From last LATE Q reported last years.
NOTE 2. GOING CONCERN
The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has limited assets, has incurred losses since inception of $20,141,465 and has negative cash flows from operations. As of September 30, 2019, the Company had a working capital deficit of $8,934,741. The Company has relied on raising debt and equity capital in order to fund its ongoing day-to-day operations and its corporate overhead. The Company will require additional working capital from either cash flow from operations, from debt or equity financing, or from a combination of these sources. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a period of one year from the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
BRAND NEW 2020 TOXIC NOTES
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On January 1, 2020, the Company entered into a four-year employment agreement with Gary, J. Grieco, its President and CEO, whereby Mr. Grieco will receive $48,000 per year commencing April 1, 2020, and receive 15,000,000 shares of the Company’s common stock for services to the Company as its President and CEO. In addition, once monthly revenue exceeds monthly expenses the salary will be increased and Mr. Grieco will be issued an additional 10,000,000 shares of the Company’s common stock. The employment agreement begins on January 1, 2020, and is automatically renewable for two years unless terminated earlier as per the terms of the agreement.
On February 11, 2020, the Company received a $1,500 advance from the President of the Company and a $2,000 advance from a Director of the Company. The advances are unsecured, non-interest bearing and due on demand.
On February 18, 2020, the Company sold future receivables of $32,978 in consideration for $22,000. The advance is to be repaid through daily payments of $660. The Company paid $794 of finance fees and the agreement includes default fees of up to $15,000. In connection with the advance, the Company granted the lender a security interest in all accounts, equipment, intangibles and inventory.
On February 18, 2020, the Company received an additional tranche of $8,888 pursuant to the convertible note described in Note 6(i). The additional tranche consisted of a $888 original issue discount resulting in cash proceeds to the Company of $8,000.
On February 28, 2020, the Company entered into a promissory note with a non-related party for $20,000. The note is due May 28, 2020, is unsecured and bears an interest rate of 8% per annum.
On March 2, 2020, the Company entered into a convertible promissory with a non-related party for $45,000 of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $42,000. The note is due on March 2, 2021 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 15% to 40%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date.
On March 5, 2020, the Company received an additional tranche of $30,000 pursuant to the convertible note described in Note 6(i). The additional tranche consisted of a $3,000 original issue discount resulting in cash proceeds to the Company of $27,000.
On March 9, 2020, the Company entered into an agreement to settle the $175,814 convertible note payable described in Note 6(v) and $5,279 of interest accrued on the note through the issuance of 181,000 Shares of Series A Preferred Stock and the payment of $93.
As of April 6, 2020, the Company sold 270,000 Series C Convertible Preferred Shares for $270,000.
From October 1, 2019 through March 25, 2020, the Company issued a total of 265,453,351 shares of common stock upon the conversion of $286,043 of principal, $20,306 of interest and of fees pursuant to the convertible notes payable described in Note 6.
On April 1, 2020, the Company entered into a settlement agreement to settle the $60,000 and $26,000 convertible notes described in Notes 6(p) and (u). The Company agreed to pay $100,000 to settle the principal and accrued interest and penalties relating to the two convertible notes.
On April 1, 2020, the Company issued 4,623,093 shares of common stock upon the cashless exercise of 4,640,371 warrants.
Major DILUTION
Embedded conversion feature accounted for as a derivative liability
** Paid off during the period
h)
On January 15, 2019, the Company executed a new, consolidated convertible note with a non-related party by extinguishing the March 28, 2018 convertible note in the amount of $450,000 with interest due of $28,898 and a $60,000 term note, dated October 31, 2018 with interest due of $1,038. The new convertible note is in the amount of $539,936, is due on or before January 15, 2022, has an 8% per annum interest rate and may be converted into shares of the Company’s common stock at $0.20 per share. The new note incorporates an anti-dilution feature if the Company issues more than 60,000,000 shares of its common stock. The embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature was $292,651. The company recorded a loss on extinguishment of debt of $350,117 equal to the initial fair value of derivative liability on the new note and the previous unamortized debt discount balance of one the old notes.
