Convertible Notes Payable
|3 Months Ended|
Mar. 31, 2022
|Debt Disclosure [Abstract]|
|Convertible Notes Payable||
The Company issues convertible notes in exchange for cash. The notes typically do not bear any interest; however, there is an implied interest rate of 10% since the notes are typically issued at a 10% discount. The notes are unsecured, and usually mature twelve months from issuance. The notes are convertible at the option of the note holder into shares of the Company’s common stock at a conversion price stipulated in the conversion agreement. In addition, the note holders receive warrants to purchase shares of common stock that are fully vested upon issuance and expire one year from the date of issuance. As a result, the Company records a note discount to account for the relative fair value of the warrants, and original issue discount of 10% (OID). The note discounts are amortized over the term of the notes.
As of December 31, 2021, total outstanding notes payable and accrued interest totaled $1,589,000. During the three-month periods ended March 31, 2022, the Company issued no convertible promissory notes. During the period ended March 31, 2022, convertible notes payable and accrued interest of $11,000 were converted into shares of common stock, and accrued interest of $36,000 was recorded. As of March 31, 2022, total outstanding convertible notes payable and accrued interest totaled $1,614,000. As of March 31, 2022, a total of twenty-nine notes in the aggregate of $1,401,000 including accrued interest have reached maturity and are past due.
As of December 31, 2021, unamortized discount totaled $86,000. During the three-months ended March 31, 2022, the Company recorded amortization of debt discount of $29,000 and $5,000 of debt discount was removed and included in the carrying amount of convertible notes that were converted. As of March 31, 2022, unamortized discount totaled $52,000. Note discounts are amortized over the term of the related note or amortized in full upon the notes’ conversion to common stock.
As of March 31, 2022, the convertible notes payable and accrued interest are convertible into 24,284,235 shares of common stock at conversion rates ranging from $0.02 to $0.03 per share.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef