INCEPTION MINING INC. filed 10-Q

INCEPTION MINING INC. filed 10-Q with SEC. Read ‘s full filing at 000149315219012449.

On February 25, 2013, Gold American Mining Corp. and its majority shareholder (the ‘Majority Shareholder’), and its wholly-owned subsidiary, Inception Development Inc. (the ‘Subsidiary’), entered into an Asset Purchase Agreement (the ‘Asset Purchase Agreement’) with Inception Resources, LLC, a Utah corporation (‘Inception Resources’), pursuant to which Inception purchased the U.P. and Burlington Gold Mine in consideration of 16,000,000 shares of common stock of Inception, the assumption of promissory notes in the amount of $950,000 and the assignment of a 3% net royalty. Inception Resources was an entity owned by and under the control of the majority shareholder. This transaction is deemed an asset purchase by entities under common control. The Asset Purchase Agreement closed on February 25, 2013 (the ‘Closing’). Inception was a ‘shell company’ (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended) immediately prior to our acquisition of the gold mine pursuant to the terms of the Asset Purchase Agreement. As a result of such acquisition, the Company’s operations are now focused on the ownership and operation of the mine acquired from Inception Resources. Consequently, the Company believes that acquisition has caused us to cease to be a shell company as it no longer has nominal operations.

The Company’s primary mine is located on the 200-hectare Clavo Rico Concession, located in southern Honduras. This mine was originally explored and exploited in the 16th century by the Spanish, and more recently has been operated by Compa ñí a Minera Cerros del Sur, S.A. de C.V. as a small family business. In 2003, Clavo Rico’s predecessor purchased a 20% interest and later increased its ownership to 99.9%.

The Company generates revenue by selling gold and silver produced from its mining operations. The majority of the Company’s sales come from the sale of refined gold; however, the end product at the Company’s gold operations is generally doré bars. Doré is an alloy consisting primarily of gold but also containing silver and other metals. Doré is sent to refiners to produce bullion that meets the required market standard of 99.95% gold. Under the terms of the Company’s refining agreements, the doré bars are refined for a fee, and the Company’s share of the refined gold and silver is credited to its bullion account.

On October 1, 2017, the Company entered into a joint venture agreement with Corpus Mining and Exploration, Ltd. (Corpus) and formed a new entity, Corpus Gold, LLC (Corpus Gold). Corpus Gold is to provide a framework within which the Company will provide management services in directing and managing an exploration, drilling and evaluation of the mineral resources in concessions owned by the Company and Corpus will provide the capital necessary to complete such purpose. All revenues will be shared based on the revenue sharing agreement of 80% to Corpus and 20% to the Company. The Company pays the monthly expenses of Corpus Gold and is reimbursed by Corpus. As of June 30, 2019, the Company had a receivable of $0 for expenses spent in the six months ended June 30, 2019.

At June 30, 2019, the Company marked to market the fair value of the debt derivatives and determined a fair value of $6,358,266. The Company recorded a gain from change in fair value of debt derivatives of $1,248,351 for the period ended June 30, 2019. The fair value of the embedded derivatives was determined using Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 208.51% through 296.43%, (3) weighted average risk-free interest rate of 1.71% through 2.09% (4) expected life of 0.57 through 2.54 years, and (5) the quoted market price of the Company’s common stock at each valuation date.

At December 31, 2018, the Company marked to market the fair value of the debt derivatives and determined a fair value of $2,511,226. The Company recorded a gain from change in fair value of debt derivatives of $953,390 for the year ended December 31, 2018. The fair value of the embedded derivatives was determined using Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 203.03% to 306.25%, (3) weighted average risk-free interest rate of 2.45% to 2.63% (4) expected life of 0.27 to 1.59 years, and (5) the quoted market price of the Company’s common stock at each valuation date.

At June 30, 2019, the Company had a warrant liability of $38,928. The Company recorded a loss from change in fair value of warrant liability of $2,348 for the six months ended June 30, 2019. The fair value of the embedded derivatives was determined using Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 211.39% to 228.29%, (3) weighted average risk-free interest rate of 1.71% to 2.23% (4) expected life of 3.12 to 4.33 years, and (5) the quoted market price of the Company’s common stock at each valuation date.

The fair value of the long-term liability of $339,477 and $341,845 as of June 30, 2019 and December 31, 2018, respectively, for our obligation to reclaim our mine facility is based on our most recent reclamation plan, as revised, submitted and approved by the Honduran Institute of Geology and Mines (INHGEOMIN) and Ministry of Natural Resources and Environment (SERNA). Such costs are based on management’s current estimate of then expected amounts for the remediation work, assuming the work is performed in accordance with current laws and regulations and using a credit adjusted risk free rate of 18.00% and an inflation rate of 5.3%. It is reasonably possible that, due to uncertainties associated with the application of laws and regulations by regulatory authorities and changes in reclamation or remediation technology, the ultimate cost of reclamation and remediation could change in the future. We periodically review the accrued reclamation obligation for information indicating that our assumptions should change.

Phil Zobrist – On January 11, 2013, the Company issued an unsecured Promissory Note to Phil Zobrist in the principal amount of $60,000 (the ‘Note’) due on demand and bearing 0% per annum interest. The total net proceeds the Company received was $60,000. On October 2, 2015, the Company entered into a new convertible note with Phil Zobrist that matures on December 31, 2016 and bears 18% per annum interest. The Company agreed to accrue interest from inception of these Notes in the amount of $29,412 and charged this amount to interest expense during the year ended December 31, 2015. The Note is convertible into common stock, at holder’s option, at a price of $0.99 (0.18 pre-split) or a 50% discount to the average of the three lowest VWAP of the common stock during the 20 trading day period prior to conversion. On October 2, 2016, the Company renegotiated the note payable. The convertible feature was removed and the note was extended until December 31, 2018. The Company recognized a gain on the extinguishment of debt of $121,337 for the remaining derivative liability and of $11,842 for the remaining debt discount. As of June 30, 2019, the gross balance of the note was $60,000 and accrued interest was $69,860.

Claymore Management – On March 18, 2011, the Company issued an unsecured Promissory Note to Claymore Management in the principal amount of $185,000 (the ‘Note’) due on demand and bore 0% per annum interest. The total net proceeds the Company received was $185,000. On October 2, 2015, the Company entered into a new convertible note with Claymore Management that matures on December 31, 2016 and bears 18% per annum interest. The Company agreed to accrue interest from March 18, 2011 in the amount of $151,355 and charged this amount to interest expense during the year ended December 31, 2015. The Note is convertible into common stock, at holder’s option, at a price of $0.99 (0.18 pre-split) or a 50% discount to the average of the three lowest VWAP of the common stock during the 20 trading day period prior to conversion. On October 2, 2016, the Company renegotiated the note payable. The convertible feature was removed and the note was extended until December 31, 2018. The Company recognized a gain on the extinguishment of debt of $448,369 for the remaining derivative liability and of $36,513 for the remaining debt discount. As of June 30, 2019, the gross balance of the note was $185,000 and accrued interest was $276,071.

