Convertible notes

At December 31, 2021, convertible notes payable totaled $1,137,000. During the year ended December 31, 2022, the Company issued convertible promissory notes in the aggregate of $432,000 for cash proceeds of $393,000, net of OID of $39,000. The notes are unsecured, with a 10% original issue discount, mature in twelve months from issuance, and are convertible into 14,409,995 shares of the Company’s common stock at $0.03 per share. In addition, the Company granted the note holders warrants to purchase 14,409,995 shares of the Company’s common stock with a relative value of $283,000. The warrants are fully vested, and expire one year from the date of issuance. The Company determined the fair value of the warrants by using a Black-Scholes option pricing model, with the following assumptions: expected term of 1.0 year, stock price of $0.09, exercise price of $0.04, volatility of 212%, risk-free rate of 4.05%, and no forfeiture rate. Also during 2022, convertible notes of $176,000 and accrued interest of $2,000, net of unamortized discount of $119,000, were converted into 6,040,049 shares of common stock. At December 31, 2022, total outstanding convertible notes payable totaled $1,393,000.

During the year ended December 31, 2023, the Company issued convertible promissory notes in the aggregate of $585,000 for cash proceeds of $532,000, net of OID of $53,000. The notes are unsecured, with a 10% original issue discount, mature in twelve months from issuance, and are convertible into 11,715,748 shares of the Company’s common stock at $0.05 per share. In addition, the Company granted the note holders warrants to purchase 11,715,748 shares of the Company’s common stock with a relative fair value of $231,000. The warrants are fully vested and expire one year from the date of issuance. The Company determined the fair value of the warrants by using a Black-Scholes option pricing model, with the following assumptions: expected term of 1.0 year, stock price of $0.06 to $0.07, exercise price of $0.07, volatility of 169% to 206%, risk-free rate of 4.64% to 5.46%, and no forfeiture rate. Also during 2023, convertible notes of $646,000, net of unamortized discount of $296,000, were converted into 15,129,048 shares of common stock. At December 31, 2023, total outstanding convertible notes payable totaled $1,332,000. As of December 31, 2023, convertible notes payable and accrued interest are convertible into 34,716,235 shares of common stock at conversion rates ranging from $0.02 to $0.48 per share. As of December 31, 2023, a total of 38 convertible notes and accrued interest in the aggregate of $2,022,000 have reached maturity and are past due. The Company is currently in negotiations with these noteholders to settle these past due notes payable.

Accrued interest

At December 31, 2021, accrued interest on convertible notes payable totaled $435,000. During the year ended December 31, 2022, accrued interest of $162,000 was recorded, and accrued interest of $2,000 was converted into shares of common stock. At December 31, 2022, accrued interest on convertible notes payable totaled $612,000.

During the year ended December 31, 2023, accrued interest of $182,000 was recorded. At December 31, 2023, accrued interest on convertible notes payable totaled $794,000.

Debt discount

At December 31, 2021, the unamortized debt discount was $86,000. During the year ended December 31, 2022, debt discount of $322,000 was recorded for the relative fair value of warrants of $283,000 and OID of $39,000, debt discount amortization of $149,000 was recorded, and $119,000 of debt discount was removed and included in the carrying amount of related convertible notes payable that were converted into shares of common stock. At December 31, 2022, the unamortized debt discount was $140,000.

During the year ended December 31, 2023, debt discount of $284,000 was recorded for the relative fair value of warrants of $231,000 and OID of $53,000, debt discount amortization of $103,000 was recorded, and $296,000 of debt discount was removed and included in the carrying amount of related convertible notes payable that were converted into shares of common stock. At December 31, 2023, the unamortized debt discount was $25,000.