default amount, if any. The shares to be issued were a function of a variable conversion price which was 65% of a market price defined to be the lowest one day closing bid price for the Companys common stock during the fifteen-day trading period ending on the last trading day prior to exercising the conversion right. The Company would keep available authorized shares reserved, initially 289,846 shares, but in any event authorized shares equal to six times the number of shares that would be issuable upon full conversion of the note from time to time. At June 30, 2018 a derivative liability with an intrinsic value of $0.2404 was $57,990 using a binomial pricing model and was recorded as a discount to the note. The note was repaid in mid-July, 2018; thus during the three-month period ended June 30, 2019 no interest was recorded on the note. During the three-month period ended June 30, 2018, $2,633 of regular interest and $1,025 of original issue discount was expensed. Convertible Note, $53,000 with 12% Interest Rate. The note matured on November 3, 2018 and interest costs accrued on the unpaid principal balance at 12% annually until November 30, 2018, and after that if not paid at maturity interest accrued annually at 22% until the principal amount and all interest accrued and unpaid were paid. The holder of the note, at its sole election, could convert the note into shares of common stock of the Company at any time during the period beginning on the date which was one hundred and eighty days following the date of the note (dated February 27, 2018) and ending on the later of i) the maturity date, or ii) the date of payment of a default amount, if any. The shares to be issued were a function of a variable conversion price which was 65% of a market price defined to be the lowest one day closing bid price for the Companys common stock during the fifteen-day trading period ending on the last trading day prior to exercising the conversion right. The Company kept available authorized shares reserved, initially 289,846 shares, but in any event authorized shares equal to six times the number of shares that would be issuable upon full conversion of the note from time to time. Derivative Liability. Because the note was repaid in August, 2018 no interest was recorded on the note during the three-month period ended June 30, 2019. During the three-month period ended June 30, 2018, $1,586 of regular interest and $1,146 of original issue discount was expensed. Working Capital Loan for Services to New Customer by IronClad Pipeline IC, Inc. with 8.5% Interest Rate. On March 21, 2018, IronClad borrowed an additional $245,000 gross proceeds as a second advance under the Agreement. Proceeds received net of the transaction fee were $240,000. During the period ended June 30, 2018, the Company repaid $125,000 of the principal, and then redrew another $100,000. The outstanding principal balance of this loan at June 30, 2018 was $475,000 and was subsequently repaid in full by a series of cash payments through September 11, 2018. Interest is to be paid annually in cash on March 1, 2019 and 2020. Outstanding interest of $17,816 was not paid at March 1, 2019. The Company is negotiating with the lender to issue common stock in exchange for the accrued amount of interest owed. There was no penalty for any of the early principal repayments. The Company has pledged 500,000 of its common stock as collateral under the terms of the Agreement. In the event of default by the Company, the lender is entitled to receive one share of Company common stock for every one dollar in principle, interest, penalties, and fees that are owed and outstanding by the Company to the lender. The Agreement is also supported by a personal $500,000 guarantee from an officer of the Company. IronClad owed the officer a 5% guarantee fee of $25,000; $15,000 was paid shortly after June 30, 2019 and the remaining $10,000 is to be paid at such time as the Board of Directors determines the Company has sufficient liquidity to pay the balance owed. The guarantee fee was reviewed and approved by the Compensation Committee of the Board which determined that the 5% fee was an appropriate market-based rate for guarantees of loans of this nature and comparable risk. Terms of the Agreement specified that the uses of funds were to be limited to only supporting the operations of the service contract and loan repayment. The terms of the Agreement were amended, effective June 11, 2018, to also permit the use of funds for certain new patent application filings of IronClad. Insurance Financing Note with 6% Interest Rate. On July 14, 2018 the outstanding loan principal balance was repaid plus accrued interest, both totaling $10,195, and the note was fully retired. Fiscal Year Ended March 31, 2019: New Loan Agreements including Convertible Notes Convertible Note, $250,000 with 10% Interest Rate . The note matured on December 26, 2018 and interest costs accrued on the unpaid principal balance at 10% annually until December 26, 2018, and after that if not paid at maturity interest accrued annually at 24% until the principal amount and all interest accrued and unpaid were paid. The holder of the note, at its sole election, could convert the note into shares of common stock of the Company at any time on or following the date of the Note from the and ending on the later of i) the maturity date, or ii) the date of payment of a default amount, if any. The shares to be issued were a function of a fixed conversion price of $1.00 per share, or an alternate variable conversion