We evaluated the terms of the new notes in accordance with ASC Topic No. 815 - 40,
Derivatives and Hedging - Contracts in Entity’s Own Stock
and determined that the underlying common stock is indexed to the Company’s 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 then evaluated the conversion feature for a beneficial conversion feature. The effective conversion price was compared to the market price on the date of the note and was deemed to be less than the market value of underlying common stock at the inception of the note. Therefore, each of the above notes was fully discounted with a beneficial conversion discount o the date of issuance. We recorded the beneficial conversion discounts as an increase in additional paid-in capital and a discount to the Convertible Notes Payable. Discounts to the Convertible Notes Payable are amortized to interest expense over the life of the respective notes using the effective interest method. During the years ended January 31, 2019 and 2018, we recorded amortization of discounts on convertible notes payable and recognized interest expense of $626,097 and $318,993, respectively.
On March 14, 2016, we issued a convertible promissory note to a third party for cash. The note (the “front-end note”) was in the amount of $65,000, and it matures on March 14, 2017. The note bears interest at 8% per year and is convertible into shares of our common stock at a 45% discount to our lowest trading price over the preceding 20 days with a floor on the conversion price of $0.00005.
We evaluated the terms of the note in accordance with ASC Topic No. 815 - 40,
Derivatives and Hedging - Contracts in Entity’s Own Stock
and determined that the underlying common stock is indexed to the Company’s 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 then evaluated the conversion feature for a beneficial conversion feature. The effective conversion price was compared to the market price on the date of the note and was deemed to be less than the market value of underlying common stock at the inception of the note. Therefore, we recognized beneficial conversion discount of $68,991 on March 14, 2016. We recorded the beneficial conversion discount as an increase in additional paid-in capital and a discount to the Convertible Notes Payable. Discounts to the Convertible Notes Payable are amortized to interest expense using the effective interest method over the life of the respective notes.
On the same date we issued a second note (the “back-end note”) in the amount of $65,000 in exchange for a note receivable in the same amount. The back-end note matures on March 14, 2017. The note bears interest at 8% per year and is convertible into shares of our common stock at a 45% discount to our lowest trading price over the preceding 20 days with a floor on the conversion price of $0.00005. The Company received proceeds of $16,551 on January 6, 2017 and the remaining proceeds of $48,449 on February 9, 2017. The note was secured by the note receivable for $65,000 from the same party.
On May 26, 2016, we issued a convertible promissory note to a third party for cash. The note (the “front-end note”) was in the amount of $75,000, and it matures on May 26, 2017. The note bears interest at 8% per year and is convertible into shares of our common stock at a 45% discount to our lowest trading price over the preceding 20 days with a floor on the conversion price of $0.00005.
On the same date we issued a second note (the “back-end note”) in the amount of $75,000 in exchange for a note receivable in the same amount. The back-end note matures on May 26, 2017. The note bears interest at 8% per year and is convertible into shares of our common stock at a 45% discount to our lowest trading price over the preceding 20 days with a floor on the conversion price of $0.00005. The Company received the proceeds of this note on April 27, 2017. The note was secured by the note receivable for $75,000 from the same party.
On September 9, 2017, we issued a convertible promissory note to a third party for cash. The note (the “front-end note”) was in the amount of $40,000, and it matures on September 9, 2018. The note bears interest at 8% per year and is convertible into shares of our common stock at a 45% discount to our lowest trading price over the preceding 20 days with a floor on the conversion price of $0.000055. The proceeds from this note were placed in an escrow account on deposit with our attorney.
On the same date we issued a second note (the “back-end note”) in the amount of $40,000 in exchange for a note receivable in the same amount. The back-end note matures on September 9, 2018. The note bears interest at 8% per year and is convertible into shares of our common stock at a 45% discount to our lowest trading price over the preceding 20 days with a floor on the conversion price of $0.000055. The Company received the proceeds of this note on December 7, 2017.