D. D’Ambrosio – On January 4, 2019, the Company issued an unsecured Short-Term Promissory Note to D. D’Ambrosio in the principal amount of $125,000 (the ‘Note’) due on February 5, 2019 and bears a 5.00% interest rate. The Company made a payment of $131,250 towards the principal balance and accrued interest of $6,250 on February 13, 2019. As of June 30, 2019, the outstanding balance of the Note was $0 and accrued interest was $0.

D. D’Ambrosio – On February 19, 2019, the Company issued an unsecured Short-Term Promissory Note to D. D’Ambrosio in the principal amount of $100,000 (the ‘Note’) due on March 19, 2019 and bears a 5.00% interest rate. The Company made a payment of $105,000 towards the principal balance and accrued interest of $5,000 on March 8, 2019. As of June 30, 2019, the outstanding balance of the Note was $0 and accrued interest was $0.

D. D’Ambrosio – On March 14, 2019, the Company issued an unsecured Short-Term Promissory Note to D. D’Ambrosio in the principal amount of $100,000 (the ‘Note’) due on April 30, 2019 and bears a 5.00% interest rate. The Company made a payment of $105,000 towards the principal balance and accrued interest of $5,000 on April 5, 2019. As of June 30, 2019, the outstanding balance of the Note was $0 and accrued interest was $0.

D. D’Ambrosio – On April 9, 2019, the Company issued an unsecured Short-Term Promissory Note to D. D’Ambrosio in the principal amount of $122,000 (the ‘Note’) due on May 30, 2019 and bears a 5.00% interest rate. The Company made a payment of $128,100 towards the principal balance and accrued interest of $6,100 on May 21, 2019. As of June 30, 2019, the outstanding balance of the Note was $0 and accrued interest was $0.

D. D’Ambrosio – On June 14, 2019, the Company issued an unsecured Short-Term Promissory Note to D. D’Ambrosio in the principal amount of $182,000 (the ‘Note’) due on July 5, 2019 and bears a 5.00% interest rate. As of June 30, 2019, the outstanding balance of the Note was $182,000 and accrued interest was $9,100.

Diamond 80, LLC – On April 3, 2017, the Company issued an unsecured Short-Term Promissory Note to Diamond 80, LLC in the principal amount of $50,000 (the ‘Note’) due on December 31, 2018 and bears a 7.0% interest rate. The Company made a payment of $1,075 towards the principal balance of $1,000 and accrued interest of $75 on June 30, 2018. The Company made a payment of $49,000 towards the principal balance on May 21, 2019. As of June 30, 2019, the outstanding balance of the Note was $0 and accrued interest was $50,700.

Francis E. Rich IRA – On February 14, 2013, the Company issued an unsecured Short-Term Promissory Note to Francis E. Rich IRA in the principal amount of 100,000 (the ‘Note’) due on June 15, 2019 and bears a 15.0% interest rate. As of June 30, 2019, the outstanding balance of the Note was $100,000 and accrued interest was $26,178.

GAIA Ltd. – Between December 2011 and October 2012, the Company issued seven unsecured Promissory Notes to GAIA Ltd. for a total principal amount of $1,150,000 (the ‘Notes’) due on demand and bearing 0% per annum interest. The total net proceeds the Company received was $1,150,000. On October 2, 2015, the Company entered into a new convertible note with GAIA Ltd. that matures on December 31, 2016 and bears 18% per annum interest. The Company agreed to accrue interest from inception of these Notes in the amount of $724,463 and charged this amount to interest expense during the year ended December 31, 2015. The Note is convertible into common stock, at holder’s option, at a price of $0.99 (0.18 pre-split) or a 50% discount to the average of the three lowest VWAP of the common stock during the 20 trading day period prior to conversion. On October 2, 2016, the Company renegotiated the note payable. The convertible feature was removed and the note was extended until December 31, 2018. The Company recognized a gain on the extinguishment of debt of $2,524,747 for the remaining derivative liability and of $226,974 for the remaining debt discount. As of June 30, 2019, the gross balance of the note was $1,150,000 and accrued interest was $1,499,721.

Legends Capital Group – Between October 2011 and September 2012, the Company issued eleven unsecured Promissory Notes to Legends Capital Group for a total principal amount of $765,000 (the ‘Notes’) due on demand and bearing 0% per annum interest. The total net proceeds the Company received was $765,000. On October 2, 2015, the Company entered into a new convertible note with Legends Capital Group that matures on December 31, 2016 and bears 18% per annum interest. The Company agreed to accrue interest from inception of these Notes in the amount of $504,806 and charged this amount to interest expense during the year ended December 31, 2015. The Note is convertible into common stock, at holder’s option, at a price of $0.99 (0.18 pre-split) or a 50% discount to the average of the three lowest VWAP of the common stock during the 20 trading day period prior to conversion. On October 2, 2016, the Company renegotiated the note payable. The convertible feature was removed and the note was extended until December 31, 2018. The Company recognized a gain on the extinguishment of debt of $2,564,130 for the remaining derivative liability and of $150,987 for the remaining debt discount. As of June 30, 2019, the gross balance of the note was $765,000 and accrued interest was $1,020,521.

Legends Capital Group – On May 16, 2017, the Company issued an unsecured Short-Term Promissory Note to Legends Capital Group in the principal amount of $100,000 (the ‘Note’) due on September 15, 2018 and bears a 7.0% interest rate. The Company made a payment of $50,000 towards the principal balance and accrued interest of $0 on June 27, 2018. The Company made a payment of $40,000 towards the principal balance on February 28, 2019. As of June 30, 2019, the outstanding balance of the Note was $0 and accrued interest was $0.