On March 27, 2019, the Company agreed to convert $548,686 of principal ($539,936) and interest ($8,750) of its convertible note payable into 3,597,989 shares of the Company’s common stock. The company recorded a gain on settlement of debt of $359,857 equal to the difference between both the fair value of the common shares of $523,867 and the fair value of the conversion feature at conversion of $335,038 compared to the carrying value of the note and interest.
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i) During the nine months ended September 30, 2019, the Company defaulted on the note, resulting in a default penalty of $26,390 added to the principal of the note. During the nine months ended September 30, 2019, $44,723 of principal ($42,223) and interest ($2,500) of the convertible note payable was converted into 76,154,631 shares of the Company’s common stock.
j) During the nine months ended September 30, 2019, the Company defaulted on the note. During the nine months ended September 30, 2019, $64,558 of principal ($58,058) and interest ($6,500) of the convertible note payable was converted into 66,290,000 shares of the Company’s common stock.
k)
In the prior year, on December 12, 2018, the Company entered into a convertible promissory with a non-related party for $63,000 of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $60,000. The note is due on December 5, 2019 and bears interest on the unpaid principal balance at a rate of 12% per annum. Any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days (June 10, 2019) of the date of issuance into shares of Company’s common stock at a conversion price equal to 61% of the average 3 lowest trading prices during the 15-trading day period prior to the conversion date.
One June 10, 2019, the embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature was $142,265 and resulted in a discount to the note payable of $60,000 and an initial derivative expense of $82,265. On June 19, 2019, the Company defaulted on the note, resulting in a default penalty of $32,650 added to the principal of the note and the remaining discount was accelerated and recognized to interest expense. During the nine months ended September 30, 2019, $74,200 of the convertible note payable was converted into 18,559,816 shares of the Company’s common stock.
l)
On January 16, 2019, the Company entered into a convertible promissory with a non-related party for $33,000 of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $30,000. The note is due on January 15, 2020 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 12% to 37%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date. On June 19, 2019, the Company defaulted on the note, resulting in the note becoming immediately convertible and a default penalty of $16,500 added to the principal of the note.
On June 19, 2019, the embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature was $116,540 and resulted in a discount to the note payable of $30,000 and an initial derivative expense of $86,540. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense.
m)
On January 18, 2019, the Company entered into a convertible promissory note with a non-related party for $100,000 of which $5,000 was an original issue discount and $5,000 was paid directly to third parties resulting in cash proceeds to the Company of $90,000. The note is due on January 16, 2020 and bears interest on the unpaid principal balance at a rate of 8% per annum. Stringent pre-payment terms apply (from 10% to 30%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 24% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 64% of the average 2 lowest trading prices during the 10-trading day period prior to the conversion date.
On July 17, 2019, the embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature was $239,668 and resulted in a discount to the note payable of $90,000 and an initial derivative expense of $149,668. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense. During the nine months ended September 30, 2019, $4,508 of the convertible note payable and $179 of accrued interest was converted into 5,207,600 shares of the Company’s common stock.
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n)
On January 29, 2019, the Company entered into a convertible promissory note with a non-related party for $60,000 of which $3,000 was an original issue discount and $8,000 was paid directly to third parties resulting in cash proceeds to the Company of $49,000. The note is due on January 22, 2020 and bears interest on the unpaid principal balance at a rate of 8% per annum. Stringent pre-payment terms apply (from 10% to 30%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 18% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to the lower of 64% of the average 2 lowest trading prices during the 10-trading day period prior to the conversion date or $0.12.