On February 6, 2018, we issued a convertible promissory note to a third party for cash. The note (the “front-end note”) was in the amount of $150,000, and it matures on November 6, 2018. The note bears interest at 8% per year and is convertible into shares of our common stock at a 45% discount to our lowest trading price over the preceding 20 days with a floor on the conversion price of $0.00005.
We evaluated the terms of the note in accordance with ASC Topic No. 815 - 40,
Derivatives and Hedging - Contracts in Entity’s Own Stock
and determined that the underlying common stock is indexed to the Company’s 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 then evaluated the conversion feature for a beneficial conversion feature. The effective conversion price was compared to the market price on the date of the note and was deemed to be less than the market value of underlying common stock at the inception of the note. Therefore, we recognized beneficial conversion discount of $142,500 on February 6, 2018. We recorded the beneficial conversion discount as an increase in additional paid-in capital and a discount to the Convertible Notes Payable. Discounts to the Convertible Notes Payable are amortized to interest expense using the effective interest method over the life of the respective notes.
On October 10, 2018, we issued a convertible promissory note to a third party for cash received of $52,000. The note was in the amount of $55,000, and it matures on July 17, 2019. The note bears interest at 8% per year and is convertible into shares of our common stock at a 39% discount to our lowest trading price over the preceding 15 days.
On October 23, 2018, we issued a convertible promissory note to the same third party for cash. The note (the “back-end note”) was in the amount of $150,000, and it matures on October 23, 2019. The note bears interest at 8% per year and is convertible into shares of our common stock at a 45% discount to our lowest trading price over the preceding 20 days with a floor on the conversion price of $0.00005.
We evaluated the terms of the note in accordance with ASC Topic No. 815 - 40,
Derivatives and Hedging - Contracts in Entity’s Own Stock
and determined that the underlying common stock is indexed to the Company’s 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 then evaluated the conversion feature for a beneficial conversion feature. The effective conversion price was compared to the market price on the date of the note and was deemed to be less than the market value of underlying common stock at the inception of the note. Therefore, we recognized beneficial conversion discount of $142,500 on October 23, 2018. We recorded the beneficial conversion discount as an increase in additional paid-in capital and a discount to the Convertible Notes Payable. Discounts to the Convertible Notes Payable are amortized to interest expense using the effective interest method over the life of the respective notes.
On November 1, 2018, we issued a convertible promissory note to the same third party for cash proceeds of $100,000. The note is in the principal amount of $103,000, and it matures on August 15, 2019. The note bears interest at 8% per year and is convertible into shares of our common stock at a 39% discount to our lowest trading price over the preceding 20 days with a floor on the conversion price of $0.00005.
- 25 -
We evaluated the terms of the note in accordance with ASC Topic No. 815 - 40,
Derivatives and Hedging - Contracts in Entity’s Own Stock
and determined that the underlying common stock is indexed to the Company’s 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 then evaluated the conversion feature for a beneficial conversion feature. The effective conversion price was compared to the market price on the date of the note and was deemed to be less than the market value of underlying common stock at the inception of the note. Therefore, we recognized beneficial conversion discount of $100,000 on November 1, 2018. We recorded the beneficial conversion discount as an increase in additional paid-in capital and a discount to the Convertible Notes Payable. Discounts to the Convertible Notes Payable are amortized to interest expense using the effective interest method over the life of the respective notes.
On December 31, 2018, we issued a convertible promissory note to the same third party for cash proceeds of $35,000. The note is in the principal amount of $38,000, and it matures on October 15, 2019. The note bears interest at 8% per year and is convertible into shares of our common stock at a 39% discount to our lowest trading price over the preceding 20 days with a floor on the conversion price of $0.00005.
We evaluated the terms of the note in accordance with ASC Topic No. 815 - 40,
Derivatives and Hedging - Contracts in Entity’s Own Stock
and determined that the underlying common stock is indexed to the Company’s 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 then evaluated the conversion feature for a beneficial conversion feature. The effective conversion price was compared to the market price on the date of the note and was deemed to be less than the market value of underlying common stock at the inception of the note. Therefore, we recognized beneficial conversion discount of $35,000 on December 31, 2018. We recorded the beneficial conversion discount as an increase in additional paid-in capital and a discount to the Convertible Notes Payable. Discounts to the Convertible Notes Payable are amortized to interest expense using the effective interest method over the life of the respective notes.
