XML 83 R15.htm IDEA: XBRL DOCUMENT

NOTE 9 - CONVERTIBLE LOANS

12 Months Ended

Dec. 31, 2019

NOTE 9 - CONVERTIBLE LOANS

At December 31, 2019 and 2018, convertible loans consisted of the following:

		December 31,		December 31,
		2019		2018
Promissory notes – Issued in fiscal year 2018, with variable conversion features	$	-	$	221901
Promissory notes – Issued in fiscal year 2019, with variable conversion features		1,908,750		-
Total convertible notes payable		1,908,750		221,901
Less: Unamortized debt discount		(646,211)		(158,696)
Total convertible notes		1,262,539		63,205

Less: current portion of convertible notes		1,251,097		63,205
Long-term convertible notes	$	11,442	$	-

During the year ended December 31, 2019 and 2018, the Company recorded interest expense of $506,649 and $4,906 and recognized amortization of discount, included in interest expense, of $1,921,734 and $55,054, respectively.

Notes in Default

Certain convertible notes held by the company were in default. During the period ended December 31, 2019, the Company did not maintain the covenant requiring the Company to be current with all financial filings. As a result of the breach, the company recorded a penalty of $8,151 as principal amount.

Conversion

During the year ended December 31, 2019, the Company converted notes with principal amounts and accrued interest of $33,750 into 1,169,723 shares of common stock. The corresponding derivative liability at the date of conversion of $430,495 was settled through additional paid in capital.

Promissory Notes - Issued in fiscal year 2018

During the year ended December 31, 2018, the Company issued a total of $213,750 notes with the following terms:

·Terms ranging from 9 months to 12 months.

·Annual interest rates ranging from of 10% to 12%.

·Convertible at the option of the holders at issuance.

·Conversion prices are typically based on the discounted (50% discount) lowest trading prices of the Company’s shares during various periods prior to conversion.

Certain notes allow the Company to redeem the notes at rates ranging from 130% to 150% depending on the redemption date provided that no redemption is allowed after the 180th day. Likewise, the notes include financing costs totaling to $12,250 and the Company received cash of $201,500.

Promissory Notes - Issued in fiscal year 2019

During the year ended December 31, 2019, the Company issued a total of $2,544,250 in notes with the following terms:

·Terms ranging from 6 months to 3 years.

·Annual interest rates ranging from of 8% to 12%.

·Convertible at the option of the holders at issuance or 180 days from issuance.

·Conversion prices are typically based on the discounted (39% or 0% discount) lowest trading prices of the Company’s shares during various periods prior to conversion.

The convertible notes were also provided with a total of 661,216 common shares and warrant to purchase up to 92,000 shares of common stock at exercise price of $2.5 per share for 3 years.

Certain notes allow the Company to redeem the notes at rates ranging from 110% to 150% depending on the redemption date provided that no redemption is allowed after the 180th day. Likewise, the notes include original issue discount and financing costs totaling $278,000 and the Company received cash of $2,266,250.

Derivative liabilities

The Company determined that the conversion option in the note met the definition of a liability in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock. The Company will bifurcate the embedded conversion option in the note once the note becomes convertible and account for it as a derivative liability.

The Company valued the conversion features using the Black Scholes valuation model. The fair value of the derivative liability for all the note and warrants that became convertible for the year ended December 31, 2019 amounted to $896,593. $201,500 of the value assigned to the derivative liability was recognized as a debt discount to the notes while the balance of $695,093 was recognized as a “day 1” derivative loss.

The Company valued the conversion features of convertible notes and warrant using the Black Scholes valuation model. The fair value of the derivative liability for all the note and warrant that became convertible for the year ended December 31, 2019 amounted to $4,916,471. $1,313,350 of the value assigned to the derivative liability was recognized as a debt discount to the notes while the balance of $3,603,121 was recognized as a “day 1” derivative loss.

Warrants

A summary of activity during the year ended December 31, 2019 follows:

	Warrants Outstanding
	Shares		Weighted Average Exercise Price
Outstanding, December 31, 2018	-	$	-
Granted	92,000		3
Reset	1,115,038		-
Cashless Exercised	(839,695)		-
Forfeited/canceled	-		-
Outstanding, December 31, 2019	367,343	$	0.48

The reset feature of warrants associated with the convertible note was effective at the time that a separate convertible note with lower exercise price was issued. As a result of the reset features for warrant, the warrants increased by 1,115,038 and the total warrants exercisable into 1,145,038 shares of common stock at $0.0655 per share. We accounted for the issuance of the warrants as liability and recognize the derivative liability (Note 10).

The following table summarizes information relating to outstanding and exercisable warrants as of December 31, 2019:

Warrants Outstanding

Warrants Exercisable

Number of

Shares

Weighted Average

Remaining

Contractual life

(in years)

Weighted

Average

Exercise Price

Number of

Shares

Weighted

Average

Exercise Price

367,343

4.05

0.48

367,343

0.48

The intrinsic value of the warrants as of December 31, 2019 is $0.