Zerify Inc (ZRFY)

[surfkast]

Convertible Notes Payable



(a) At March 31, 2017 and December 31, 2016, $542,588 of notes payables are due to DART/Citco Global. The notes are convertible into shares of the Company’s common stock based on adjustable conversion prices, are secured by all of the Company’s assets, were due in 2010, and are currently in default. The adjustable conversion features of the notes are accounted for as derivative liabilities (see Note 6). DART/Citco Global did not process any conversions of notes into shares of common stock during the three months ended March 31, 2017 or in fiscal 2016. The Company has been in contact with the note holder who has indicated that it has no present intention of exercising its right to convert the debentures into shares of the Company's common stock. Under the terms of the secured debentures, the Company is restricted in its ability to issue additional securities as long as any portion of the principal or interest on the secured debentures remains outstanding. During the three months ended March 31, 2017 or in fiscal 2016, the Company did not obtain DART/Citco Global’s written consent related to any of its financing agreements.


(b) Convertible notes payable consist of 14 unsecured convertible notes convertible at a fixed amount (”fixed convertible notes”) into 13 shares of the Company’s common stock, at fixed prices ranging from $1,950,000 to $9,750,000,000 per share, as defined in the agreements. The notes bear interest at 8% to 18% per annum, and were due on various dates from March 2008 to July 2015. All of the fixed convertible notes are currently in default and the Company is pursuing settlements with certain of the holders. During the three months ended March 31, 2017, there were no additional notes issued and the Company repaid $6,500 of note principal.


At December 31, 2016, the balance of the accrued interest on the fixed convertible notes was $936,639. During the three months ended March 31, 2017, interest expense of $19,644 was accrued. At March 31, 2017, the balance of accrued interest on the fixed convertible notes was $956,283. During the three months ended March 31, 2016, interest expense of $20,082 was recorded.