Convertible Notes Payable |
Note 4. Convertible Notes Payable
During the
nine months ended December 31, 2015, Vista View Ventures, Inc. (Vista View) advanced $423,909 to the Company for working
capital. Vista View paid the advances to KMDA, and subsequently KMDA paid them to the Company on behalf of Vista View. These advances
are typically memorialized into a convertible note payable on a quarterly basis as discussed below.
Convertible
notes payable consist of the following as of December 31, 2015 and March 31, 2015:
|
|
December
31, 2015 |
|
March
31, 2015 |
|
Convertible
note dated June 30, 2014, bearing interest at 10% per annum, maturing June 30, 2016 and convertible into shares of common
stock at $0.02 per share |
|
|
2,322 |
|
|
62,980 |
|
Convertible
note dated September 30, 2014, bearing interest at 10% per annum, maturing September 30, 2016 and convertible into shares
of common stock at $0.01 per share |
|
|
80,133 |
|
|
80,133 |
|
Convertible
note dated December 31, 2014, bearing interest at 10% per annum, maturing December 31, 2016 and convertible into shares of
common stock at $0.01 per share |
|
|
94,074 |
|
|
94,074 |
|
Convertible
note dated December 31, 2014, bearing interest at 10% per annum, maturing December 31, 2016 and convertible into shares of
common stock at $0.02 per share. |
|
|
|
|
|
125,059 |
|
Convertible
note dated March 31, 2015, bearing interest at 10% per annum, maturing March 31, 2017 and convertible into shares of common
stock at $0.007 per share |
|
|
39,635 |
|
|
39,635 |
|
Convertible
note dated June 30, 2015, bearing interest at 10% per annum, maturing June 30, 2017 and convertible into shares of common
stock at $0.25 per share. |
|
|
54,006 |
|
|
|
|
Convertible
note dated September 30, 2015, bearing interest at 10% per annum, maturing September 30, 2018, and convertible into shares
of common stock at $0.25 per share. |
|
|
267,558 |
|
|
|
|
Convertible
note dated December 31, 2015, bearing interest at 10% per annum, maturing December 31, 2018 and convertible into shares of
common stock at $0.09 per share |
|
|
102,345 |
|
|
|
|
Total
convertible notes payable |
|
$ |
640,073 |
|
$ |
401,881 |
|
|
|
|
|
|
|
|
|
Less:
current portion of convertible notes payable |
|
|
(176,529 |
) |
|
|
|
Less:
discount on convertible notes payable |
|
|
(449,371 |
) |
|
(237,643 |
) |
Convertible
notes payable, net of discount |
|
$ |
14,173 |
|
$ |
164,238 |
|
|
|
|
|
|
|
|
|
Current
portion of convertible notes payable |
|
|
176,529 |
|
|
|
|
Less:
discount on current portion of convertible notes payable |
|
|
(116,664 |
) |
|
|
|
Current
portion of convertible notes payable, net of discount |
|
$ |
59,865 |
|
$ |
|
|
Convertible notes issued
During the
nine months ended December 31, 2015, the Company signed Convertible Promissory Notes totaling $423,909 with Vista View Ventures,
Inc. that memorialize non-interest bearing periodic advances into convertible notes payable. The Convertible Promissory Notes
bear interest at 10% per annum and are payable along with accrued interest at maturity. The Convertible Promissory Note and unpaid
accrued interest are convertible into common stock at the option of the holder. The holder of the notes may not convert the convertible
promissory note into common stock if that conversion would result in the holder owning more than 4.99% of the Companys outstanding
common stock on the conversion date.
Date
Issued |
|
Maturity
Date |
|
Interest
Rate |
|
Conversion
Rate |
|
Note
Amount |
|
June 30, 2015 |
|
June 30, 2017 |
|
10% |
|
$ |
0.25 |
|
$ |
54,006 |
|
September 30, 2015 |
|
September 30, 2018 |
|
10% |
|
|
0.25 |
|
|
267,558 |
|
December 31, 2015 |
|
December 31, 2018 |
|
10% |
|
|
0.09 |
|
|
102,345 |
|
Total |
|
|
|
|
|
|
|
|
$ |
423,909 |
|
The Company
evaluated the terms of the notes in accordance with ASC Topic No. 815 40, Derivatives and Hedging - Contracts in Entitys
Own Stock and determined that the underlying common stock is indexed to the Companys common stock. We determined that
the conversion features did not meet the definition of a liability and therefore did not bifurcate the conversion feature and
account for it as a separate derivative liability. We evaluated the conversion features for a beneficial conversion feature. The
effective conversion price was compared to the market price on the date of the notes and was deemed to be less than the market
value of underlying common stock at the inception of the note. Therefore, we recognized a discount for the beneficial conversion
features of $423,909, in aggregate, on the date the notes were signed. We amortize the discounts for the notes dated June 30,
2015; September 30, 2015 and December 31, 2015 at effective interest rate of 277.49%; 222.23% and 224.88%, respectively. The beneficial
conversion feature was recorded as an increase in additional paid-in capital and a discount to the convertible notes payable.