LW Briggs Irrevocable Trust – Between December 2010 and January 2013, the Company issued eight unsecured Promissory Notes to LW Briggs Irrevocable Trust for a total principal amount of $1,101,000 (the ‘Notes’) due on demand and bearing 0% per annum interest. The total net proceeds the Company received was $1,101,000. On October 2, 2015, the Company entered into a new convertible note with LW Briggs Irrevocable Trust that matures on December 31, 2016 and bears 18% per annum interest. The Company agreed to accrue interest from inception of these Notes in the amount of $814,784 and charged this amount to interest expense during the year ended December 31, 2015. The Note is convertible into common stock, at holder’s option, at a price of $0.99 (0.18 pre-split) or a 50% discount to the average of the three lowest VWAP of the common stock during the 20 trading day period prior to conversion. On October 2, 2016, the Company renegotiated the note payable. The convertible feature was removed and the note was extended until December 31, 2018. The Company recognized a gain on the extinguishment of debt of $2,564,130 for the remaining derivative liability and of $217,303 for the remaining debt discount. As of June 30, 2019, the gross balance of the note was $1,101,000 and accrued interest was $1,557,009.

MDL Ventures – The Company entered into an unsecured convertible note payable agreement with MDL Ventures, LLC, which is 100% owned by a Company officer, effective October 1, 2014, due on December 31, 2016 and bears 18% per annum interest, due at maturity. Principal on the convertible note is convertible into common stock at the holder’s option at a price of the lower of $0.99 (0.18 pre-split) or 50% of the lowest three daily volume weighted average prices of the Company’s common stock during the 20 consecutive days prior to the date of conversion. On October 2, 2016, the Company renegotiated the note payable. The convertible feature was removed and the note was extended until December 31, 2018. The Company recognized a gain on the extinguishment of debt of $1,487,158 for the remaining derivative liability. As of June 30, 2019, the gross balance of the note was $1,162,933 and accrued interest was $0.

Pine Valley Investments, LLC – On May 7, 2019, the Company issued an unsecured Short-Term Promissory Note to Pine Valley Investments, LLC in the principal amount of $100,000 (the ‘Note’) due on May 21, 2019 and bears a 5.0% interest rate. The Company made a payment of $105,000 towards the principal balance and accrued interest of $5,000 on May 21, 2019. As of June 30, 2019, the outstanding balance of the Note was $0 and accrued interest was $0.

Silverbrook Corporation – Between March 2011 and February 2015, the Company issued 23 unsecured Promissory Notes to Silverbrook Corporation for a total principal amount of $2,227,980 (the ‘Notes’) due on demand and bearing 0% per annum interest. The total net proceeds the Company received was $2,227,980. On October 2, 2015, the Company entered into a new convertible note with Silverbrook Corporation that matures on December 31, 2016 and bears 18% per annum interest. The Company agreed to accrue interest from inception of these Notes in the amount of $1,209,606 and charged this amount to interest expense during the year ended December 31, 2015. The Note is convertible into common stock, at holder’s option, at a price of $0.99 (0.18 pre-split) or a 50% discount to the average of the three lowest VWAP of the common stock during the 20 trading day period prior to conversion. On October 2, 2016, the Company renegotiated the note payable. The convertible feature was removed and the note was extended until December 31, 2018. The Company recognized a gain on the extinguishment of debt of $4,656,189 for the remaining derivative liability and of $439,733 for the remaining debt discount. As of June 30, 2019, the gross balance of the note was $2,227,980 and accrued interest was $2,711,570.

WOC Energy, LLC – On November 6, 2017, the Company issued an unsecured Short-Term Promissory Note to WOC Energy, LLC in the principal amount of $40,000 (the ‘Note’) due on January 6, 2019 and bears a 4.0% interest rate. As of June 30, 2019, the outstanding balance of the Note was $40,000 and accrued interest was $0.

WOC Energy, LLC – On January 8, 2019, the Company issued an unsecured Short-Term Promissory Note to WOC Energy, LLC in the principal amount of $75,000 (the ‘Note’) due on January 11, 2019 and bears a 5.0% interest rate. The Company made a payment of $78,750 towards the principal balance and accrued interest of $3,750 on February 19, 2019. As of June 30, 2019, the outstanding balance of the Note was $0 and accrued interest was $0.

WOC Energy, LLC – On February 22, 2019, the Company issued an unsecured Short-Term Promissory Note to WOC Energy, LLC in the principal amount of $50,000 (the ‘Note’) due on March 21, 2019 and bears a 5.0% interest rate. The Company made a payment of $52,500 towards the principal balance and accrued interest of $2,500 on March 26, 2019. As of June 30, 2019, the outstanding balance of the Note was $0 and accrued interest was $0.

WOC Energy, LLC – On April 3, 2019, the Company issued an unsecured Short-Term Promissory Note to WOC Energy, LLC in the principal amount of $60,000 (the ‘Note’) due on May 10, 2019 and bears a 5.0% interest rate. The Company made a payment of $63,000 towards the principal balance and accrued interest of $3,000 on May 21, 2019. As of June 30, 2019, the outstanding balance of the Note was $0 and accrued interest was $0.

WOC Energy, LLC – On April 16, 2019, the Company issued an unsecured Short-Term Promissory Note to WOC Energy, LLC in the principal amount of $55,000 (the ‘Note’) due on May 31, 2019 and bears a 5.0% interest rate. The Company made a payment of $57,750 towards the principal balance and accrued interest of $2,750 on May 21, 2019. As of June 30, 2019, the outstanding balance of the Note was $0 and accrued interest was $0.

WOC Energy, LLC – On May 1, 2019, the Company issued an unsecured Short-Term Promissory Note to WOC Energy, LLC in the principal amount of $40,000 (the ‘Note’) due on May 31, 2019 and bears a 5.0% interest rate. This note was a conversion of accounts payable due to the lender of $40,000. As of June 30, 2019, the outstanding balance of the Note was $40,000 and accrued interest was $2,000.

Adar Alef, LLC – On November 19, 2018, the Company issued an unsecured Convertible Promissory Note (‘Note’) to Adar Alef, LLC (‘Adar Alef’), in the principal amount of $105,000 (the ‘Note’) due on November 19, 2019 and bears 8% per annum interest, due at maturity. The total net proceeds the Company received was $100,000 (less an original issue discount (‘OID’) of $5,000). The Note is convertible into common stock, at holder’s option, at a 40% discount of the lowest trading price of the common stock during the 20 trading day period prior to conversion. In the event the Company experiences a DTC ‘Chill’ on its shares, the conversion price shall be decreased an additional 10% discount while the ‘Chill’ is in effect. On May 22, 2019, the Company paid $146,137 to pay off the principal balance of $105,000 and $41,137 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $92,918 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

Antczak Polich Law, LLC – On August 1, 2018, the Company issued an unsecured Convertible Promissory Note (‘Note’) to Antczak Polich Law, LLC (‘Antczak’), in the principal amount of $300,000 (the ‘Note’) due on August 1, 2019 and bears 8% per annum interest, due at maturity. This Note was issued for $300,000 in legal fees due to Antczak for its services related to several legal issues handled for the Company. The Note is convertible into common stock, at holder’s option, at a fixed conversion price of $0.75 per share. As of June 30, 2019, the gross balance of the note was $300,000 and accrued interest was $23,934.

