Quarterly report pursuant to Section 13 or 15(d)

Convertible Notes Payable

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Convertible Notes Payable
 3 Months Ended
Mar. 31, 2024
Debt Disclosure [Abstract]  
Convertible Notes Payable

 

  4. Convertible Notes Payable

 

           
   

March 31, 2024

(unaudited)

    

December 31,

2023

  
Convertible notes   $ 1,371,000     $ 1,332,000  
Accrued interest     843,000       794,000  
Total outstanding debt, including $2,071,000 and $2,022,000 in default at March 31, 2024 and December 31, 2023, respectively     2,214,000       2,265,000  
Unamortized debt discount     (30,000 )     (25,000 )
Balance on convertible notes, net of note discounts   $ 2,184,000     $ 2,101,000  

 

Convertible notes

 

At December 31, 2023, total outstanding convertible notes payable totaled $1,332,000. During the three-month period ended March 31, 2024, the Company issued convertible promissory notes in the aggregate of $199,000 for cash proceeds of $181,000, net of original issue discount (“OID”) of $18,000. The notes are unsecured, with a 10% original issue discount, mature in twelve months from issuance, and are convertible into 3,980,900 shares of the Company’s common stock at $0.05 per share.

 

In addition, the Company granted the note holders warrants to purchase 3,980,900 shares of the Company’s common stock with a relative fair value of $85,000. 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 $0.07, exercise price of $0.07, volatility of 156%, risk-free rate of 5.03%, and no forfeiture rate.

 

Also, during the period ended March 31, 2024, convertible notes of $160,000, net of unamortized discount of $83,000, were converted into 3,212,000 shares of common stock. At March 31, 2024, total outstanding convertible notes payable totaled $1,371,000. As of March 31, 2024, convertible notes payable and accrued interest are convertible into approximately 36,272,510 shares of common stock at conversion rates ranging from $0.02 to $0.48 per share. As of March 31, 2024, a total of 38 convertible notes and accrued interest in the aggregate of $2,071,000 have reached maturity and are past due.

 

Accrued interest

 

At December 31, 2023, accrued interest on convertible notes payable totaled $794,000. During the three-month period ended March 31, 2024, accrued interest of $49,000 was recorded. At March 31, 2024, accrued interest on convertible notes payable totaled $843,000.

 

Debt discount

 

At December 31, 2023, the unamortized debt discount was $25,000. During the three-month period ended March 31, 2024, debt discount of $103,000 was recorded for the relative fair value of warrants of $85,000 and OID of $18,000, debt discount amortization of $15,000 was recorded, and $83,000 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 March 31, 2024, the unamortized debt discount was $30,000.