On July 28, 2019, the embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature was $640,053 and resulted in a discount to the note payable of $49,000 and an initial derivative expense of $591,053. During the nine months ended September 30, 2019, the Company defaulted on the note, resulting in a default penalty of $214,690 added to the principal of the note. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense. During the nine months ended September 30, 2019, $8,640 of the convertible note payable was converted into 7,500,000 shares of the Company’s common stock.
o)
On February 1, 2019, the Company entered into a convertible promissory note with a non-related party for $50,000 of which $5,000 was an original issue discount resulting in cash proceeds to the Company of $45,000. The note is due on October 22, 2019 and bears interest on the unpaid principal balance at a rate of 12% per annum and a default interest rate of 24% per annum. The Note may be converted by the Lender at any time after the date of issuance into shares of Company’s common stock at a conversion price equal 50% of the lowest trading price during the 20-trading day period prior to the conversion date. As the closing sales price fell below $0.03, an additional 15% discount was attributed to the conversion price. During the nine months ended September 30, 2019, the Company defaulted on the note, resulting in a default penalty of $104,382 added to the principal of the note.
The embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature was $158,142 and resulted in a discount to the note payable of $50,000 and an initial derivative expense of $113,142. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense. During the nine months ended September 30, 2019, $2,196 of the convertible note payable and $953 of accrued interest was converted into 4,999,000 shares of the Company’s common stock.
p)
On February 21, 2019, the Company entered into a convertible promissory note with a non-related party for $60,000 of which $5,000 was an original issue discount and $8,000 was paid directly to third parties resulting in cash proceeds to the Company of $47,000. The Company also issued a warrant with a term of five years to purchase up to 300,000 shares of common stock of the Company at an exercise price of $0.20 per share and subject to adjustment for dilutive issuances and cashless exercise. The note is due on February 14, 2022 and bears interest on the unpaid principal balance at a rate of 0% per annum. Stringent pre-payment terms apply (from 10% to 40%, dependent upon the timeframe of repayment during the note’s term) and in the event of default an additional 40% of the principal and interest balance shall be owed. The Note may be converted by the Lender at any time after the date of issuance into shares of Company’s common stock at a conversion price equal to the lower of 60% of the lowest trading price during the 20-trading day period prior to the conversion date or $0.12. If at any time the closing sales price falls below $0.01, then an additional 10% discount will be attributed to the conversion price. During the nine months ended September 30, 2019, the Company defaulted on the note, resulting in a default penalty of $40,000 added to the principal of the note.
The embedded conversion option and warrant qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature of $124,796 and the warrant of $51,856 resulted in a discount to the note payable of $60,000 and an initial derivative expense of $129,652. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense. During the nine months ended September 30, 2019, $5,000 of the convertible note payable was converted into 5,555,555 shares of the Company’s common stock.
q)
On February 21, 2019, the Company entered into a convertible promissory note with a non-related party for $55,125 of which $2,500 was an original issue discount and $2,625 was paid directly to third parties resulting in cash proceeds to the Company of $50,000. The note is due on February 20, 2020 and bears interest on the unpaid principal balance at a rate of 8% per annum. Stringent pre-payment terms apply (from 10% to 30%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 24% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 64% of the average 2 lowest trading prices during the 10-trading day period prior to the conversion date.
On August 20, 2019, the embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature was $172,120 and resulted in a discount to the note payable of $50,000 and an initial derivative expense of $122,120. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense. During the nine months ended September 30, 2019, $13,000 of the convertible note payable was converted into 3,054,511 shares of the Company’s common stock.
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r) On February 26, 2019, the Company entered into a convertible promissory with a non-related for $53,000 of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $50,000. The note is due on February 20, 2020 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 12% to 37%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date. On June 19, 2019, the Company defaulted on the note, resulting in the note becoming immediately convertible and a default penalty of $26,500 added to the principal of the note.
On June 19, 2019, the embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature was $187,924 and resulted in a discount to the note payable of $50,000 and an initial derivative expense of $137,924. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense.
s) On March 18, 2019, the Company entered into a convertible promissory note with a non-related party for $75,000 of which $10,250 was an original issue discount resulting in cash proceeds to the Company of $64,750. The Company also issued a warrant with a term of five years to purchase up to 187,500 shares of common stock of the Company at an exercise price of $0.20 per share and subject to adjustment for dilutive issuances and cashless exercise. The note is due on December 13, 2019 and bears interest on the unpaid principal balance at a rate of 12% per annum and a default interest rate of 24% per annum. The Note may be converted by the Lender at any time after the date of issuance into shares of Company’s common stock at a conversion price equal to 50% of the lowest trading price during the 25-trading day period prior to the conversion date. During the nine months ended September 30, 2019, the Company defaulted on the note, resulting in a default penalty of $185,618 added to the principal of the note.