Antczak Polich Law, LLC – On December 1, 2018, the Company issued an unsecured Convertible Promissory Note (‘Note’) to Antczak Polich Law, LLC (‘Antczak’), in the principal amount of $130,000 (the ‘Note’) due on December 1, 2019 and bears 8% per annum interest, due at maturity. This Note was issued for $130,000 in legal fees due to Antczak for its services related to several legal issues handled for the Company. The Note is convertible into common stock, at holder’s option, at a fixed conversion price of $0.75 per share. As of June 30, 2019, the gross balance of the note was $130,000 and accrued interest was $6,012.

Auctus Fund – On December 4, 2018, the Company issued an unsecured Convertible Promissory Note (‘Note’) to Auctus Fund (‘Auctus’), in the principal amount of $125,000 (the ‘Note’) due on September 4, 2019 and bears 12% per annum interest, due at maturity. The total net proceeds the Company received was $112,250 (less an original issue discount (‘OID’) of $12,750). The Note is convertible into common stock, at holder’s option, at a 50% discount of the lowest trading price of the common stock during the 25 trading day period prior to conversion. At any time after the closing date, if the Company’s common stock is not deliverable by DWAC, then an additional 10% discount will apply to all future conversions on this note. In the event the Company experiences a DTC ‘Chill’ on its shares, the conversion price shall be decreased an additional 15% discount while the ‘Chill’ is in effect. On May 23, 2019, the Company paid $171,475 to pay off the principal balance of $125,000 and $46,475 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $111,240 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

Coolidge Capital, LLC – On November 7, 2018, the Company entered into a Securities Purchase Agreement (the ‘Securities Purchase Agreement’) with Coolidge Capital, LLC. (the ‘Purchaser’), pursuant to which the Company issued to the Purchaser a Convertible Promissory Note (the ‘Note’) in the aggregate amount of $75,000. The total net proceeds the Company received was $70,500 (less an original issue discount (‘OID’) of $4,500). The Note has a maturity date of August 7, 2019 and the Company has agreed to pay interest on the unpaid principal balance of the Note at the rate of twelve percent (12%) per annum from the date on which the Note is issued (the ‘Issue Date’) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company may prepay the Note in whole provided that the Purchaser be given written notice not more than three (3) Trading Days. The outstanding principal amount of the Note (if any) is convertible at any time and from time to time at the election of the Purchaser during the period beginning on the date that is 180 days following the Issue Date into shares of the Company’s common stock, par value $0.0001 per share (the ‘Common Stock’) at a conversion price of variable conversion price is 61% (39% discount) of the market price. Market price is the average of the lowest two trading prices in a ten trading day look back period. The company recognized a debt discount on this note of $4,500 which will be amortized over the life of the note. On May 3, 2019, the Company paid $105,000 to pay off the principal balance of $75,000 and $30,000 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $3,610 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

Coolidge Capital, LLC – On May 10, 2019, the Company entered into a Securities Purchase Agreement (the ‘Securities Purchase Agreement’) with Coolidge Capital, LLC. (the ‘Purchaser’), pursuant to which the Company issued to the Purchaser a Convertible Promissory Note (the ‘Note’) in the aggregate amount of $100,000. The total net proceeds the Company received was $95,000 (less an original issue discount (‘OID’) of $5,000). The Note has a maturity date of February 10, 2020 and the Company has agreed to pay interest on the unpaid principal balance of the Note at the rate of twelve percent (12%) per annum from the date on which the Note is issued (the ‘Issue Date’) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company may prepay the Note in whole provided that the Purchaser be given written notice not more than three (3) Trading Days. The outstanding principal amount of the Note (if any) is convertible at any time and from time to time at the election of the Purchaser during the period beginning on the date that is 180 days following the Issue Date into shares of the Company’s common stock, par value $0.0001 per share (the ‘Common Stock’) at a conversion price of variable conversion price is 61% (39% discount) of the market price. Market price is the average of the lowest two trading prices in a ten trading day look back period. The company recognized a debt discount on this note of $5,000 which will be amortized over the life of the note. For the six months ended June 30, 2019, the Company amortized $924 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $100,000 and accrued interest was $1,677.

Coventry Enterprises, LLC – On February 12, 2019, the Company issued an unsecured Convertible Promissory Note (‘Note’) to Coventry Enterprises, LLC (‘Coventry’), in the principal amount of $50,000 (the ‘Note’) due on February 12, 2020 and bears 10% per annum interest, due at maturity. The total net proceeds the Company received was $47,500 (less an original issue discount (‘OID’) of $2,500). The Note is convertible into common stock, at holder’s option, at a 40% discount of the lowest trading price of the common stock during the 20 trading day period prior to conversion. In the event the Company experiences a DTC ‘Chill’ on its shares, the conversion price shall be decreased an additional 10% discount while the ‘Chill’ is in effect. On May 23, 2019, the Company paid $68,750 to pay off the principal balance of $50,000 and $18,750 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $50,000 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

Crossover Capital Fund II, LLC – On July 10, 2018, the Company issued an unsecured Convertible Promissory Note (‘Note’) to Crossover Capital Fund II, LLC (‘Crossover Capital’), in the principal amount of $82,894 (the ‘Note’) due on April 10, 2019 and bears 12% per annum interest, due at maturity. The total net proceeds the Company received was $75,000 (less an original issue discount (‘OID’) of $7,894). The Note is convertible into common stock, at holder’s option, at a 40% discount of the lowest trading price of the common stock during the 20 trading day period prior to conversion. In the event the Company experiences a DTC ‘Chill’ on its shares, the conversion price shall be decreased an additional 10% discount while the ‘Chill’ is in effect. On January 4, 2019, the Company paid $118,750 to pay off the principal balance of $82,894 and $35,856 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $30,253 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

Crossover Capital Fund II, LLC – On May 3, 2019, the Company issued an unsecured Convertible Promissory Note (‘Note’) to Crossover Capital Fund II, LLC (‘Crossover Capital’), in the principal amount of $80,500 (the ‘Note’) due on February 3, 2020 and bears 12% per annum interest, due at maturity. The total net proceeds the Company received was $70,975 (less an original issue discount (‘OID’) of $9,525). The Note is convertible into common stock, at holder’s option, at a 50% discount of the lowest trading price of the common stock during the 20 trading day period prior to conversion. In the event the Company experiences a DTC ‘Chill’ on its shares, the conversion price shall be decreased an additional 10% discount while the ‘Chill’ is in effect. On May 22, 2019, the Company paid $93,161 to pay off the principal balance of $80,500 and $12,661 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $80,500 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

