Quarterly report pursuant to Section 13 or 15(d)

Convertible Notes Payable

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Convertible Notes Payable
3 Months Ended
Mar. 31, 2022
Debt Disclosure [Abstract]  
Convertible Notes Payable

 

  4. Convertible Notes Payable

               
   

March 31,
2022

(unaudited)

   

December 31,

2021

 
Convertible notes   $ 1,143,000     $ 1,154,000  
Accrued interest     471,000       435,000  
Subtotal, including $1,401,000 and $1,333,000 in default at March 31, 2022 and December 31, 2021, respectively     1,614,000       1,589,000  
Convertible note discount     (52,000 )     (86,000 )
Balance on convertible notes, net of note discounts   $ 1,562,000     $ 1,503,000  

 

The Company issues convertible notes in exchange for cash. The notes typically do not bear any interest; however, there is an implied interest rate of 10% since the notes are typically issued at a 10% discount. The notes are unsecured, and usually mature twelve months from issuance. The notes are convertible at the option of the note holder into shares of the Company’s common stock at a conversion price stipulated in the conversion agreement. In addition, the note holders receive warrants to purchase shares of common stock that are fully vested upon issuance and expire one year from the date of issuance. As a result, the Company records a note discount to account for the relative fair value of the warrants, and original issue discount of 10% (OID). The note discounts are amortized over the term of the notes.

 

As of December 31, 2021, total outstanding notes payable and accrued interest totaled $1,589,000. During the three-month periods ended March 31, 2022, the Company issued no convertible promissory notes. During the period ended March 31, 2022, convertible notes payable and accrued interest of $11,000 were converted into 366,666 shares of common stock, and accrued interest of $36,000 was recorded. As of March 31, 2022, total outstanding convertible notes payable and accrued interest totaled $1,614,000. As of March 31, 2022, a total of twenty-nine notes in the aggregate of $1,401,000 including accrued interest have reached maturity and are past due.

 

As of December 31, 2021, unamortized discount totaled $86,000. During the three-months ended March 31, 2022, the Company recorded amortization of debt discount of $29,000 and $5,000 of debt discount was removed and included in the carrying amount of convertible notes that were converted. As of March 31, 2022, unamortized discount totaled $52,000. Note discounts are amortized over the term of the related note or amortized in full upon the notes’ conversion to common stock.

 

As of March 31, 2022, the convertible notes payable and accrued interest are convertible into 24,284,235 shares of common stock at conversion rates ranging from $0.02 to $0.03 per share.