Convertible Promissory Notes - Past Due |
7. CONVERTIBLE PROMISSORY NOTES –
PAST DUE
As of September 30, 2020 and December 31, 2019,
the Company had a total of $841,423 and $1,099,278, respectively, of outstanding convertible notes payable, which consisted of
the following:
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September 30, 2020 |
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December 31, 2019 |
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a) Convertible Notes – with fixed conversion terms |
|
$ |
714,500 |
|
|
$ |
894,000 |
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b) Convertible Notes – with variable conversion |
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|
126,923 |
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|
|
205,278 |
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Total convertible notes – past due |
|
$ |
841,423 |
|
|
$ |
1,099,278 |
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a) |
Included in Convertible Notes - with fixed conversion terms, are loans provided to the Company from various investors. These notes carry simple interest rates ranging from 0% to 14% per annum and with terms ranging from 1 to 2 years. In lieu of the repayment of the principal and accrued interest, the outstanding amounts are convertible, at the option of the note holder, generally at any time on or prior to maturity and automatically under certain conditions, into the Company’s common shares at $0.015 to $0.30 per share. These notes became due in 2017 and prior, and are currently past due. |
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At December 31, 2019, balance of the convertible notes was $894,000. During the nine months ended September 30, 2020, we issued 28,026,792 shares of common stock to convert $175,000 of principal of these outstanding convertible notes and $39,518 in accrued interest. Of the total Notes converted during the period, approximately $110,000 of the notes were converted at a conversion price that was higher than the market price of the shares on the date of conversion. As such, the Company issued 81,792 common shares with a fair value of $1,420 in settlement of the $131,000 debt, which resulted in a $129,261 gain on the conversion of the Notes. The Company also paid down $4,500 of the principal balance of the convertible notes, which brought the outstanding balance of the convertible notes to $714,500 as of September 30, 2020. These convertible notes are currently past due. |
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b) |
Convertible notes payable with principal balance of $126,923 as of September 30, 2020 consist of loans provided to the Company from various investors. These notes are non-interest bearing and with terms ranging from 1 to 2 years. In lieu of the repayment of the principal and accrued interest, the outstanding amounts are convertible, at the option of the note holder, generally at any time on or prior to maturity and automatically under certain conditions, into the Company’s common shares at 60% of the lowest trading price in the prior 30 days. The Company determined that since the conversion floor of these notes had no limit to the conversion price, the Company could no longer determine if it had enough authorized shares to fulfil its conversion obligation. As such, pursuant to current accounting guidelines, the Company determined that the conversion feature of these notes created a derivative at the date of issuance which was recorded as a valuation discount that was fully amortized as of December 31, 2019. At December 31, 2019, balance of the loan was $205,278. During the nine months ended September 30, 2020, we issued 8,454,828 shares of common stock to convert $78,355 of these outstanding convertible notes, which brought the principal balnce down to $126,923 as of the period then ended. These notes became due in 2019 and prior, and are currently past due. |
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