The embedded conversion option and warrant qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature of $139,196 and the warrant of $25,401 resulted in a discount to the note payable of $75,000 and an initial derivative expense of $99,847. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense. During the nine months ended September 30, 2019, $27,804 of the convertible note payable and $5,287 of accrued interest was converted into 11,490,000 shares of the Company’s common stock
t) On May 2, 2019, the Company entered into a convertible promissory with a non-related party for $38,000 of which $3,000 was an original issue discount resulting in cash proceeds to the Company of $35,000. The note is due on April 29, 2020 and bears interest on the unpaid principal balance at a rate of 12% per annum. Stringent pre-payment terms apply (from 12% to 37%, dependent upon the timeframe of repayment during the note’s term) and any part of the note which is not paid when due shall bear interest at the rate of 22% per annum from the due date until paid. The Note may be converted by the Lender at any time after 180 days of the date of issuance into shares of Company’s common stock at a conversion price equal to 61% of the lowest trading price during the 15-trading day period prior to the conversion date. On June 19, 2019, the Company defaulted on the note, resulting in the note becoming immediately convertible and a default penalty of $19,000 added to the principal of the note.
On June 19, 2019, the embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature was $135,455 and resulted in a discount to the note payable of $35,000 and an initial derivative expense of $100,455. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense.
u) On September 16, 2019, the Company entered into a convertible promissory note with a non-related party for $26,000 of which $6,000 was an original issue discount resulting in cash proceeds to the Company of $20,000. The note is due on September 11, 2022 and bears interest on the unpaid principal balance at a rate of 0% per annum and a default interest rate of 0% per annum. The Company also issued a warrant with a term of five years to purchase up to 300,000 shares of common stock of the Company at an exercise price of $0.10 per share and subject to adjustment for dilutive issuances and cashless exercise. The Note may be converted by the Lender at any time after the date of issuance into shares of Company’s common stock at a conversion price equal 60% of the lowest trading price during the 20-trading day period prior to the conversion date. As the closing sales price fell below $0.01, an additional 10% discount was attributed to the conversion price.
The embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature was $58,453 and warrants $2,768 resulted in a discount to the note payable of $20,000 and an initial derivative expense of $41,221. Due to the note being in default, the remaining discount was accelerated and recognized to interest expense.
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v) During the nine months ended September 30, 2019, the $150,000 note and $25,814 of accrued interest was repaid by a cosigner to the loan. On September 25, 2019, the Company entered into a convertible promissory note with the non-related party for $175,814 in consideration for repaying the note. The note is due on September 25, 2020 and bears interest on the unpaid principal balance at a rate of 8% per annum and a default interest rate of 8% per annum. The Note will be repaid in cash or by conversion to common shares at a mutually acceptable rate not less than the market price of the Company’s common stock.
NOTE 7 – DERIVATIVE AND PREFERRED SERIES A STOCK LIABILITIES
The embedded conversion option of (1) the convertible debentures described in Note 6; (2) preferred series A stock liability; (3) warrants; contain conversion features that qualify for embedded derivative classification. The fair value of the liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments.
Upon the issuance of the convertible notes payable described in Note 6, the Company concluded that it only has sufficient shares to satisfy the conversion of some but not all of the outstanding convertible notes, warrants and options. The Company elected to reclassify contracts from equity with the earliest inception date first. As a result, none of the Company’s previously outstanding convertible instruments qualified for derivative reclassification, however, any convertible securities issued after the election, including the warrants described in Note 10, qualified for derivative classification. The Company reassesses the classification of the instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.
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