| CONVERTIBLE NOTES PAYABLE | 7.
CONVERTIBLE NOTES PAYABLE
Convertible Notes Payable at consists of the following: December 31, 2018
Auctus Fund, LLC On February 26, 2018, we entered into a Securities Purchase Agreement (the “Auctus SPA”), under which we agreed to sell a 12% convertible promissory note in an aggregate principal amount of $167,750 (the “Auctus Note”) to Auctus Fund, LLC (“Auctus”). The Auctus Note will bear interest at a rate of 12% per annum and will mature on November 26, 2018. The net proceeds of the sale of the Auctus Note, after deducting the expenses payable by were $150,000. At any time after the issue date of the Auctus Note, Auctus has the option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the Auctus Note into shares of our common stock at the Conversion Price. The “Conversion Price” will be the lesser of (i) the lowest trading price of our common stock during the twenty-five-day trading period prior to the issue date of the Auctus Note and (ii) 50% of the lowest trading price of our common stock during the twenty-five-day trading period prior to the conversion. The Conversion Price is subject to further reduction upon certain events specified in the Auctus Note. We have the right to prepay the Auctus Note at any time until the 180th calendar day after the issue date of the Auctus Note, in an amount equal to 150% (or 135% if we prepay the Auctus Note on or before the date that is 90 days after the issue date of the Auctus Note) of the outstanding balance of the Auctus Note (including principal and accrued and unpaid interest). We may not prepay the Auctus Note after the 180th calendar day after the issue date of the Auctus Note. We will be subject to a liquidated damages charge of 25% of the outstanding principal amount of the Auctus Note if we effect certain exchange transactions in accordance with, based upon or related or pursuant to Section 3(a)(10) of the Securities Act. In addition, the Auctus Note grants Auctus the right to update the terms of the Auctus SPA and the Auctus Note to incorporate the terms of any future transaction document related to a security issuance by us to a third party that are more favorable to the third party than the terms of the Auctus SPA and the Auctus Note. Any amounts due and payable to Auctus under the terms of the Auctus Note, including any payment on an event of default, default interest, or agreed upon liquidated damages may, at the Auctus's option, be converted into shares of our common stock at the Conversion Price. Pursuant to a Registration Rights Agreement, we are required to register 30,000,000 shares into which the Auctus Note may be converted. As of December 31, 2018, the note holder had converted $13,775 in Principal and $19,115 in interest and fees into 1,140,000 shares of the Company’s common stock. (See note 9 for additional details.) During the nine months ending December 31, 2018 the Company recorded interest of $16,612. The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $147,472 during the nine months ended December 31, 2018. $ 167,750
Unamortized debt discount —
Total, net of unamortized discount 154,005
EMA Financial, LLC On February 23, 2018 we entered into a Securities Purchase Agreement (“EMA SPA”) with EMA Financial, LLC, a Delaware limited liability company (“EMA”), pursuant to which we issued and sold to EMA a convertible promissory note, dated February 23, 2018 in the principal amount of $125,000 (the “EMA Note”). In connection with the foregoing, we also entered into a Registration Rights Agreement with the Purchaser dated February 23, 2018 (the “Registration Rights Agreement”). The EMA Note as amended, is due February 23, 2019, bears interest at the rate of 12% per annum. All principal and accrued interest on the EMA Note is convertible into shares of our common stock at the election of EMA at any time at a conversion price equal to the lesser of (i) the trading price for our common stock on the trading day prior to the closing date of the EMA Note, or (ii) a 50% discount to the lowest trading or lowest closing bid price for our common stock during the 25-trading day period immediately prior to conversion. We have no right to prepay the EMA Note more than 180 days after the closing date. The EMA Note contains customary default events which, if triggered and not timely cured, will result in default interest and penalties. As a result of claimed defaults, the promissory notes discount conversion rate was increased to a 80% discount to the lowest trading or lowest closing bid price for our common stock during the 25-trading day period immediately prior to conversion On July 6, 2018 the Company executed an amendment to the promissory note to cure certain events of default in which it agreed to increase the principal balance of the note by $37,500 and pay $25,000 in principal to the lender within 5 days of execution of the amendment. The company treated the amendment as a debt modification under ASC 470 and recorded a corresponding loss on debt modification of $37,500. During the three months ending December 31, 2018 the Company incurred penalties of approximately $120,533 which were added to the principal total owed under the promissory note. Pursuant to the Registration Rights Agreement, we are required to register 30,000,000 shares into which the EMA Note may be converted. As of December 31, 2018, the note holder had converted $61,841 in Principal and $6,350 in interest and fees into 8,300,000 shares of the Company’s common stock. (See note 9 for additional details.) During the nine months ending December 31, 2018 the Company recorded interest of $11,173. In July 2018, the Company made principal and interest payments of $60,000 on the outstanding convertible note with EMA financial, LLC. The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $138,936 during the nine months ended December 31, 2018. 176,747