Crown Bridge Partners – On October 25, 2018, the Company issued an unsecured Convertible Promissory Note (‘Note’) to Crown Bridge Partners (‘Crown Bridge’), in the principal amount of $55,000 (the ‘Note’) due on May 11, 2019 and bears 5% per annum interest, due at maturity. The total net proceeds the Company received was $47,000 (less an original issue discount (‘OID’) of $8,000). The Note is convertible into common stock, at holder’s option, at a 40% discount of the lowest trading price of the common stock during the 20 trading day period prior to conversion. If the conversion price drops below $0.15 per share, then the conversion price will be 50% of the trading price. The Company issued 100,000 warrants to purchase shares of common stock.in connection with this note. The warrants have a five year life and an exercise price of $0.75 per share. On April 18, 2019, the Company paid $83,738 to pay off the principal balance of $55,000 and $28,738 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $44,904 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

Crown Bridge Partners – On April 18, 2019, the Company issued an unsecured Convertible Promissory Note (‘Note’) to Crown Bridge Partners (‘Crown Bridge’), in the principal amount of $55,000 (the ‘Note’) due on April 18, 2020 and bears 5% per annum interest, due at maturity. The total net proceeds the Company received was $47,000 (less an original issue discount (‘OID’) of $8,000). The Note is convertible into common stock, at holder’s option, at a 40% discount of the lowest trading price of the common stock during the 20 trading day period prior to conversion. If the conversion price drops below $0.15 per share, then the conversion price will be 50% of the trading price. For the six months ended June 30, 2019, the Company amortized $10,970 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $55,000 and accrued interest was $550.

Investor – On August 2, 2018, the Company issued an unsecured Convertible Promissory Note (‘Note’) to Investor, in the principal amount of $150,000 (the ‘Note’) due on August 2, 2020 and bears 10% (24% default) per annum interest, due at maturity. The total net proceeds the Company received was $150,000. The Note is convertible into common stock, at holder’s option, at a 40% discount of the lowest trading price of the common stock during the 20 trading day period prior to conversion. If at any time while the note is outstanding, an event of default occurs, then an additional discount of 10% shall be factored into the variable conversion price until the note is no longer outstanding. On January 23, 2019, the Company paid $210,000 to pay off the principal balance of $150,000 and $60,000 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $119,015 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

Investor – On May 20, 2019, the Company issued a secured Convertible Promissory Note (‘Note’) to Investor, in the principal amount of $4,250,000 (the ‘Note’) due on May 20, 2021 and bears 10% (24% default) per annum interest, due at maturity. The total net proceeds the Company received was $3,000,000. The Note is convertible into common stock, at holder’s option, at 100% of market price less $0.01 per share. Market price means the mathematical average of the five lowest individually daily volume weighted average prices of the common stock from the period beginning on the issuance date and ending on the maturity date. The conversion price has a floor price of $0.01 per share of common stock. The Company issued 9,250,000 warrants to purchase shares of common stock.in connection with this note. The warrants have a three year life and an exercise price as follows: 3,750,000 at an exercise price of $0.40 per share, 3,000,000 at an exercise price of $0.50 per share and 2,500,000 at an exercise price of $0.60 per share. The proceeds were allocated between the note for $1,788,038 and the warrants for $1,211,962. The note has an early payoff penalty of 140% of the then outstanding face value. For the six months ended June 30, 2019, the Company amortized $238,372 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $4,250,000 and accrued interest was $47,740.

Eagle Equities, LLC – On December 12, 2018, the Company issued an unsecured Convertible Promissory Note (‘Note’) to Eagle Equities, LLC (‘Eagle Equities’), in the principal amount of $103,000 (the ‘Note’) due on December 12, 2019 and bears 8% per annum interest, due at maturity. The total net proceeds the Company received was $100,000 (less an original issue discount (‘OID’) of $3,000). The Note is convertible into common stock, at holder’s option, at a 40% discount of the lowest trading price of the common stock during the 20 trading day period prior to conversion. In the event the Company experiences a DTC ‘Chill’ on its shares, the conversion price shall be decreased an additional 10% discount while the ‘Chill’ is in effect. On May 22, 2019, the Company paid $147,812 to pay off the principal balance of $103,000 and $44,812 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $97,638 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

EMA Financial – On October 23, 2018, the Company issued an unsecured Convertible Promissory Note (‘Note’) to EMA Financial, in the principal amount of $75,000 (the ‘Note’) due on July 23, 2019 and bears 12% per annum interest, due at maturity. The total net proceeds the Company received was $67,500 (less an original issue discount (‘OID’) of $7,500). The Note is convertible into common stock, at holder’s option, at a 40% discount of the lowest trading price of the common stock during the 20 trading day period prior to conversion. However, if the Company’s share price at any time loses the bid, then the conversion price may, in the Holder’s sole and absolute discretion, be reduced to a fixed conversion price of $0.00001 (if lower than the conversion price otherwise), and provided, that if on the date of delivery of the conversion shares to the Holder, or any date thereafter while conversion shares are held by the Holder, the closing bid price per share of common stock on the principal market on the trading day on which the common shares are traded is less than the sale price used to calculate the conversion price, then such conversion price shall be automatically reduced using the new low closing bid price and additional shares issued to the Holder. In the event the Company experiences a DTC ‘Chill’ on its shares, or if the closing sale price at any time falls below $0.047, then the conversion price shall be decreased an additional 15% discount. At any time after the closing date, if the Company’s common stock is not deliverable by DWAC, then an additional 15% discount will apply to all future conversions on this note. On April 25, 2019, the Company paid $107,308 to pay off the principal balance of $75,000 and $32,308 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $56,044 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

EMA Financial – On May 1, 2019, the Company issued an unsecured Convertible Promissory Note (‘Note’) to EMA Financial, in the principal amount of $75,000 (the ‘Note’) due on July 23, 2019 and bears 12% per annum interest, due at maturity. The total net proceeds the Company received was $67,500 (less an original issue discount (‘OID’) of $7,500). The Note is convertible into common stock, at holder’s option, at a 40% discount of the lowest trading price of the common stock during the 20 trading day period prior to conversion. In the event the Company experiences a DTC ‘Chill’ on its shares, or if the closing sale price at any time falls below $0.15, then the conversion price shall be decreased an additional 15% discount. At any time after the closing date, if the Company’s common stock is not deliverable by DWAC, then an additional 15% discount will apply to all future conversions on this note. For the six months ended June 30, 2019, the Company amortized $16,304 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $75,000 and accrued interest was $1,479.