The discount to the convertible notes payable will be amortized to interest expense over the life of the notes. During the nine
months ended December 31, 2015 and 2014, the Company amortized discounts on convertible notes payable of $95,517 and $343,385,
respectively, to interest expense.
Conversions to Common Stock
During the
nine months ended December 31, 2015, Essen Enterprises, Inc. (Essen), the original payee of the Convertible Note Payable
dated December 31, 2014 elected to convert principal and accrued interest in the amounts show below into share of common stock
at a rate of $0.02 per share. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement
that provided for conversion.
Date |
|
Amount
Converted |
|
Shares
of Common Stock Issued |
|
June
1, 2015 |
|
$ |
130,267 |
|
6,513,344 |
|
Total |
|
$ |
130,267 |
|
6,513,344 |
|
As a result
of this conversion, Essen became a significant shareholder of the Company.
During the
nine months ended December 31, 2015, the holders of the Convertible Note Payable dated June 30, 2014 elected to convert principal
and accrued interest in the amounts show below into share of common stock at a rate of $0.02 per share. On the conversion date,
the unamortized discount related to the principal amount converted was immediately amortized to interest expense. No gain or loss
was recognized on the conversions as they occurred within the terms of the agreement that provided for conversion.
Date |
|
Amount
Converted |
|
Shares
of Common Stock Issued |
|
June
5, 2015 |
|
$ |
13,600 |
|
680,000 |
|
July
8, 2015 |
|
|
1,400 |
|
70,000 |
|
July
16, 2015 |
|
|
7,520 |
|
376,000 |
|
July
22, 2015 |
|
|
3,220 |
|
161,000 |
|
July
23, 2015 |
|
|
995 |
|
49,750 |
|
July
24, 2015 |
|
|
4,920 |
|
246,000 |
|
August
3, 2015 |
|
|
2,200 |
|
110,000 |
|
August
11, 2015 |
|
|
3,860 |
|
193,000 |
|
August
18, 2015 |
|
|
2,040 |
|
102,000 |
|
August
26, 2015 |
|
|
4,280 |
|
214,000 |
|
September
11, 2015 |
|
|
5,560 |
|
278,000 |
|
September
24, 2015 |
|
|
4,000 |
|
200,000 |
|
September
29, 2015 |
|
|
7,449 |
|
372,450 |
|
October
1, 2015 |
|
|
5,940 |
|
297,000 |
|
October
8, 2015 |
|
|
789 |
|
39,450 |
|
Total |
|
$ |
67,773 |
|
3,388,650 |
|
During the
nine months ended December 31, 2015, the holders of the Convertible Note Payable dated September 30, 2014 elected to convert principal
and accrued interest in the amounts show below into share of common stock at a rate of $0.01 per share. On the conversion date,
the unamortized discount related to the principal amount converted was immediately amortized to interest expense. No gain or loss
was recognized on the conversions as they occurred within the terms of the agreement that provided for conversion.
Date |
|
Amount
Converted |
|
Shares
of Common Stock Issued |
|
December
22, 2015 |
|
$ |
1,920 |
|
192,000 |
|
Total |
|
$ |
1,920 |
|
192,000 |
|
In connection
with the 1 for 100 reverse common stock split on May 29, 2015, the conversion rates of the outstanding convertible notes payable
were not modified. As a result, in the event all potentially issuable shares were converted, the holders of the existing notes
at December 31, 2015 would be issued 27,841,559 shares of common stock representing approximately 99% of the Companys total
shares outstanding on an if-converted basis. The holders of the notes are limited to holding no greater than 4.99% of the common
stock at any time.