Unamortized debt discount (11,235)
Total, net of unamortized discount 165,512
Adar Bays, LLC July 2, 2018 Secured Convertible Note On July 2, 2018 we entered into a Secured Convertible note with Adar Bays, LLC (“Adar”) pursuant to which we issued a convertible promissory note, dated July 2, 2018 in the principal amount of $150,000 (the “July 2, 2018 Adar Note”). The July 2, 2018 Adar Note, is due July 2, 2019, bears interest at the rate of 10% per annum. All principal and accrued interest on the July 2, 2018 Adar Note is convertible into shares of our common stock at the election of Adar six months after the issuance date at a conversion price equal to a 50% discount to the lowest trading or lowest closing bid price for our common stock during the 25-trading day period immediately prior to conversion. We can pay the note in cash within the first six months of issuance, we have no right to prepay the July 2, 2018 Adar Note six months and one day after issuance. The July 2, 2018 Adar Note contains customary default events which, if triggered and not timely cured, will result in default interest and penalties. During the nine months ending December 31, 2018 the Company recorded interest of $8,712. The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $74,795 during the nine months ended December 31, 2018. 150,000
Unamortized debt discount (75,205)
Total, net of unamortized discount 74,795
GS Capital Partners, LLC Convertible Note On July 11, 2018 we entered into a Convertible note with GS Capital Bays, LLC (“GS”) pursuant to which we issued a convertible promissory note, dated July 11, 2018 in the principal amount of $110,000 (the “GS Note”). The GS Note, is due July 11, 2019, bears interest at the rate of 10% per annum. All principal and accrued interest on the GS Note is convertible into shares of our common stock at the election of GS at any time at a conversion price equal to a 50% discount to the lowest trading or lowest closing bid price for our common stock during the 25-trading day period immediately prior to conversion. We have the right to prepay the GS Note within 60 days of the closing date at a premium of 125% of all amounts owed to GS and at a premium of 135% if prepaid more than 60 but less than 120 days following the closing date, at a premium of 145% if prepaid more than 120 but less than 180 days following the closing date. We have no right to prepay the GS Note more than 180 days after the closing date. The GS Note contains customary default events which, if triggered and not timely cured, will result in default interest and penalties. During the nine months ending December 31, 2018 the Company recorded interest of $6,118. The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $52,137 during the nine months ended December 31, 2018. 110,000
Unamortized debt discount (57,863)
Total, net of unamortized discount 52,137
Eagle Equities, LLC Convertible Note On July 20, 2018 we entered into a Convertible note with Eagle Equities, LLC (“Eagle”) pursuant to which we issued a convertible promissory note, dated July 20, 2018 in the principal amount of $100,000 (the “Eagle Note”). The Eagle Note, is due July 20, 2019, bears interest at the rate of 10% per annum. All principal and accrued interest on the Eagle Note is convertible into shares of our common stock at the election of Eagle at any time at a conversion price equal to a 50% discount to the lowest trading or lowest closing bid price for our common stock during the 25-trading day period immediately prior to conversion. We have the right to prepay the Eagle Note within 90 days of the closing date at a premium of 135% of all amounts owed to GS and at a premium of 150% if prepaid more than 90 but less than 180 days following the closing date. We have no right to prepay the Eagle Note more than 180 days after the closing date. The Eagle Note contains customary default events which, if triggered and not timely cured, will result in default interest and penalties. During the nine months ending December 31, 2018 the Company recorded interest of $5,315. The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $44,932 during the nine months ended December 31, 2018. 100,000
Unamortized debt discount (55,069)
Total, net of unamortized discount 44,932
Adar Bays, LLC July 23, 2018 Secured Convertible Note On July 23, 2018 we entered into a Secured Convertible note with Adar Bays, LLC (“Adar”) pursuant to which we issued a convertible promissory note, dated July 23, 2018 in the principal amount of $50,000 (the “Adar Note”). The Adar Note, is due July 23, 2019, bears interest at the rate of 10% per annum. All principal and accrued interest on the Adar Note is convertible into shares of our common stock at the election of Adar at any time at a conversion price equal to a 50% discount to the lowest trading or lowest closing bid price for our common stock during the 25-trading day period immediately prior to conversion. We have the right to prepay the Adar Note within 90 days of the closing date at a premium of 135% of all amounts owed to Adar and at a premium of 150% if prepaid more than 90 but less than 180 days following the closing date. We have no right to prepay the Adar Note more than 180 days after the closing date. The Adar Note contains customary default events which, if triggered and not timely cured, will result in default interest and penalties. During the nine months ending December 31, 2018 the Company recorded interest of $2,616. The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $22,055 during the nine months ending December 31, 2018. 50,000
Unamortized debt discount (27,945)
