XML 31 R20.htm IDEA: XBRL DOCUMENT

Convertible Notes Receivable

9 Months Ended

Sep. 30, 2024

Convertible Notes Receivable [Abstract]

Note 12 – Convertible Notes Receivable

The Company’s convertible notes receivable consisted of the following as of September 30, 2024 and December 31, 2023:

	Convertible Notes Receivable
Beginning	$	-
Convertible note receivable		2,500,000
Fair value changes of convertible notes		102,027
As of December 31, 2023		2,602,027
Fair value changes of convertible notes		54,849
As of March 31, 2024		2,656,876
Fair value changes of convertible notes		(93,912	)
Other-than-temporary impairment losses on convertible note receivable		(1,500,000	)
AS of June 30, 2024		1,062,964
Fair value changes of convertible notes		(106	)
As of September 30, 2024	$	1,062,858

On June 1, 2023 and August 17, 2023, the Company purchased two convertible notes issued by DigiTrax Entertainment Inc. (the “DigiTrax”) for an aggregated of $1,000,000 (the “DigiTrax Convertible Notes”). Each DigiTrax Convertible Note will be due on one year after the original issuance (the “DigiTrax Convertible Note Maturity Date”). The Company has the right to receive interest on the aggregate unconverted and then outstanding principal amount of these notes at the rate of 10% per annum. Accrued and unpaid interest will be due and payable on conversion, repayment, redemption, maturity or default. At any time (after six months) after the issuance until the notes are no longer outstanding, the notes shall be convertible, in whole or part, into shares of common stock of DigiTrax at a price of $1.4 per share. In the event DigiTrax consummates a public offering of any capital stock and is able to receive gross proceeds of at least $10,000,000 (“Qualified Offering”) prior to the DigiTrax Convertible Note Maturity Date and there’s no event of default, all then outstanding principal and accrued but unpaid interest under the DigiTrax Convertible Notes should convert into the number of fully paid and nonassessable shares of DigiTrax common stock based on the lesser of (i) $1.4 per share, or (ii) seventy percent (70%) of the price per share of DigiTrax common stock that is subject to the Qualified Offering.

On June 2, 2023 and August 17, 2023, the Company purchased two convertible notes issued by Liquid Marketplace Corp. (the “Liquid”) for an aggregated of $1,500,000 (the “Liquid Convertible Notes”). Each Liquid Convertible Note will be due on one year after the original issuance (the “Liquid Convertible Note Maturity Date”). The Company has the right to receive interest on the aggregate unconverted and then outstanding principal amount of these notes at the rate of 8% per annum. Accrued and unpaid interest will be due and payable on conversion, repayment, redemption, maturity or default. At any time after the issuance until the notes are no longer outstanding, the notes shall be convertible, in whole or part, into shares of common stock of Liquid at a price of $0.25 per share. In the event Liquid consummates a public offering of any capital stock and is able to receive gross proceeds of at least $10,000,000 (“Qualified Offering”) prior to the Liquid Convertible Note Maturity Date and there’s no event of default, all then outstanding principal and accrued but unpaid interest under the Liquid Convertible Notes should convert into the number of fully paid and nonassessable shares of Liquid common stock based on the lesser of (i) $0.25 per share, or (ii) seventy percent (70%) of the price per share of Liquid common stock that is subject to the Qualified Offering.

The Company evaluated the terms of the DigiTrax Convertible Notes and the Liquid Convertible Notes according to ASC 320 and concluded that these notes should be classified as an available-for-sale security and measured at fair value.

As of September 30, 2024, the DigiTrax Convertible Notes were due and extended to May 31, 2025 and August 17, 2025, respectively, with the same terms and conditions as set forth in the original notes, as agreed by the Company and DigiTrax.

As of September 30, 2024, the Liquid Convertible Notes were due, but the Company failed to collect repayments from Liquid. The Company evaluated the recoverability of the aggregated $1,500,000 Liquid Convertible Notes according to ASC 326 and concluded that, the decline in value of Liquid Convertible Notes is other-than-temporary-impairment. The Company recorded $1,500,000 impairment loss on the Liquid Convertible Notes in the accompanying unaudited statement of operations, for the three months ended September 30, 2024. The unrealized gains on the fair value changes of the Liquid Convertible Notes amounted to $83,726, which was recognized in prior periods, were reversed from other comprehensive income. Up to the date of the unaudited interim consolidated financial statements were issued, there’s no evidence indicating that the fair value of Liquid Convertible Notes increased.

For the nine months ended September 30, 2024 and 2023, the Company recorded unrealized loss on the fair value changes of these notes amounted to $14,639 (consisting of $53,808 unrealized loss on the fair value changes of Liquid Convertible Notes, partially offset by $39,169 unrealized gain on the fair value changes of DigiTrax Convertible Notes) and $nil in other comprehensive income in relation to above convertible notes in the unaudited interim consolidated statements of operations and comprehensive loss. As of September 30, 2024 and December 31, 2023, the balance of the convertible notes were $1,062,858 and $2,602,027, respectively.