GS Capital Partners – On August 1, 2018, the Company issued an unsecured Convertible Promissory Note (‘Note’) to GS Capital Partners (‘GS Capital’), in the principal amount of $100,000 (the ‘Note’) due on August 1, 2019 and bears 8% per annum interest, due at maturity. The total net proceeds the Company received was $95,000 (less an original issue discount (‘OID’) of $5,000). The Note is convertible into common stock, at holder’s option, at a 42% discount of the lowest closing price of the common stock during the 12 trading day period prior to conversion. In the event the Company experiences a DTC ‘Chill’ on its shares, the conversion price shall be decreased an additional 10% discount while the ‘Chill’ is in effect. On January 22, 2019, the Company paid $133,814 to pay off the principal balance of $100,000 and $33,814 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $57,515 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

GS Capital Partners – On November 28, 2018, the Company issued an unsecured Convertible Promissory Note (‘Note’) to GS Capital Partners (‘GS Capital’), in the principal amount of $200,000 (the ‘Note’) due on November 28, 2019 and bears 8% per annum interest, due at maturity. The total net proceeds the Company received was $190,000 (less an original issue discount (‘OID’) of $10,000). The Note is convertible into common stock, at holder’s option, at a 42% discount of the lowest closing price of the common stock during the 12 trading day period prior to conversion. In the event the Company experiences a DTC ‘Chill’ on its shares, the conversion price shall be decreased an additional 10% discount while the ‘Chill’ is in effect. On May 23, 2019, the Company paid $267,890 to pay off the principal balance of $200,000 and $67,890 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $181,918 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

GS Capital Partners – On January 23, 2019, the Company issued an unsecured Convertible Promissory Note (‘Note’) to GS Capital Partners (‘GS Capital’), in the principal amount of $100,000 (the ‘Note’) due on February 23, 2020 and bears 8% per annum interest, due at maturity. The total net proceeds the Company received was $95,000 (less an original issue discount (‘OID’) of $5,000). The Note is convertible into common stock, at holder’s option, at a 42% discount of the lowest closing price of the common stock during the 12 trading day period prior to conversion. In the event the Company experiences a DTC ‘Chill’ on its shares, the conversion price shall be decreased an additional 10% discount while the ‘Chill’ is in effect. For the six months ended June 30, 2019, the Company amortized $39,899 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $100,000 and accrued interest was $3,463.

JSJ Investments – On November 9, 2018, the Company issued an unsecured Convertible Promissory Note (‘Note’) to JSJ Investments (‘JSJ’), in the principal amount of $100,000 (the ‘Note’) due on November 9, 2019 and bears 12% per annum interest, due at maturity. The total net proceeds the Company received was $98,000 (less an original issue discount (‘OID’) of $2,000). The Note is convertible into common stock, at holder’s option, at a 40% discount of the lowest trading price of the common stock during the 20 trading day period prior to conversion. On May 10, 2019, the Company paid $145,961 to pay off the principal balance of $100,000 and $45,961 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $85,753 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

JSJ Investments – On February 5, 2019, the Company issued an unsecured Convertible Promissory Note (‘Note’) to JSJ Investments (‘JSJ’), in the principal amount of $100,000 (the ‘Note’) due on February 5, 2020 and bears 12% per annum interest, due at maturity. The total net proceeds the Company received was $98,000 (less an original issue discount (‘OID’) of $2,000). The Note is convertible into common stock, at holder’s option, at a 40% discount of the lowest trading price of the common stock during the 20 trading day period prior to conversion. On May 23, 2019, the Company paid $138,452 to pay off the principal balance of $100,000 and $38,452 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $100,000 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

Labrys Fund LP – On October 26, 2018, the Company entered into a Securities Purchase Agreement (the ‘Securities Purchase Agreement’) with LABRYS FUND, LP (the ‘Purchaser’), pursuant to which the Company issued to the Purchaser a Convertible Promissory Note (the ‘Note’) in the aggregate principal amount of $300,000. The Note has a maturity date of April 26, 2018 and the Company has agreed to pay interest on the unpaid principal balance of the Note at the rate of twelve percent (12%) per annum from the date on which the Note is issued (the ‘Issue Date’) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The total net proceeds the Company received was $270,000 (less an original issue discount (‘OID’) of $30,000). The Company has the right to prepay the Note, provided it makes a payment to the Purchaser as set forth in the Note within 180 days of its Issue Date. The transactions described above closed on October 26, 2018. In connection with the issuance of the Note, the Company issued to the Purchaser 1,362,398 shares of its common stock (the ‘Returnable Shares’) that shall be returned to the Company’s treasury if the Note is fully repaid and satisfied. The outstanding principal amount of the Note (if any) is convertible at any time and from time to time at the election of the Purchaser during the period beginning on the Issue Date into shares of the Company’s common stock, par value $0.0001 per share (the ‘Common Stock’) at a conversion price of $0.11 as set forth in the Note, subject to adjustment as set forth in the Note if the Note is in Default. The Default Note Conversion Price is a 45% discount of the lowest trading price of the common stock during the 30 trading day period prior to conversion. In the event the Company experiences a DTC ‘Chill’ on its shares, the conversion price shall be decreased an additional 15% discount on all future conversions. The Company issued 235,000 shares of common stock in connection with this note, which were valued at $28,200 and recorded as part of the debt discount. The Company recognized a debt discount on this note of $85,473 which will be amortized over the life of the note. On May 22, 2019, the Company paid $319,510 to pay off the principal balance of $300,000 and $19,510 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $54,477 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

Labrys Fund LP – On January 14, 2019, the Company entered into a Securities Purchase Agreement (the ‘Securities Purchase Agreement’) with LABRYS FUND, LP (the ‘Purchaser’), pursuant to which the Company issued to the Purchaser a Convertible Promissory Note (the ‘Note’) in the aggregate principal amount of $282,000. The Note has a maturity date of July 14, 2019 and the Company has agreed to pay interest on the unpaid principal balance of the Note at the rate of twelve percent (12%) per annum from the date on which the Note is issued (the ‘Issue Date’) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The total net proceeds the Company received was $250,000 (less an original issue discount (‘OID’) of $32,000). The Company has the right to prepay the Note, provided it makes a payment to the Purchaser as set forth in the Note within 180 days of its Issue Date. The transactions described above closed on January 14, 2019. In connection with the issuance of the Note, the Company issued to the Purchaser 1,000,000 shares of its common stock (the ‘Returnable Shares’) that shall be returned to the Company’s treasury if the Note is fully repaid and satisfied. The outstanding principal amount of the Note (if any) is convertible at any time and from time to time at the election of the Purchaser during the period beginning on the Issue Date into shares of the Company’s common stock, par value $0.0001 per share (the ‘Common Stock’) at a conversion price of $0.11 as set forth in the Note, subject to adjustment as set forth in the Note if the Note is in Default. The Default Note Conversion Price is a 45% discount of the lowest trading price of the common stock during the 30 trading day period prior to conversion. In the event the Company experiences a DTC ‘Chill’ on its shares, the conversion price shall be decreased an additional 15% discount on all future conversions. The Company issued 130,000 shares of common stock in connection with this note, which were valued at $17,550 and recorded as part of the debt discount. The Company recognized a debt discount on this note of $113,641 which will be amortized over the life of the note. On May 22, 2019, the Company paid $293,867 to pay off the principal balance of $282,000 and $11,867 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $113,641 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

