| 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 7. Commitment Note, $82,500 with 10% Interest Rate. The Commitment Note matured on March 24, 2018. The Commitment Note was convertible into shares of IronClads Class A common stock at the fixed price of $3.25 per share; provided, however, that at any time and from time to time after a default occurred solely due to the fact the Commitment Note was not retired on or before the maturity date, all or any part of the Commitment Note was convertible into shares of Class A common stock of the Company at a per share price equal to the lower of: (a) $3.25 or (b) 65% of the average of the two lowest per share trading prices of the Class A common stock during the twenty consecutive trading days prior to the conversion date. 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. On March 24, 2018 the Commitment Note ($100,000 contractually reduced to $82,500 in 2017) reached its maturity date and was not repaid in cash. Consequently, the note was in maturity date default and, pursuant to the terms of the loan, was convertible at the lesser of $3.25 or 65% of the average lowest two trades for the prior 20 days, resulting in an initial recognition for derivative treatment. Derivative Liability. Interest Expense. 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 $0.62000 07/17/2018 $ 115,000 $ (20,000) 61,538 $0.32500 8/23/2018 $ 105,000 $ (10,000) 73,260 $0.13650 09/14/18 $ 85,000 $ (20,000) 236,686 $0.08450 02/06/19 $ 45,000 $ (40,000) 2,051,282 $0.01950 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. On March 24, 2018 the first tranche of the 10% Convertible Note for $165,000 (less the $10,000 conversion in late March) reached its maturity date and was not repaid in cash. Consequently the note was in maturity date default and, pursuant to the terms of the loan, was convertible at the lesser $1.00 or 65% of the average lowest two trades for the prior 20 days, resulting in an initial recognition for derivative treatment. Derivative Liability. Interest Expense. 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 $0.0056225 03/25/19 $ 53,500 $ (24,000) 5,351,171 $0.0044850 03/27/19 $ 49,500 $ (4,000) 891,862 $0.0044850 03/28/19 $ 45,500 $ (4,000) 891,862 $0.0044850 04/12/19 $ 22,500 $ (23,000) 5,361,305 $0.0042900 04/16/19 $ 17,517 $ (4,983) 1,161,539 $0.0042900 04/22/19 $ - $ (17,517) 4,083,217 $0.0042900 Total 8,024,179 Interest Expense: 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) was 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. Interest Expense. Convertible Notes, Post Maturity Derivative Liabilities. Derivative Liability. At September 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 $1,680,757 for individual valuation amounts of $549,670, $624,607, and $506,480. There was no corresponding revaluation at September 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. Derivative Liability. Interest Expense. 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. Interest Expense. 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. 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. Derivative Liability. 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. Interest Expense. 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 Company's 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 02/04/2019 $ 120,000 $ (15,000) 808,303 $0.019500 03/01/2019 $ 111,500 $ (8,500) 921,451 $0.009750 03/21/2019 $ 99,000 $ (12,500) 2,876,192 $0.004615 03/29/2019 $ 77,000 $ (22,000) 5,218,503 $0.004485 04/04/2019 $ 56,000 $ (21,000) 4,895,105 $0.004290 04/16/2019 $ 29,000 $ (27,000) 6,293,706 $0.004290 04/17/2019 $ - $ (29,000) 6,759,907 $0.004290 Derivative Liability. Interest Expense. 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 $0.0975650 02/04/2019 $ 91,500 $ (15,000) 794,872 $0.0195000 02/12/2019 $ 77,000 $ (14,500) 769,231 $0.0195000 02/20/2019 $ 57,500 $ (19,500) 1,025,642 $0.0195000 02/28/2019 $ 42,500 $ (15,000) 1,402,715 $0.0110500 03/11/2019 $ 30,000 $ (12,500) 2,105,264 $0.0061750 03/14/2019 $ 17,500 $ (12,500) 2,312,139 $0.0056225 03/26/2019 $ 4,000 $ (13,500) 3,121,517 $0.0044850 04/04/2019 $ - $ (4,000) 932,401 $0.0042900 Derivative Liability. Interest Expense. 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 $0.1235000 02/04/2019 $ 132,500 $ (15,000) 769,231 $0.0195000 02/07/2019 $ 115,000 $ (17,500) 897,436 $0.0195000 02/20/2019 $ 90,000 $ (25,000) 1,282,051 $0.0195000 02/27/2019 $ 75,000 $ (15,000) 1,357,466 $0.0110500 03/07/2019 $ 60,000 $ (15,000) 1,923,077 $0.0078000 03/13/2019 $ 45,000 $ (15,000) 2,667,852 $0.0056225 03/25/2019 $ 35,000 $ (10,000) 2,229,654 $0.0448500 03/26/2019 $ 20,937 $ (14,063) 3,135,563 $0.0044850 03/29/2019 $ 1,000 $ (19,937) 4,445,262 $0.0044850 04/01/2019 $ - $ (1,000) 222,965 $0.0044850 Derivative Liability. Interest Expense. 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. 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 derivative liability note discount formally recorded was $142,500 ($157,500 net of $15,000) and was amortized as interest expense over the life of the loan. The remaining $209,948 was expensed as financing fees as of the inception date of the note. Interest Expense. 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 $0.004290 04/30/2019 $ 47,000 $ (32,000) 7,032,967 $0.004550 05/03/2019 $ 12,500 $ (34,500) 7,582,418 $0.004550 05/16/2019 $ - $ (12,500) 2,236,136 $0.005589 Derivative Liability. Interest Expense. 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 Company's 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 year ended March 31, 2019, there were multiple events that triggered the down round provision, the cumulative effect reduced the exercise price to $0.004485 and the number of warrants exercisable was increased to 20,197,324. As a result, the valuation of the warrants increased to $123,067 and a reduction to retained earnings was recorded for the difference, similar to a dividend, in the amount of $112,587. 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. During the three-month period ended September 30, 2019, there were no events that caused the down round feature to be triggered. Derivative Liability. Interest Expense. 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. Interest Expense. 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. Interest Expense. 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 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 28, 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 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. The Company will keep available authorized shares reserved, initially 130,000,000 shares. Derivative Liability. Interest Expense. Convertible Note, $43,200 with 8% Interest Rate, First Note (and Back End and Collateralized Notes). The First Note matures on April 12, 2020 and interest costs accrue on the unpaid principal balance at 8% annually until February 14, 2020, and after that if not paid at maturity interest accrues annually at 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, but only converted. The Company is under no obligation to accept the Back-End Note, but may do so at its sole discretion, following 180 days from the date of the note (dated April 12, 2019). As part of the SPA, the holder issued the Company a collateralized secured promissory note in the amount of $40,000 that may be exchanged for cash against the 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 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 are a function of a fixed conversion price of $0.50 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 the conversion date. The Company will keep available authorized shares reserved, initially 2,100,000 shares. Derivative Liability. Interest Expense. Convertible Note, $57,750 with 12% Interest Rate. The note matures on April 23, 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 the Company after 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 r |