price, triggered by events such as stock splits, stock dividends or rights offerings which is 70% of a market price defined to be the lowest five day closing bid price for the Companys common stock during the twenty-day trading period ending on the last trading day prior to exercising the conversion right. The Company kept available authorized shares reserved, initially 3,081,854 shares, but in any event authorized shares equal to five times the number of shares that would be issuable upon full conversion of the note from time to time. Derivative Liability. As a commitment fee for the Note, the Company issued the holder 240,384 shares of common stock to be held in escrow until the Note was repaid. The holder kept the shares, if the Note was not retired prior to its maturity date. The shares were valued at $165,865 and were recorded as a discount on the note and amortized through repayment of the note on November 1, 2018. Upon repayment of the note the shares were returned and the $165,865 expense was reversed. Warrants and Down Round Feature. The warrant included a down round feature that would reduce the exercise price of the warrant if the Company sold or granted any option to purchase, or sell or grant any right to reprice, or otherwise disposed of or issued common stock or securities entitling any person or entity to acquire shares of common stock (upon conversion, exercise or otherwise) at an effective price per share less than the then exercise price. On January 17, 2019, the down round feature was triggered and the exercise price was reduced to $0.0195 and the number of warrants exercisable was increased to 9,615,385. As a result, the original valuation of $43,121 was increased to $164,132 and a reduction to retained earnings was recorded for the difference, similar to a dividend, in the amount of $121,011. Because the note was repaid in November, 2018 no interest was recorded on the note during the three-month period ended June 30, 2019. During the three-month period ended June 30, 2018, $274 of regular interest and $328 of original issue discount was expensed. On October 11, 2018 the holder of the note converted $100,000 of the principal into 3,076,923 shares of Class A capital stock. On November 1, 2018 the Company paid off the remaining $150,000 of principal in cash. Convertible Note, $135,000 with 9% Interest Rate. The First Note matured on July 11, 2019 and interest costs accrued on the unpaid principal balance at 9% annually until July 11, 2019, and after that if not paid at maturity interest accrued annually at 24% until the principal amount and all interest accrued and unpaid were paid. The Back End Note carried the same terms as the First Note, except it could not be repaid, but only converted. The Company was under no obligation to accept the Back End Note, but could do so at its sole discretion, following 180 days from the date of the note (dated July 11, 2018). As part of the SPA, the Holder issued the Company a collateralized secured promissory note in the amount of $131,500 that could be exchanged for cash against the Back End Note. On January 25, 2019, the holder of the note chose to cancel the Back End Note. The holder of the note, at its sole election, could convert the note into shares of common stock of the Company at any time during the period beginning on the date which was 180 days following the date of the note (dated July 11, 2018) and ending on the later of i) the maturity date, or ii) the date of payment of a default amount, if any. The shares to be issued were a function of a fixed conversion price of $1.00 per share for six months, and thereafter until maturity at a variable conversion price which was 65% of a market price defined to be the lowest trading price for the Companys common stock during the fifteen-day trading period ending on the last trading day prior to exercising the conversion right. The Company kept available authorized shares reserved, initially 1,730,000 shares, but in any event the number of reserved shares at least equals 400% of the number of shares of Company common stock issuable upon conversion of the Note. From February 4, 2019 thru April 17, 2019 the holder of the note elected to convert $135,000 of principal and accrued interest into common stock. The dates, shares issued and principal amounts repaid at each conversion event are as follows: Conversion Date Principal Outstanding Principal Reduction Shares Issued Exercise Price 12/31/2018 135,000 2/04/2019 $120,000 $(15,000) 808,303 $0.0195 03/01/2019 $111,500 $(8,500) 921,451 $0.00975 03/21/2019 $99,000 $(12,500) 2,876,192 $0.004615 03/29/2019 $77,000 $(22,000) 5,218,503 $0.004485 04/04/19 $56,000 $(21,000) 4,895,105 $0.00429 04/16/19 $29,000 $(27,000) 6,293,706 $0.00429 04/17/19 $- $(29,000) 6,759,907 $0.00429 Derivative Liability. During the three-month period ended June 30, 2019, $(697) of regular interest, $2,375 of unamortized original issue discount, and $35,351 of unamortized derivative liability was expensed. There was no corresponding expense during the three-month period ended June 30, 2018. Convertible Note, $115,500 with 12% Interest Rate. The Holder of the note, at its sole election, could convert the note into shares of common stock of the Company at any time during the period beginning on the date which is one hundred and eighty days following the date of the note (dated July 18, 2018) and ending on the later of i) the maturity date, or ii) the date of payment of a default amount, if any. The shares to be issued upon conversion were a function