Convertible Debentures

9 Months Ended

Sep. 30, 2020

Convertible Debt [Abstract]

Convertible Debentures

Note 4. Convertible Debentures

During the third quarter of 2020, the holders of all previously outstanding convertible debentures totaling approximately $97,900 that were due during the third quarter of 2020 elected to convert those debentures plus approximately $46,100 of accrued interest into 5,758,992 shares of restricted stock of our Company. At September 30, 2020, our Company had no convertible debentures outstanding. The convertible debentures bore interest at 7%. During the third quarter of 2019, the holders of approximately $30,400 of previously outstanding convertible debentures elected to convert those debentures plus approximately $12,300 of accrued interest into 1,707,982 shares of restricted stock of our Company.

Our Company also granted warrants in earlier periods to purchase 691,365 shares of our Company’s common stock at $0.02 per share to the holders of the debentures. The warrants are exercisable two years after issuance and expire seven years after issuance. The fair value of the warrants was determined using the Black-Scholes pricing model. The relative fair value of the warrants was recorded as a discount to the notes payable with an offsetting credit to additional paid-in capital since our Company determined that the warrants were an equity instrument in accordance with FASB ASC 815. The debt discount related to the warrant issuances has been accreted through interest expense over the term of the notes payable. During the third quarter of 2020, holders of 550,000 warrants exercised their warrants to purchase a total of 550,000 shares of our Company’s common stock.

The following table summarizes our Company’s warrant position at September 30, 2020 and December 31, 2019:

					Weighted Average
	Number		Exercise		Exercise
	of Shares		Price		Price
Outstanding warrants -
December 31, 2019		691,365	$	0.02	$	0.02
Outstanding warrants -
September 30, 2020		141,365	$	0.02	$	0.02
Weighted average remaining
contractual life (years)		.77
Currently exercisable warrants -
September 30, 2020		141,365	$	0.02	$	0.02

The aggregate intrinsic value of warrants outstanding and exercisable as of September 30, 2020 was approximately $22,300. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $0.1775 for our Company’s common stock on September 30, 2020.