Conversions to Common Stock
During the year ended January 31, 2019, the holders of our convertible promissory notes converted $152,637 of principal and accrued interest into 7,287,054 shares of our common stock. During year ended January 31, 2018, the holders of our convertible promissory notes converted $245,190 of principal and accrued interest into 3,857,614 shares of our common stock.
See Note 8 for a detail of the conversions. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement which provided for conversion.
Note 8. Shareholders’ Equity
Common stock issued for services
On October 2, 2018, we issued 20,000,000 shares of common stock to Mr. Jim for services. The shares were valued at $1,464,000 based on the fair market value of the stock on the date of issuance.
Conversions to common stock
During the year ended January 31, 2019, the holders of our convertible notes elected to convert principal and interest into shares of common stock as detailed below:
|
|
|
|
|
|
Date
|
|
Amount
Converted
|
|
Number of
Shares Issued
|
April 26, 2018
|
|
$
|
18,904
|
|
343,709
|
September 12, 2018
|
|
|
21,209
|
|
550,094
|
September 28, 2018
|
|
|
21,280
|
|
552,727
|
October 25, 2018
|
|
|
14,006
|
|
505,275
|
November 5, 2018
|
|
|
26,545
|
|
965,252
|
November 29, 2018
|
|
|
26,678
|
|
2,425,253
|
January 23, 2019
|
|
|
23,745
|
|
1,944,744
|
Total
|
|
$
|
152,367
|
|
7,287,054
|
- 26 -
During the year ended January 31, 2018, the holders of our convertible notes elected to convert principal and interest into shares of common stock as detailed below:
|
|
|
|
|
|
Date
|
|
Amount
Converted
|
|
Number of
Shares Issued
|
February 13, 2017
|
|
$
|
16,619
|
|
151,085
|
February 22, 2017
|
|
|
25,066
|
|
227,870
|
March 6, 2017
|
|
|
23,629
|
|
214,807
|
March 21, 2017
|
|
|
12,784
|
|
102,168
|
March 30, 2017
|
|
|
21,346
|
|
170,595
|
April 7, 2017
|
|
|
10,690
|
|
92,558
|
April 20, 2017
|
|
|
35,372
|
|
321,567
|
May 22, 2017
|
|
|
10,055
|
|
130,582
|
May 30, 2017
|
|
|
650
|
|
65,000
|
June 2, 2017
|
|
|
10,079
|
|
160,748
|
June 2, 2017
|
|
|
650
|
|
65,000
|
June 13, 2017
|
|
|
11,113
|
|
202,060
|
June 30, 2017
|
|
|
10,140
|
|
290,344
|
July 12, 2017
|
|
|
10,167
|
|
308,078
|
July 25, 2017
|
|
|
13,254
|
|
401,624
|
August 8, 2017
|
|
|
11,000
|
|
340,858
|
January 9, 2018
|
|
|
22,576
|
|
612,670
|
Total
|
|
$
|
245,190
|
|
3,857,614
|
Note 9. Subsequent Event
On February 20, 2019, the Company issued 981,959 shares of common stock upon conversion
of our convertible note payable in the principal and interest amount of $10,856.
On March 7, 2019, the Company issued 989,899 shares of common stock upon conversion of our convertible note payable in the principal and interest amount of $10,889.
On March 28, 2019, the Company issued 1,060,417 shares of common stock upon conversion
of our convertible note payable in the principal and interest amount of $8,748.
On April 9, 2019, the Company issued 1,326,599 shares of common stock upon conversion
of our convertible note payable in the principal and interest amount of $7,296.
On April 30, 2019, the Company issued 2,042,466 shares of common stock upon conversion of our convertible note payable in the principal and interest amount of $11.009.
- 27 -