of a variable conversion price which is 65% of a market price defined to be the lowest one (1) trading price for the Companys common stock during the fifteen (15) day trading period ending on the last trading day prior to the conversion date. The Company kept available authorized shares reserved, initially 1,500,000 shares. From January 22, 2019 thru April 4, 2019 the holder of the note elected to convert $115,500 of principal, $4,500 of financing fees and $8,448 of accrued interest into 14,646,896 shares of Class A common stock. The dates, shares issued, and principal amounts repaid at each conversion event are as follows: Conversion Date Principal Outstanding Principal Reduction Shares Issued Exercise Price 12/31/2018 115,500 01/22/2019 $106,500 $(9,000) 97,371 $0.097565 02/4/2019 $91,500 $(15,000) 794,872 $0.0195 02/12/2019 $77,000 $(14,500) 769,231 $0.0195 02/20/2019 $57,500 $(19,500) 1,025,642 $0.0195 02/28/2019 $42,500 $(15,000) 1,402,715 $0.01105 03/11/2019 $30,000 $(12,500) 2,105,264 $0.006175 03/14/2019 $17,500 $(12,500) 2,312,139 $0.0056225 03/26/2019 $4,000 $(13,500) 3,121,517 $0.004485 04/04/2019 $- $(4,000) 932,401 $0.00429 Derivative Liability. Convertible Note, $157,500 with 9% Interest Rate, First Note (and Back End Note). The First Note matured on July 19, 2019 and interest costs accrued on the unpaid principal balance at 9% annually until July 19, 2019, and after that if not paid at maturity interest accrues annually at up to 24% until the principal amount and all interest accrued and unpaid are paid. The Back End Note carries the same terms as the First Note, except it may not be repaid in cash, but only converted. The Company accepted the Back End Note on March 19, 2019. As part of the SPA, the Holder issued the Company a collateralized secured promissory note in the amount of $150,000 that was exchanged for cash against the Back End Note (discussed below). The holder of the note, at its sole election, could convert the note into shares of common stock of the Company at any time during the period beginning on the date which is 180 days following the date of the note (dated July 19, 2018) and ending on the later of i) the maturity date, or ii) the date of payment of a default amount, if any. The shares to be issued are a function of a fixed conversion price of $1.00 per share for six months, and thereafter until maturity at a variable conversion price which is 65% of a market price defined to be the lowest trading price for the Companys common stock during the fifteen-day trading period ending on the last trading day prior to exercising the conversion right. From January 24, 2019 thru April 1, 2019 the holder of the note elected to convert $157,500 of principal into 19,011,529 shares of Class A common stock. The dates, shares issued and principal amounts repaid at each conversion event are as follows: Conversion Date Principal Outstanding Principal Reduction Shares Issued Exercise Price 12/31/2018 $157,500 01/24/2019 $147,500 $(10,000) 80,972 $0.1235 02/04/2019 $132,500 $(15,000) 769,231 $0.0195 02/07/2019 $115,000 $(17,500) 897,436 $0.0195 02/20/2019 $90,000 $(25,000) 1,282,051 $0.0195 02/27/2019 $75,000 $(15,000) 1,357,466 $0.01105 03/07/2019 $60,000 $(15,000) 1,923,077 $0.0078 03/13/2019 $45,000 $(15,000) 2,667,852 $0.0056225 03/25/2019 $35,000 $(10,000) 2,229,654 $0.04485 03/26/2019 $20,937 $(14,063) 3,135,563 $0.004485 03/29/2019 $1,000 $(19,937) 4,445,262 $0.004485 04/01/19 $- $(1,000) 222,965 $0.004485 Derivative Liability. During the three-month period ended June 30, 2019, $(291) of regular interest, $0 of original issue discount, and $0 of derivative liability was expensed on the First Note, There was no corresponding expense during the three-month period ended June 30, 2018. Convertible Note, $157,500 with 9% Interest Rate, Back End Note. The holder of the note, at its sole election, may convert the note into shares of common stock of the Company at any time during the period beginning on the date which is 180 days following the date of the note (dated March 14, 2019) and ending on the later of i) the maturity date, or ii) the date of payment of a default amount, if any. The shares to be issued are a function of a fixed conversion price of $1.00 per share for six months, and thereafter until maturity at a variable conversion price which is 65% of a market price defined to be the lowest trading price for the Companys common stock during the fifteen-day trading period ending on the last trading day prior to exercising the conversion right. Derivative Liability. During the three-month period ended June 30, 2019, $3,534 of regular interest, $10,748 of original issue discount, and $102,106 of derivative liability was expensed on the Back End Note. There was no corresponding expense during the three-month period ended June 30, 2018. Convertible Note, $107,000 with 10% Interest Rate. The Holder of the note is entitled, at any time after cash payment, to convert all or any amount of the principal face amount of the Note then outstanding into shares of the Company's common stock. The shares to be issued upon conversion are a function of a variable conversion price which is 65% of a market price defined to be the lowest trading price for the Companys common stock during the fifteen day trading period ending on the last trading day prior to the conversion date. The Company kept available authorized shares reserved, initially 2,993,000 shares. From April 17, 2019 thru May 16, 2019 the holder of the note elected to convert $107,000 of principal into 23,378,328 