LG Capital Funding – On December 7, 2018, the Company issued an unsecured Convertible Promissory Note (‘Note’) to LG Capital Funding (‘LG Cap’), in the principal amount of $100,000 (the ‘Note’) due on December 7, 2019 and bears 10% per annum interest, due at maturity. The total net proceeds the Company received was $85,000 (less an original issue discount (‘OID’) of $15,000). The Note is convertible into common stock, at holder’s option, for the first 6 months at a fixed price of $0.18 per share and after that date at a 40% discount of the lowest trading price of the common stock during the 20 trading day period prior to conversion. In the event the Company experiences a DTC ‘Chill’ on its shares, the conversion price shall be decreased an additional 10% discount on all future conversions. The Company issued 39,473 shares of common stock in connection with this note, which were valued at $7,500 and recorded as part of the debt discount. The Company recognized a debt discount on this note of $22,500 which will be amortized over the life of the note. On May 23, 2019, the Company paid $146,252 to pay off the principal balance of $100,000 and $46,252 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $21,020 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

Morningview Financial – On November 26, 2018, the Company issued an unsecured Convertible Promissory Note (‘Note’) to Morningview Financial (‘Morningview’), in the principal amount of $55,000 (the ‘Note’) due on November 26, 2019 and bears 10% per annum interest, due at maturity. The total net proceeds the Company received was $47,500 (less an original issue discount (‘OID’) of $7,500). The Note is convertible into common stock, at holder’s option, at a 40% discount of the lowest trading price of the common stock during the 20 trading day period prior to conversion. On May 23, 2019, the Company paid $78,546 to pay off the principal balance of $55,000 and $23,546 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $49,726 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

Odyssey Capital Funding, LLC – On May 15, 2019, the Company issued an unsecured Convertible Promissory Note (‘Note’) to Odyssey Capital Funding, LLC (‘Odyssey Capital’), in the principal amount of $105,000 (the ‘Note’) due on May 15, 2020 and bears 10% per annum interest, due at maturity. The total net proceeds the Company received was $100,000 (less an original issue discount (‘OID’) of $5,000). The Note is convertible into common stock, at holder’s option, at a 40% discount of the lowest trading price of the common stock during the 20 trading day period prior to conversion. In the event the Company experiences a DTC ‘Chill’ on its shares, the conversion price shall be decreased an additional 10% discount while the ‘Chill’ is in effect. For the six months ended June 30, 2019, the Company amortized $13,197 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $105,000 and accrued interest was $1,323.

One 44 Capital, LLC – On January 28, 2019, the Company issued an unsecured Convertible Promissory Note (‘Note’) to One 44 Capital, LLC (‘One 44’), in the principal amount of $100,000 (the ‘Note’) due on December 12, 2019 and bears 8% per annum interest, due at maturity. The total net proceeds the Company received was $95,000 (less an original issue discount (‘OID’) of $5,000). The Note is convertible into common stock, at holder’s option, at a 40% discount of the lowest trading price of the common stock during the 20 trading day period prior to conversion. In the event the Company experiences a DTC ‘Chill’ on its shares, the conversion price shall be decreased an additional 10% discount while the ‘Chill’ is in effect. For the six months ended June 30, 2019, the Company amortized $41,918 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $100,000 and accrued interest was $4,192.

Power Up Lending Group – On July 12, 2018, the Company entered into a Securities Purchase Agreement (the ‘Securities Purchase Agreement’) with POWER UP LENDING GROUP LTD. (the ‘Purchaser’), pursuant to which the Company issued to the Purchaser a Convertible Promissory Note (the ‘Note’) in the aggregate amount of $53,000. The total net proceeds the Company received was $50,000 (less an original issue discount (‘OID’) of $3,000). The Note has a maturity date of April 30, 2019 and the Company has agreed to pay interest on the unpaid principal balance of the Note at the rate of twelve percent (12% – 22% default interest per annum) per annum from the date on which the Note is issued (the ‘Issue Date’) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company may prepay the Note in whole provided that the Purchaser be given written notice not more than three (3) Trading Days. The outstanding principal amount of the Note (if any) is convertible at any time and from time to time at the election of the Purchaser during the period beginning on the date that is 180 days following the Issue Date into shares of the Company’s common stock, par value $0.0001 per share (the ‘Common Stock’) at a conversion price of the greater of the fixed conversion price of or a variable conversion price as set forth in the Note. The fixed conversion price is $0.00009. The variable conversion price is 61% (39% discount) of the market price. Market price is the average of the lowest two trading prices in a ten trading day look back period. The company recognized a debt discount on this note of $3,000 which will be amortized over the life of the note. On January 14, 2019, the Company paid $75,855 to pay off the principal balance of $53,000 and $22,855 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $1,233 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

Power Up Lending Group – On October 22, 2018, the Company entered into a Securities Purchase Agreement (the ‘Securities Purchase Agreement’) with POWER UP LENDING GROUP LTD. (the ‘Purchaser’), pursuant to which the Company issued to the Purchaser a Convertible Promissory Note (the ‘Note’) in the aggregate amount of $63,000. The total net proceeds the Company received was $60,000 (less an original issue discount (‘OID’) of $3,000). The Note has a maturity date of July 30, 2019 and the Company has agreed to pay interest on the unpaid principal balance of the Note at the rate of twelve percent (12% – 22% default interest per annum) per annum from the date on which the Note is issued (the ‘Issue Date’) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company may prepay the Note in whole provided that the Purchaser be given written notice not more than three (3) Trading Days. The outstanding principal amount of the Note (if any) is convertible at any time and from time to time at the election of the Purchaser during the period beginning on the date that is 180 days following the Issue Date into shares of the Company’s common stock, par value $0.0001 per share (the ‘Common Stock’) at a conversion price of the greater of the fixed conversion price of or a variable conversion price as set forth in the Note. The fixed conversion price is $0.00009. The variable conversion price is 61% (39% discount) of the market price. Market price is the average of the lowest two trading prices in a ten trading day look back period. The company recognized a debt discount on this note of $3,000 which will be amortized over the life of the note. On April 16, 2019, the Company paid $90,083 to pay off the principal balance of $63,000 and $27,083 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $2,253 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

