| Schedule of Convertible Note Payable |
Convertible
note payable consists of the following at March 31, 2022 and December 31, 2021, respectively:
Schedule
of Convertible Note Payable
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March 31, |
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December 31, |
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2022 |
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2021 |
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On September 24, 2021, the Company completed the sale of a (i) Promissory Note in the principal amount of $750,000 (the “Second AJB Note”) to AJB Capital Investments LLC (“AJB Capital”), (ii) a three-year warrant to purchase 1,500,000 shares of the Company’s common stock at an initial exercise price of $0.25 per share, and (iii) a three-year warrant to purchase 2,000,000 shares of the Company’s common stock at an initial exercise price of $0.50 per share, for an aggregate purchase price of $705,000, pursuant to a Securities Purchase Agreement between the Company and AJB Capital (the “Purchase Agreement”). The aggregate estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 197% and a call option value of $0.1053 and $0.1001, respectively, was $358,017, based on and is being amortized as a debt discount over the life of the loan. The Company received net proceeds of $678,750 after deductions of debt discounts, consisting of $45,000 pursuant to an original issue discount, $15,000 of legal fees and $11,250 of brokerage fees.
The Note matures on September 24, 2022 (the “Maturity Date”), bears interest at a rate of 8% per annum, and, following an event of default only, is convertible into shares of the Company’s common stock at a conversion price equal to the lesser of 90% of the lowest trading price during (i) the 20 trading day period preceding the issuance date of the note, or (ii) the 20 trading day period preceding date of conversion of the Note. The Note is also subject to covenants, events of defaults, penalties, default interest and other terms and conditions customary in transactions of this nature.
Pursuant to the Purchase Agreement, the Company paid a commitment fee to AJB Capital in the amount of $250,000 (the “Commitment Fee”) in the form of 1,250,000 shares of the Company’s common stock (the “Commitment Fee Shares”). During the six month period following the six month anniversary of the closing date, AJB Capital shall be entitled to be issued additional shares of common stock of the Company to the extent AJB Capital’s sale of the Commitment Fee Shares has resulted in net proceeds in an amount less than the Commitment Fee. The Commitment Fee Shares resulted in a debt discount of $150,062 that is being amortized over the life of the loan.
The obligations of the Company to AJB Capital under the Note and the Purchase Agreement are secured by a lien on the Company’s assets pursuant to a Security Agreement between the Company and AJB Capital. |
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$ |
750,000 |
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$ |
750,000 |
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| Total convertible notes payable |
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750,000 |
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750,000 |
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| Less: unamortized debt discounts |
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269,824 |
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|
412,673 |
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| Convertible note payable, net of discounts |
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$ |
480,176 |
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|
$ |
337,327 |
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| Schedule of Convertible Debt Discounts |
The
Company recognized aggregate debt discounts on the convertible notes and notes payable to AJB Capital for the three months ended March
31, 2022 and the year ended December 31, 2021, as follows:
Schedule of Convertible Debt Discounts
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March 31, |
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December 31, |
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2022 |
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2021 |
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| Fair value of 3,250,000 commitment shares of common stock |
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$ |
418,312 |
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$ |
418,312 |
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| Fair value of warrants to purchase 3,500,000 shares of common stock |
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358,017 |
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358,017 |
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| Original issue discounts |
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53,700 |
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53,700 |
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| Legal and brokerage fees |
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|
39,300 |
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39,300 |
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| Total debt discounts |
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869,329 |
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869,329 |
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| Amortization of debt discounts |
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599,505 |
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456,656 |
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| Unamortized debt discounts |
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$ |
269,824 |
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$ |
412,673 |
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