shares of Class A common stock. The dates, shares issued and principal amounts repaid at each conversion event are as follows: Conversion Date Principal Outstanding Principal Reduction Shares Issued Exercise Price 12/31/2018 $107,000 04/17/2019 $79,000 $(28,000) 6,526,807 $0.00429 04/30/2019 $47,000 $(32,000) 7,032,967 $0.00455 05/03/2019 $12,500 $(34,500) 7,582,418 $0.00455 05/16/2019 $- $(12,500) 2,236,136 $0.005589 Derivative Liability. During the three-month period ended June 30, 2019, $816 of regular interest, $2,836 of original issue discount, and $57,847 of derivative liability was expensed. There was no corresponding expense during the three-month period ended June 30, 2018. Convertible Note, $181,170 with 12% Interest Rate. The Holder shall have the right at any time following the 180th calendar day after the issue date (October 26, 2018), and ending on the later of i) the maturity date, or ii) the date of payment of a default amount, if any, to convert all or any amount of the principal face amount of the Note then outstanding into shares of the Company's common stock. The shares to be issued upon conversion are a function of a variable conversion price which is 65% of a market price defined to be the lowest trading price for the Companys common stock during the fifteen day trading period ending on the last trading day prior to the conversion date. From May 7, 2019 thru June 10, 2019 the holder of the note elected to convert $33,342 of principal into 19,011,529 shares of Class A common stock. The dates, shares issued, and principal amounts repaid at each conversion event are as follows: Conversion Date Principal Outstanding Principal Reduction Shares Issued Exercise Price 12/31/2018 $181,170 04/17/2019 $168,261 $(12,909) 4,361,220 $0.00296 04/30/2019 $147,828 $(20,433) 8,374,250 $0.00244 The Company will keep available authorized shares reserved, initially 6,500,000 shares. In connection with the issuance of the Note, the Company issued a common stock purchase warrant to the Holder to purchase up to 30,195 shares of the Companys common stock at an exercise price of $3.00 per share with an exercise period of five years. The warrants were valued at $10,265 using a Black Scholes option pricing model and were recorded as a financing expense. Warrants and Down Round Feature. During the three-month period ended June 30, 2019, there were also multiple events that caused the down round feature to be triggered again. The cumulative effect reduced the exercise price to $0.0024 and the number of warrants exercisable was increased to 37,743,750. As a result, the valuation of the warrants increased to $201,663 and a reduction to retained earnings was recorded for the difference, similar to a dividend, in the amount of $78,596. Derivative Liability. During the three-month period ended June 30, 2019, $4,143 of regular interest, $10,275 of original issue discount, and $50,115 of derivative liability was expensed. There was no corresponding expense during the three-month period ended June 30, 2018. Convertible Note, $57,500 with 12% Interest Rate. The note matures on February 14, 2020. Interest costs accrue on the unpaid principal balance at 12% annually until maturity, and after that if not paid, interest accrues annually at 18% until any unpaid principal amount and unpaid interest accrued are paid. The Holder of the note, at its sole election, may convert the note into shares of common stock of Company the six month anniversary of the note, the conversion price shall be equal to 65% of the lowest trading price for the fifteen prior trading days including the day upon which a notice of conversion is received. Derivative Liability. During the three-month period ended June 30, 2019, $1,728 of regular interest, $1,932 of original issue discount, and $12,466 of derivative liability was expensed. There was no corresponding expense during the three-month period ended June 30, 2018. Convertible Note, $107,000 with 10% Interest Rate. The Holder of the note is entitled, at any time after cash payment, to convert all or any amount of the principal face amount of the Note then outstanding into shares of the Companys common stock. The shares to be issued upon conversion are a function of a variable conversion price which is 65% of a market price defined to be the lowest trading price for the Companys common stock during the fifteen day trading period including the day upon which the notice of conversion is received conversion date. The Company will keep available authorized shares reserved, initially 11,551,000 shares. Derivative Liability. During the three-month period ended June 30, 2019, $2,668 of regular interest, $1,247 of original issue discount, and $25,430 of derivative liability was expensed. There was no corresponding expense during the three-month period ended June 30, 2018. Convertible Note, $86,250 with 12% Interest Rate, First Note (and Back End and Collateralized Notes). The First Note matures on March 28, 2020 and interest costs accrue on the unpaid principal balance at 12% annually until March 28, 2020, and after that if not paid at maturity interest accrues annually at up to 24% until the principal amount and all interest accrued and unpaid are paid. The Back End Note carries the same terms as the First Note, except it may not be repaid in cash, but only by a conversion to Class A common stock. As part of the SPA, the Holder issued the Company a collateralized secured promissory note in the amount of $ 78,750 that may be exchanged for cash against the Back End Note. The holder |
