Note 5 – Related Party Transactions

The Company’s CEO earned $10,000 per month. The following compensation was recorded within general and administrative expenses – related parties on the statements of operations: $90,000 and $90,000 for the nine months ended September 30, 2020 and 2019, respectively. For the three months ended September 30, 2020 and 2019, $30,000 and $30,000 was recorded within general and administrative expenses – related parties on the statement of operations. As of September 30, 2020, $701,659 of compensation was unpaid and was included in accounts payable – related party on the consolidated balance sheet.

On September 30, 2016, Balance Group LLC loaned $120,000 as a convertible note payable to the Company at an interest rate of 10%, due on October 1, 2017. In addition, the Company issued 600,000 warrants at an execution price of $1.00 which expire on September 30, 2021. See Note 7. The note is currently in default and has an accrued interest balance of $48,016.

During 2016, 2017, and 2019 Balance Group LLC loaned an additional $66,850 to the Company. The notes are in default and have an accrued interest balance of $19,572.

As of September 30, 2020, the CEO and companies controlled by the CEO have loaned the Company a total of $1,221,558 in addition to the convertible note discussed above. The loans carry an interest rate of 8% and mature one year and one day from the date of the loan. The Company accrued interest of $193,209 on the loans. $1,012,949 of these loans are in default as of November 13, 2020.

The Company on July 27, 2016 signed a sublease with entity partially owned by a related party to sub-lease approximately 2200 square feet 1691 Michigan Ave, Miami Beach, Fl. 33139, beginning August 1, 2016 and ending December 31, 2019 at a monthly base rental of $7,741 per month until July 31, 2017, $7,973 per month from August 1, 2017 to July 31, 2018, and $8,212 from August 1, 2018 to the sublease termination date. In addition to base rent, the Company will have to pay 50% of the CAM charges as additional rent. On or about January 15, 2017, The Company was made aware that the master lease for the office space was in default. Consequently, the Company ceased payments. On or about March, 31, 2017, The Company was served with an eviction notice as the Master Lease was still in default. The Company has used its security deposit to partially pay its delinquent rent. The balance was paid in cash and the matter was partially settled. The Company still has $16,725 accrued on its books representing the amount that may be subject to pay. On May 12, 2017 the Company moved its headquarters to 350 Lincoln Road, Miami Beach, FL 33139. The Company pays $2,750 per month rent. Beginning November 1, 2017, the Company began occupying the space on a month to month basis. In addition, the Company had to pay a security deposit of $4,325. The security deposit is included in prepaid expenses on the balance sheet, and $2,896 of it was returned on October 16^th, 2020, The residual balance was used to cover the remaining rent. The Company terminated its lease agreement during August 2020 and is currently on a 6-month commitment for a virtual office with another landlord, Spaces. The contract start date is October 6, 2020 and an ending date of April 30, 2021. The Company currently pays $99.75 a month.

iGrow Systems, Inc., as part of its initial funding borrowed $15,000 from KryptoBank Co. On July 15, 2019, KryptoBank Co. converted the $15,000 note into 150,000 shares of common stock at a price of $0.10 per share.

On April 1, 2016, the Company received $500,000 from Newell Trading Group in exchange for a convertible debenture due April 2, 2017 bearing interest at 10% and convertible into common stock at $.25 per share unless the note is paid by the Company prior to the election of the holder to convert. The Company recognized a beneficial conversion feature expense of $500,000 that has been fully amortized. As of September 30, 2020, accrued interest on the note is $225,034. On October 3, 2019, Newell Trading Group assigned its rights and interests in its $500,000 convertible debenture to the Sammy Farkas Foundation Inc., (the “Foundation”), a related party. The Foundation then entered into an agreement with the Company to extend the maturity date of the convertible debenture to October 10, 2024 in exchange for 54,000 shares of the Company’s stock. The shares have a fair value of $56,700 which was recorded as a debt discount and amortized over the life of the extension. During the three and nine months ended September 30, 2020, the Company amortized $2,835 and $8,505 of debt discount, respectively. As of September 30, 2020, the remaining debt discount was $45,360.

The Company received $40,000 from The Foundation in exchange for a promissory note which bears 12% interest per annum and matures on October 10, 2020 or upon the Company raising $500,000 from outside investors, whichever occurs first. The promissory note is currently in default, and as of September 30, 2020, accrued interest on the note is $7,022. The promissory note comes with a warrant to purchase 40,000 shares of the Company’s stock with an exercise price of $1.00 per share and expires on October 10, 2022. The warrants have a relative fair value of $8,283, which was recorded as a debt discount and amortized over the life of the note. During the three and nine months ended September 30, 2020, the Company amortized $2,071 and $6,212 of debt discount, respectively. As of September 30, 2020, the remaining debt discount was $0.

During January 2020, The Farkas Group, a related party, loaned the Company $36,200, unsecured, for one year and one day at an interest rate of 8%.

During February 2020, The Farkas Group, a related party, loaned the Company $23,500, unsecured for one year and one day at an interest rate of 8%.

During March 2020, The Farkas Group, a related party, loaned the Company $4,050, unsecured for one year and one day at an interest rate of 8%.

During April 2020, The Farkas Group, a related party, loaned the Company $18,500, unsecured, for one year and one day at an interest rate of 8%.

During May 2020, The Farkas Group, a related party, loaned the Company $2,500, unsecured for one year and one day at an interest rate of 8%.

During June 2020, The Farkas Group, a related party, loaned the Company $17,200, unsecured for one year and one day at an interest rate of 8%.

During July 2020, The Farkas Group, a related party, loaned the Company $10,000, unsecured for one year and one day at an interest rate of 8%.

During August 2020, The Farkas Group, a related party, loaned the Company $29,000, unsecured for one year and one day at an interest rate of 8%.

During September 2020, The Farkas Group, a related party, loaned the Company $12,000, unsecured for one year and one day at an interest rate of 8%.