Keep Buying CODY CO -In March 2016, we authorized the issuance of up to $1 million in principal amount of convertible promissory notes (which we refer to as the “Fixed Rate Convertible Notes”). The Fixed Rate Convertible Notes are secured by certain Company real estate holdings.
The Fixed Rate Convertible Notes issued mature on March 15, 2021, the fifth anniversary of the date of issuance and are convertible into shares of our common stock at a price of $0.015 per share. Interest accrues at a rate of 5% per annum and is payable semi-annually. The Company has the option to issue a notice of its intent to redeem, for cash, an amount equal to the sum of (a) 120% of the then outstanding principal balance, (b) accrued but unpaid interest and (c) all liquidated damages and other amounts due in respect of the Fixed Rate Convertible Notes. The Company may only issue the notice of its intent to redeem the Fixed Rate Convertible Notes if the trading average of the Company’s common stock equals or exceeds 300% of the conversion price during each of the five business days immediately preceding the date of the notice of intent to redeem. The holder of the Fixed Rate Convertible Notes has the right to convert all or any portion of the Fixed Rate Convertible Notes at the conversion price at any time prior to redemption.
During the year ended June 30, 2019, concurrent with the execution of the Exchange Agreement more fully described in Note 9, holders of $515,247 aggregate principal amount of the Company’s 5% convertible promissory notes (“Notes”), including accrued interest, converted their Notes into 103,132,226 shares of Common Stock. At June 30, 2019, there were approximately $135,000 of Fixed Rate Convertible Notes outstanding, of which $76,068 of Notes was converted into 15,213,646 shares of Common Stock subsequent to June 30, 2019. The remaining $50,000 of Fixed Rate Convertible Notes (plus accrued interest) are convertible into our common stock at a conversion rate of $0.015 per share or 3,922,066 shares. During the years ended June 30, 2019 and 2018, we paid-in-kind $29,294 and $29,943, respectively, of interest on these convertible notes.
F-12
During the year ended June 30, 2019, we also issued $334,622 of convertible notes to third parties with variable conversion rates (“Variable Rate Convertible Notes”). The Variable Rate Convertible Notes mature at various dates between September and November 2019. We received, net of financing costs incurred, $289,622 in cash from the issuance of these notes. These Variable Rate Convertible Notes have interest accruing at rates ranging between 10% - 12%, and redemption. These notes issued to third parties have a variable conversion rate based on the price of the Company’s common stock. At June 30. 2019, $256,500 of the convertible notes are currently convertible into our Common Stock beginning in the quarter ending September 30, 2019. During the year ended June 30, 2019, holders of Variable Rate Convertible Notes converted $290,885 of notes, including accrued interest, into 465,397,050 shares of Common Stock. Subsequent to June 30, 2019, we also paid in full three convertible notes in the amount of $154,250 and notes totaling $41,250 were converted into equity.
The Variable Rate Convertible Notes have maturity dates prior to June 30, 2020 and could be classified as a current liability. However, it is the Company’s expectation that we will either re-finance these convertible notes to longer terms or permit a limited amount of conversions. Therefore, we have classified these notes as noncurrent. If we do not re-finance these convertible notes to longer terms, however, the holders of the convertible notes have the option to convert these notes into equity or hold the convertible notes to maturity.
Also, during the year ended June 30, 201, we issued $29,250 of convertible notes to our majority stockholder in exchange for 7,450,000 shares of our common stock. The note matures in December 2020 and is convertible into 1,950,000 shares, or $0.015 per share. (See Note 5.)
In February 2018, we obtained a $100,000 line of credit from a bank. The line of credit matures in February 2021 and is collateralized by a $100,000 certificate of deposit at the bank. As of June 30, 2019, approximately $100,000 was drawn under the line of credit. The interest rate on the line of credit is 7.0% per annum.
On March 12, 2019, we obtained a $180,000 real estate loan from a financial institution. The note matures on April 1, 2020 and is secured by certain real estate property and the personal guarantee of an officer and director of the Company. Interest only is payable monthly and accrues at an interest rate of 12%.
In the quarter ended June 30, 2019, we entered into a series of credit financing arrangements from financing institutions by pledging future accounts receivable. The proceeds from these credit agreements were used to pay the initial amount due under the Schreiber settlement agreement. As of June 30, 2019, we had drawn approximately $150,000 under these agreements. Subsequent to June 30, 2019, we have paid off approximately $50,000 of these loans.