Power Up Lending Group – On January 11, 2019, the Company entered into a Securities Purchase Agreement (the ‘Securities Purchase Agreement’) with POWER UP LENDING GROUP LTD. (the ‘Purchaser’), pursuant to which the Company issued to the Purchaser a Convertible Promissory Note (the ‘Note’) in the aggregate amount of $53,000. The total net proceeds the Company received was $50,000 (less an original issue discount (‘OID’) of $3,000). The Note has a maturity date of October 30, 2019 and the Company has agreed to pay interest on the unpaid principal balance of the Note at the rate of twelve percent (12% – 22% default interest per annum) per annum from the date on which the Note is issued (the ‘Issue Date’) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company may prepay the Note in whole provided that the Purchaser be given written notice not more than three (3) Trading Days. The outstanding principal amount of the Note (if any) is convertible at any time and from time to time at the election of the Purchaser during the period beginning on the date that is 180 days following the Issue Date into shares of the Company’s common stock, par value $0.0001 per share (the ‘Common Stock’) at a conversion price of the greater of the fixed conversion price of or a variable conversion price as set forth in the Note. The fixed conversion price is $0.00009. The variable conversion price is 61% (39% discount) of the market price. Market price is the average of the lowest two trading prices in a ten trading day look back period. The company recognized a debt discount on this note of $3,000 which will be amortized over the life of the note. On May 22, 2019, the Company paid $67,353 to pay off the principal balance of $53,000 and $14,353 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $3,000 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

Power Up Lending Group – On April 16, 2019, the Company entered into a Securities Purchase Agreement (the ‘Securities Purchase Agreement’) with POWER UP LENDING GROUP LTD. (the ‘Purchaser’), pursuant to which the Company issued to the Purchaser a Convertible Promissory Note (the ‘Note’) in the aggregate amount of $63,000. The total net proceeds the Company received was $60,000 (less an original issue discount (‘OID’) of $3,000). The Note has a maturity date of February 28, 2020 and the Company has agreed to pay interest on the unpaid principal balance of the Note at the rate of twelve percent (12% – 22% default interest per annum) per annum from the date on which the Note is issued (the ‘Issue Date’) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company may prepay the Note in whole provided that the Purchaser be given written notice not more than three (3) Trading Days. The outstanding principal amount of the Note (if any) is convertible at any time and from time to time at the election of the Purchaser during the period beginning on the date that is 180 days following the Issue Date into shares of the Company’s common stock, par value $0.0001 per share (the ‘Common Stock’) at a conversion price of the greater of the fixed conversion price of or a variable conversion price as set forth in the Note. The fixed conversion price is $0.00009. The variable conversion price is 61% (39% discount) of the market price. Market price is the average of the lowest two trading prices in a ten trading day look back period. The company recognized a debt discount on this note of $3,000 which will be amortized over the life of the note. On May 22, 2019, the Company paid $80,062 to pay off the principal balance of $63,000 and $17,062 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $3,000 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

SBI Investments – On December 17, 2018, the Company issued an unsecured Convertible Promissory Note (‘Note’) to SBI Investments, LLC (‘SBI’), in the principal amount of $110,000 (the ‘Note’) due on June 17, 2019 and bears 8% per annum interest, due at maturity. The total net proceeds the Company received was $100,000 (less an original issue discount (‘OID’) of $10,000). The Note is convertible into common stock, at holder’s option, at a 50% discount of the lowest trading price of the common stock during the 20 trading day period prior to conversion. At any time after the closing date, if the Company’s common stock is not deliverable by DWAC, then an additional 10% discount will apply to all future conversions on this note. If at any time while the note is outstanding, an event of default occurs, then an additional discount of 15% shall be factored into the variable conversion price until the note is no longer outstanding. On May 23, 2019, the Company paid $147,827 to pay off the principal balance of $110,000 and $37,827 in accrued interest and prepayment penalty. For the six months ended June 30, 2019, the Company amortized $101,538 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $0 and accrued interest was $0.

Scotia International of Nevada, Inc. – On January 10, 2019, the Company issued an unsecured Convertible Promissory Note (‘Note’) to Scotia International of Nevada, Inc. (‘Scotia’), in the principal amount of $400,000 (the ‘Note’) due on January 10, 2022 and bears 6% per annum interest, due at maturity. The Note was issued as part of a buyout agreement on the net smelter royalty due Scotia on the precious metals mined from the Company’s mining operation in Honduras. The Note is convertible into common stock, at holder’s option, at $0.50 per share as long as the Company’s common stock’s bid price is less than $0.75 per share. If the bid price is more than $0.75 per share, then Scotia may elect to convert at the average bid price of the common stock during the 10 trading day period prior to conversion. For the six months ended June 30, 2019, the Company amortized $14,129 of debt discount to current period operations as interest expense. As of June 30, 2019, the gross balance of the note was $400,000 and accrued interest was $11,244.

On February 25, 2013, the Company acquired certain real property and the associated exploration permits and mineral rights commonly known as the UP and Burlington Gold Mine (‘UP and Burlington’ or the ‘Mine’) pursuant to that certain asset purchase agreement entered between the Company, its majority shareholder (the ‘Majority Shareholder’), and its wholly-owned subsidiary, Inception Development Inc. (the ‘Subsidiary’) on one hand, and Inception Resources on the other hand, dated February 25, 2013 (the ‘Asset Purchase Agreement’). Accordingly, the Company owns and controls this property exclusively; there are no third parties who impose conditions of any kind on operations at this location. We are presently in the exploration stage at UP and Burlington. UP and Burlington contain two federal patented mining claims which Inception Resources acquired for the purpose of the exploration and potential development of gold on the 40 acres which comprises UP and Burlington. Production at this mine is subject to a 3% net smelter royalty, which may increase or decrease depending on the amount of gold produced.

The Company’s primary mine is located on the 200-hectare Clavo Rico Concession, located in southern Honduras. This mine was originally explored and exploited in the 16th century by the Spanish, and more recently has been operated by Compañía Minera Cerros del Sur, S. de R.L. as a small family business. In 2003, Clavo Rico’s predecessor purchased a 20% interest and later increased its ownership to 99.9%. This company has since invested over five million dollars in the expansion and development of the mine and surrounding properties. Today, the Company operates this mine through exploration of surface-level material.

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