|
Note 5. Convertible Notes Payable
Convertible notes payable consist of the following as of March 31, 2015 and March 31, 2014:
| | | | | | | |
| | March 31, 2015
| | March 31, 2014
| |
Convertible note payable, dated June 30, 2013, bearing interest at 10% per annum, matures on June 30, 2015 and convertible into shares of common stock at $0.04 per share
| | $
|
| | $
| 4,742
| |
Convertible note payable, dated September 30, 2013, bearing interest at 10% per annum, matures on September 30, 2015 and convertible into shares of common stock at $0.04 per share
| | |
| | | 224,085
| |
Convertible note payable, dated June 30, 2014, bearing interest at 10% per annum, matures on June 30, 2016 and convertible into shares of common stock at $0.02 per share
| | | 62,980
| | |
| |
Convertible note payable, dated September 30, 2014, bearing interest at 10% per annum, matures on September 30, 2016 and convertible into shares of common stock at $0.01 per share
| | | 80,133
| | |
| |
Convertible note payable, dated December 31, 2014, bearing interest at 10% per annum, matures on December 31, 2016 and convertible into shares of common stock at $0.01 per share
| | | 94,074
| | |
| |
Convertible note payable, dated December 31, 2014, bearing interest at 10% per annum, matures on December 31, 2016 and convertible into shares of common stock at $0.02 per share
| | | 125,059
| | |
| |
Convertible note payable, dated March 31, 2015, bearing interest at 10% per annum, matures on March 31, 2017 and convertible into shares of common stock at $0.007 per share
| | | 39,635
| | |
| |
Total convertible notes payable
| | $
| 401,881
| | $
| 228,827
| |
| | | | | | | |
Less: discount on convertible notes payable
| | | (237,643
| )
| | (215,716
| )
|
Convertible notes payable, net of discount
| | $
| 164,238
| | $
| 13,111
| |
Convertible notes issued
During the year ended March 31, 2015, the Company entered into convertible promissory notes with Vista View Ventures, Inc., which refinanced non-interest bearing advances. The convertible notes have the following terms:
| | | | | | | | | | | |
Date Issued
| | Maturity Date
| | Interest
Rate
| | Conversion
Rate
| | Amount of
Note
|
April 1, 2014
| | March 31, 2016
| | 10
| %
| | $
| 0.03
| | $
| 149,453
|
June 30, 2014
| | June 30, 2016
| | 10
| %
| | $
| 0.02
| | | 62,980
|
September 30, 2014
| | September 30, 2016
| | 10
| %
| | $
| 0.01
| | | 80,133
|
December 31, 2014
| | December 31, 2016
| | 10
| %
| | $
| 0.01
| | | 94,074
|
December 31, 2014
| | December 31, 2016
| | 10
| %
| | $
| 0.02
| | | 125,059
|
March 31, 2015
| | March 31, 2017
| | 10
| %
| | $
| 0.007
| | | 39,635
|
Total
| | | | | | | | | | $
| 551,334
|
All principal along with accrued interest is payable on the maturity date.
The Company evaluated the terms of the notes in accordance with ASC Topic No. 815 40, Derivatives and Hedging - Contracts in Entitys Own Stock and determined that the underlying common stock is indexed to the Companys common stock. The Company determined that the conversion features did not meet the definition of a liability and therefore did not bifurcate the conversion feature and account for it as a separate derivative liability. The Company evaluated the conversion features for a beneficial conversion feature. The effective conversion price was compared to the market price on the date of the notes and was deemed less than the market value of underlying common stock at the inception of the note. Therefore, the Company recognized a discount for the beneficial conversion feature in the amount of $399,935, in aggregate, on the date the notes were signed. The beneficial conversion feature was recorded as an increase in additional paid-in capital and a discount to the convertible notes payable. The discount to the convertible notes payable will be amortized to interest expense over the life of the notes.
Conversions to common stock
During the year ended March 31, 2015, the holder of the convertible note payable dated June 30, 2013 elected to convert principal and accrued interest in the amounts shown below into shares of common stock at a rate of $0.04 per share. On the conversion date, the unamortized discount related to the principal amount was immediately amortized to interest expense. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement.
| | | | | | |
Date
| | Amount Converted
| | Shares of Common Stock Issued
| |
August 20, 2014
| | $
| 4,954
| | 1,239
| |
Total
| | $
| 4,954
| | 1,239
| |
During the year ended March 31, 2015, the holder of the convertible note payable dated September 30, 2013 elected to convert principal and accrued interest in the amounts shown below into shares of common stock at a rate of $0.04 per share. On the conversion date, the unamortized discount related to the principal amount was immediately amortized to interest expense. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement.
| | | | | | |
Date
| | Amount Converted
| | Shares of Common Stock Issued
| |
April 21, 2014
| | $
| 80,000
| | 20,000
| |
May 14, 2014
| | | 40,000
| | 10,000
| |
May 23, 2014
| | | 40,000
| | 10,000
| |
June 14, 2014
| | | 40,000
| | 10,000
| |
June 18, 2014
| | | 38,368
| | 9,592
| |
Total
| | $
| 238,368
| | 59,592
| |
During the year ended March 31, 2015, the holder of the Convertible Note Payable dated April 1, 2014 elected to convert principal and accrued interest in the amounts shown below into shares of common stock at a rate of $0.03 per share. On the conversion date, the unamortized discount related to the principal amount was immediately amortized to interest expense. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement.
| | | | | | |
Date
| | Amount Converted
| | Shares of Common Stock Issued
| |
October 8, 2014
| | $
| 42,000
| | 14,000
| |
October 9, 2014
| | | 42,000
| | 14,000
| |
October 22, 2014
| | | 42,000
| | 14,000
| |
January 15, 2015
| | | 32,260
| | 10,754
| |
Total
| | $
| 158,260
| | 52,754
| |
In connection with the 1 for 100 reverse common stock split on May 29, 2015, the conversion rates of the outstanding convertible notes payable were not modified. As a result, in the event all potentially issuable shares were converted, the holders of the existing notes at March 31, 2015 would be issued 27,458,608 shares of common stock representing approximately 99% of the Companys total shares outstanding on an if-converted basis. The holders of the notes are limited to holding no greater than 4.99% of the common stock at any time.
|