Total, net of unamortized discount 22,055
Power UP Lending Group Convertible Note – October 15, 2018 On October 15, 2018 we entered into a Convertible note with Power UP Lending Group LTD (“Power UP”) pursuant to which we issued a convertible promissory note, dated October 15, 2018 in the principal amount of $128,000 (the “Power UP Note”). The Power UP Note, is due October 15, 2019, bears interest at the rate of 8% per annum. All principal and accrued interest on the Power UP Note is convertible into shares of our common stock 180 days following October 15, 2018 at a conversion price equal to a 37% discount to the lowest trading or lowest closing bid price for our common stock during the 15-trading day period immediately prior to conversion. We have the right to prepay the Power UP Note within 30 days of the closing date at a premium of 112% of all amounts owed to Power UP and at a premium of 117% if prepaid more than 31 but less than 60 days following the closing date and at a premium of 122% if prepaid more than 61 but less than 90 days following the closing date and at a premium of 127% if prepaid more than 91 but less than 120 days following the closing date and at a premium of 132% if prepaid more than 121 but less than 150 days following the closing date and at a premium of 137% if prepaid more than 151 but less than 180 days following the closing date. We have no right to prepay the Power UP Note more than 180 days after the closing date. The Power UP Note contains customary default events which, if triggered and not timely cured, will result in default interest and penalties. During the nine months ending December 31, 2018 the Company recorded interest of $3,002. The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $27,997 during the nine months ending December 31, 2018. 128,000
Unamortized debt discount (100,003)
Total, net of unamortized discount 27,997
Power UP Lending Group Convertible Note – November 6, 2018 On October 15, 2018 we entered into a Convertible note with Power UP Lending Group LTD (“Power UP”) pursuant to which we issued a convertible promissory note, dated October 15, 2018 in the principal amount of $53,000 (the “Power UP Note-2”). The Power UP Note-2, is due November 6, 2019, bears interest at the rate of 8% per annum. All principal and accrued interest on the Power UP Note-2 is convertible into shares of our common stock 180 days following October 15, 2018 at a conversion price equal to a 39% discount to the lowest trading or lowest closing bid price for our common stock during the 15-trading day period immediately prior to conversion. We have the right to prepay the Power UP Note within 30 days of the closing date at a premium of 112% of all amounts owed to Power UP and at a premium of 117% if prepaid more than 31 but less than 60 days following the closing date and at a premium of 122% if prepaid more than 61 but less than 90 days following the closing date and at a premium of 127% if prepaid more than 91 but less than 120 days following the closing date and at a premium of 132% if prepaid more than 121 but less than 150 days following the closing date and at a premium of 137% if prepaid more than 151 but less than 180 days following the closing date. We have no right to prepay the Power UP Note more than 180 days after the closing date. The Power UP Note contains customary default events which, if triggered and not timely cured, will result in default interest and penalties. During the nine months ending December 31, 2018 the Company recorded interest of $987. The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $8,726 during the nine months ending December 31, 2018. 53,000
Unamortized debt discount (44,274)
Total, net of unamortized discount 8,726
Total $ 550,158 Derivative
liability The
Company accounts for the fair value of the conversion features of its convertible debt in accordance with ASC Topic No. 815-15
“Derivatives and Hedging; Embedded Derivatives” (“Topic No. 815-15”). Topic No. 815-15 requires the Company
to bifurcate and separately account for the conversion features as an embedded derivative contained in the Company’s convertible
debt. The Company is required to carry the embedded derivative on its balance sheet at fair value and account for any unrealized
change in fair value as a component of results of operations. The Company values the embedded derivatives using the Black-Scholes
pricing model. The
following table presents a summary of the Company’s derivative liabilities associated with its convertible notes as of December
31, 2018:
Amount
Balance March 31, 2017 $ —
Debt discount originated from derivative liabilities 262,500
Initial loss recorded 170,924
Adjustment to derivative liability due to debt settlement —
Change in fair market value of derivative liabilities 296,313
Balance March 31, 2018 $ 729,737
Debt discount originated from derivative liabilities 530,050
Initial loss recorded 473,113
Adjustment to derivative liability due to debt settlement (288,950)
Change in fair market value of derivative liabilities 192,045
Balance December 31, 2018 $ 1,635,995 The
Black-Scholes model utilized the following inputs to value the derivative liabilities at the date of issuance of the convertible
notes, at March 31, 2018 and at December 31, 2018:
Fair
value assumptions – derivative notes: February
23, 2018 February
26, 2018 March
31, 2018 July
2, 2018 July
11, 2018 July
20, 2018 July
23, 2018 October
15, 2018 November
6, 2018 December
31, 2018
Risk
free interest rate 2.02% 2.03% 2.09% 2.34% 2.36% 2.41% 2.42% 2.67% 2.72% 2.56%
Expected
term (years) 1.0 .75 0.66
-.90 1.0 1.0 1.0 1.0 1.0 1.0 0.01-0.84
Expected
volatility 188.62% 188.72% 199.58% 170.90% 171.08% 172.31% 172.42% 198.49% 202.93% 202.35%
Expected
dividends 0 0 0 0 0 0 0 0 0 0 |
