Talk about gimme's. Check this floorless convertible.....
It won't matter what the pps is upon conversion. And check the freaking fair value after just 22 days. Not to mention the full-ratchet, anti-dilution protection....for the LENDER.
Convertible Note Payable Dated September 8, 2015 at Fair Value
On September 8, 2015, the Company entered into a convertible note payable with a corporation. The convertible note payable, with a face value of $27,000, bears interest at 8.0% per annum and is due on September 8, 2016. The note payable is convertible, at the holder’s option, into the Company’s common shares at the Variable Conversion Price. The Variable Conversion Price is defined as 65% multiplied by the lowest closing bid price for the Company’s common stock during the fifteen (15) trading day period including the day the notice of conversion is received by the Company. The conversion feature is subject to full-ratchet, anti-dilution protection if the Company sells shares or share-indexed financing instruments at less than the conversion price.
In the evaluation of the financing arrangement, the Company concluded that the conversion feature did not meet the conditions set forth in current accounting standards for equity classification. Since equity classification is not available for the conversion feature, it requires bifurcation and liability classification, at fair value. The Company elected to account for this hybrid contract under the guidance of ASC 815-15-25-4.
In connection with the issuance of the convertible note payable, the Company recognized day-one derivative loss totaling $16,690 related to the recognition of (i) the hybrid note and (ii) the derivative instrument arising from the fair value measurement due to the fair value of the hybrid note and embedded derivative exceeding the proceeds that the Company received from the arrangement. Therefore, the Company was required to record a $16,690 loss on the derivative financial instrument and is included in interest expense. In addition, the fair value will change in future periods, based upon changes in the Company’s common stock price and changes in other assumptions and market indicators used in the valuation techniques. These future changes will be currently recognized in interest expense or interest income on the Company’s statement of operations.
The conversion of the note into shares of the Company’s common stock is potentially highly dilutive to current shareholders. If the note holder elects to sell the shares that it has acquired as a result of converting the note into shares of common stock, then any such sales may result in a significant decrease in the market price of the Company’s shares.
At September 30, 2015, the $27,000 face value convertible note payable was recorded at its fair value of $47,524
On September 8, 2015, the Company entered into a convertible note payable with a corporation.
A corporation?
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