cote will drop back to the trips in few days and most likely see no bid. all you have to do i look at the 10k. scam city indeed. printing press to enrich the insiders.
share structure is enormous and they issues promissory notes to themselves. shady stuff printing press payments of shares. major losses and and debt as well. this is unsustainable.
Common Stock, $0.0001 par value, 12,000,000,000 shares authorized, 3,002,730,366 shares issued and outstanding at December 31, 2016 Float 2,324,826,673
Net loss for the year $ -(8,356,092 )
PROMISSORY NOTES TO RELATED PARTIES
Promissory Notes Issued to George J. Coates
During the years ended December 31, 2016 and 2015, the Company issued, in a series of transactions, promissory notes to George J. Coates and received cash proceeds of $177,000 and $70,000, respectively. During the years ended December 31, 2016 and 2015 the Company repaid promissory notes to George J. Coates in cash in the aggregate principal amount of $30,000 and $120,000, respectively, which included $63,000 of interest in 2016. In addition, the Company and Mr. Coates mutually agreed to convert $159,000 of promissory notes into common stock of the Company at exercise prices ranging from $0.0006 to $0.0011 per share. The exercise price was determined to be the closing trading price of the Company’s common stock on the date of conversion. The promissory notes are payable on demand and provide for interest at the rate of 17% per annum, compounded monthly. At December 31, 2016, the outstanding balance consisted of $4,000 of principal and $315,000 of accrued interest.
Promissory Note Issued to Gregory G. Coates
The Company has a non-interest bearing note payable to Gregory G. Coates, son of George J. Coates, President, Technology Division and Director, with a principal balance of $1,438,000 at December 31, 2016, which is payable on demand. During the year ended December 31, 2015, the Company repaid $24,000 principal amount of this promissory note. As required by GAAP, interest at the rate of 10% per annum amounting to $144,000 and $145,000 has been imputed on this promissory note for the years ended December 31, 2016 and 2015, respectively.
Promissory Notes Issued to Bernadette Coates
During the year ended December 31, 2015, the Company partially repaid promissory notes to Bernadette Coates, spouse of George J. Coates, in the aggregate principal amount of $36,000. The promissory notes are payable on demand and provide for interest at the rate of 17% per annum, compounded monthly. At December 31, 2016, the outstanding balance consisted of $7,000 of principal and $79,000 of accrued interest.
Promissory Note to Employee
During the year ended December 31, 2016, the Company issued a promissory note to an employee and received cash proceeds of $5,000. The promissory note is payable on demand and provides for interest at the rate of 17% per annum, compounded monthly.
For the years ended December 31, 2016 and 2015, aggregate interest expense on all promissory notes to related parties amounted to $293,000 and $218,000, respectively.
14. CONVERTIBLE PROMISSORY NOTES AND EMBEDDED DERIVATIVE LIABILITY
From time to time, the Company issues convertible promissory notes. At December 31, 2016, there was $99,000 principal amount of convertible promissory notes outstanding. The net proceeds from these convertible notes were used for general working capital purposes. During the years ended December 31, 2016 and 2015, $190,000 and $659,000, respectively, of convertible promissory notes were issued The notes may be converted into unregistered shares of the Company’s common stock at a discount of 38% of the defined trading price of the common stock on the date of conversion. The defined trading prices are based on the trading price of the stock during a 25-day trading period immediately preceding the date of conversion. The conversion rate discount establishes a beneficial conversion feature (“BCF”) or unamortized discount, which is required to be valued and accreted to interest expense over the six-month period until the conversion of the notes into restricted shares of common stock is permitted. In addition, the conversion formula meets the conditions that require accounting for convertible notes as derivative liability instruments.
F- 17
Coates International, Ltd.
Notes to Financial Statements – (Continued)
All of the convertible notes become convertible, in whole, or in part, beginning on the six month anniversary of the issuance date and may be prepaid at the option of the Company, generally with a prepayment penalty of 50% of the principal amount of the convertible note at any time prior to becoming eligible for conversion.
In accordance with GAAP, the estimated fair value of the embedded derivative liability related to the convertible notes is required to be remeasured at each balance sheet date. The fair value measurement accounting standard establishes a valuation hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on independent market data sources. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available. The valuation hierarchy is composed of three categories. The three levels of the fair value hierarchy are as follows:
? Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
? Level 2 – Inputs include quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.
? Level 3 – Inputs to the fair value measurement are unobservable inputs or valuation techniques.
The estimated fair value of the embedded derivative liabilities related to promissory notes outstanding was measured as the aggregate estimated fair value, based on Level 2 inputs, which included the average of the quoted daily yield curve rates on six-month and one-year treasury securities and, because the actual volatility rate on the Company’s common stock is not available, a conservative estimated volatility rate of 200%.
The embedded derivative liability arises because, based on historical trading patterns of the Company’s stock, the formula for determining the Conversion Rate is expected to result in a different Conversion Rate than the closing price of the stock on the actual date of conversion (hereinafter referred to as the “Variable Conversion Rate Differential”). The estimated fair values of the derivative liabilities have been calculated based on a Black-Scholes option pricing model.
The following table presents the Company's fair value hierarchy of financial assets and liabilities measured at fair value on:
December 31,
2016 December 31,
2015
Level 1 Inputs $ - $ -
Level 2 Inputs 153,000 633,000
Level 3 Inputs - -
Total $ 153,000 $ 633,000
In a series of transactions, during the year ended December 31, 2016, convertible promissory notes with an aggregate principal balance of $715,000, including accrued interest thereon were converted into 1,349,144,802 unregistered shares of common stock. The Company incurred a loss on these conversions amounting to $143,000 for the year ended December 31, 2016.
In a series of transactions, during the year ended December 31, 2015, convertible promissory notes with an aggregate principal balance of $974,000, including accrued interest thereon were converted into 520,777,120 unregistered shares of common stock. The Company incurred a loss on these conversions amounting to $273,000 for the year ended December 31, 2015. In two transactions, during the year ended December 31, 2015, the Company also repaid $54,000 of a convertible promissory note, including accrued interest thereon without penalty.
