CAUTION...From 1Oq Page Number 14.. .In April 2018, the Company issued convertible notes with an aggregate principal balance of $350,000, for net proceeds after issuance costs which were recorded as a discount against the debt to be amortized into interest expense through the maturity of the notes, of $281,660. The notes mature in April 2019, accrue interest at an annual rate of 10% and are convertible into common stock at a conversion rate equal to the greater of $0.05 and 60% times the lowest trading price of the Company’s common stock during the 18 trading days prior to conversion. In the event of default, if the trading price of the Company’s common stock falls below $0.07, the floor moves to $0.01 and if the price of the Company’s common stock falls to below $0.03, the floor moves to $0.0001. Because the conversion feature is indexed to the Company’s stock, and there is an explicit cap to the total number of shares issuable upon conversion, the Company determine that the embedded conversion option did not require bifurcation and liability presentation. The investors in the notes also received warrants to acquire an aggregate of 6,349,457 shares of common stock for an exercise price of $0.11 per share, exercisable for 2 years. The Company estimated the fair value of the warrants using the Black Scholes model and the following assumptions: volatility – 261.8% to 268.7%; expected term – 2.0 years; dividend rate – 0.0%; risk free rate – 2.49%, and allocated $173,355 of the proceeds to the warrants, which was recorded as a discount against the debt to be amortized into interest expense through the maturity of the notes. Based on the allocation of proceeds to the debt, the Company determined there was a beneficial conversion feature totaling $176,645, which was recorded as a discount against the debt to be amortized into interest expense through the maturity of the notes. During the six months ended June 30, 2019, holder of the notes elected to convert principal, interest, and conversion fees totaling $234,622 into 210,943,127 shares of common stock. During the six months ended June 30, 2019, the Company amortized $156,461 of the discounts. As of June 30, 2019, the notes are carried at $180,076, and no unamortized discounts remain. On July 8, 2019 the Company entered into a settlement agreement with Auctus Fund, LLC, settling all amounts owed pursuant to that convertible promissory note entered into on April 30, 2018 for $150,000. See Note 9.
Convertible notes payable, related party
On October 23, 2015, a total of $332,474 in advances from a related party was converted into two one-year unsecured convertible notes payable to Nicholas Campanella, Chief Executive Officer of the Company (Note 8). The notes have an annual interest rate of 6% and are currently past due. At the election of the holder, the notes can be converted into common stock of the Company at a conversion price per share equal to 20% of the average bid price for the three consecutive business days prior to conversion. The notes are subject to a forbearance agreement, pursuant to which the holder cannot convert the note until such time as the Company has sufficient authorized and unissued common stock available. See Note 8. As of June 30, 2019 and December 31, 2018, the balances of the notes totaled $332,474. As of June 30, 2019, there was $34,890 of accrued interest on these advances, included in accounts payable and accrued expenses on the accompanying condensed consolidated balance sheet.
On August 24, 2016, a total of $76,500 in advances from a related party was converted into a two-year unsecured convertible note payable to Nicholas Campanella, Chief Executive Officer of the Company (Note 8), pursuant to a private placement memorandum. The note matured on August 24, 2018, has an annual interest rate of 12.5% and is past due. At the election of the holder, upon the occurrence of certain events, the note can be converted into common stock of the Company at a conversion price per share equal to 50% of the average bid price for the 30 consecutive business days prior to conversion. The notes are subject to a forbearance agreement, pursuant to which the holder cannot convert the note until such time as the Company has sufficient authorized and unissued common stock available. See Note 8. The conversion feature is contingent upon i) the successful filing of a registration statement to become publicly traded, and ii) the company stock has become publicly quoted on the OTC Markets and iii) the conversion price is above $0.10. In connection with this note, the Company issued 75,000 shares of Series B preferred stock. As of June 30, 2019, and December 31, 2018, the balance of the notes was $76,500.
Project Financing Obligation
In June 2018, the Company received proceeds of $260,000 pursuant to a partnership agreement and related partnership contribution agreements with third party investors, pursuant which investors have agreed to provide financing for no less than (10) ten new bus shelters being installed annually. Each investment in the partnership grants the investor the right to preferential distributions of profits related to the Company’s contract with Rhode Island. The investors receive 100% of the profits from the Rhode Island contract to install 20 bus shelters until 100% of the initial investments are returned. Thereafter, the investors receive 20% of the remaining profits from Rhode Island contract. As of June 30, 2019, no profits have been earned on the Rhode Island contract, no repayments have occurred, and the total amount of investments received totaling $260,000 is reflected on the accompanying condensed consolidated balance sheet as a Project Financing Obligation. During the 2 nd quarter of 2019, the Company received from the manufacturer the respective Bus Shelters and presently they are in the process of being assembled and installed accordingly.
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