Replies to post #39604 on 12 Retech Corp (fka RETC)

[VST7]

Wasn't referring to the noteholders...

[tchalla]

i had been previously looking at and quoting from 2019 10k thinking it was the last they filed. but here is the info from 2020 10k from 2020. wonder what notes they took in 2020 to add to these existing convertible liabilites. look at the increased reserve for default penalties. there are a ton of shares that can convert. and most of the notes are based upon 40% discount of lowest price in the preceding THIRTY DAYS!

NOTE 9 – NOTES PAYABLE



On May 1, 2018, 12 ReTech acquired Emotion Apparel, Inc. As part of the acquisition, Emotion Fashion Group was obligated under a disputed note payable to a third party in the amount of $250,000, maturing in July 2027 and bearing an interest rate of 2% per annum. The note calls for monthly payments to be made to equal to ten percent (10%) of the gross sales of the Company until paid in full, including accrued interest. When the note was acquired, the Company recorded the note at its fair market value of $156,014. The note discount is being amortized to interest expense through maturity. Prior to September 30, 2019 the total payments made under the note payable were $0. Amortization of debt discount amortized amounted to $8,340 and $10,194 for the years ended December 31, 2019 and 2018, respectively.



On September 30, 2019, the Company foreclosed on its liens taking possession of the assets including the brands; Lexi-Luu, Emotion Fashion Group, Punkz Gear and retuned the stock in Emotion Apparel, Inc. and its subsidiaries to the Seller. As a result, the Company wrote off the payables of Emotion Apparel, Inc. to other income, including $261,486 in accounts payable and accrued liabilities and $250,000 in notes payable.



On October 3, 2019, Bluwire issued a demand promissory note to a related party $300,000 and it accrued interest of $15,000 in 2019. As of December 31, 2019, the entire principal and interest balance was outstanding.



As of December 31, 2019, there were two demand notes outstanding totaling $31,000.



NOTE 10 – CONVERTIBLE NOTES PAYABLE



Convertible notes payable at December 31, 2019 and 2018 consists of the following:



December 31, 2019 December 31, 2018
September 15, 2017 $ 337,653 $ 344,262
December 8, 2017 - 52,260
December 12, 2017 - 107,109
March 15, 2018 40,123 40,123
April 27, 2018 - 16,000
May 17, 2018 56,714 60,000
September 17, 2018 60,000 60,000
September 21, 2018 25,443 64,500
November 28, 2018 57,870 64,500
November 28, 2018 25,000 25,000
December 13, 2018 105,000 105,000
January 15, 2019 115,000 -
February 7, 2019 132,720 -
February 19, 2019 64,500 -
February 19, 2019 55,125 -
March 13, 2019 55,125 -
May 14, 2019 26,500 -
May 17, 2019 27,825 -
August 1, 2019 56,194 -
August 7, 2019 55,125 -
October 3,2019 5,350
October 25, 2019 6,825

Total $ 1,308,092 $ 938,754

Less: unamortized debt discount - (313,909 )

Total convertible notes payable, net of discounts $ 1,308,092 $ 624,845


During the year ended December 31, 2019, the Company recognized interest expense of $1,259,889 and $1,295,055, respectively, all of which represented the amortization of original issue discounts and debt discounts. As of December 31, 2019, all original issue and debt discounts pertaining to outstanding convertible notes were fully amortized.



During the year ended December 31, 2019, the Company converted principal and unpaid accrued interest totaling $251,521 into an aggregate of 17,803,260 shares of common stock.



F-20



The Company has twenty (20) outstanding convertible notes as of December 31, 2019, with a total outstanding principal of $1,308,092. The 2019 notes mature from January 2020 to May 2020. These notes carry an interest rate ranging between 8% and 12% per annum. The notes carry an original issue discounts ranging between 10% to 25% of the face value of each note.



The notes may be converted into shares of the Company’s common stock at any time on or after the occurrence of an event of default. The conversion prices of the notes include The conversion price shall be the 60% multiplied by the lowest trading price during the 30 trading days period ending, in holder’s sole discretion on each conversion, on either (i) the last complete trading day prior to the conversion date or (ii) the conversion date.



For some notes, the Company agreed to pay a one-time interest charge of 9% of the principal amount for each note. The notes may be converted at specified times per the respective agreements. The conversion price shall be 75% multiplied by the lowest trading price during the 10 prior trading days period ending on either (i) the last complete trading day prior to conversion date or (ii) the conversion date.



All terms of the notes, including but not limited to interest rate, prepayment terms, conversion discount or look-back period will be adjusted downward if the Company offers more favorable terms to another party, while this note is in effect.



The notes may be redeemed by the Company at rates ranging from 105% to 130% depending on the redemption date provided that no redemption is allowed after the 180th day.



The following table is a rollforward of activity, by each noteholder, for the years ended December 31, 2019 and 2018:



Loan Holder Principal Amount Date Maturity OID & Financing Costs Balance
at
12 31 17 Additions Payments Conversion Balance
at
12 31 18 Additions Payments Conversion Balance
at
12 31 19

1 SBI Investment $ 200,000 9/27/2017 3/15/2018 200,000 75,000 (25,000 ) (93,150 ) 156,850 - - (6,697 ) 150,153
1 SBI Investment $ 187,500 11/14/2017 5/14/2018 187,500 - - - 187,500 - - - 187,500
2 LG Capital Funding, LLC $ 185,292 12/8/2017 6/8/2018 17,646 92,646 92,646 - (133,032 ) 52,260 - - (52,260 ) 0
3 Cerberus Finance Group Ltd $ 185,292 12/12/2017 6/8/2018 17,646 92,646 92,646 (25,000 ) (53,183 ) 107,109 - (99,684 ) (7,425 ) -
4 Eagle Equities LLC $ 50,000 3/15/2018 3/15/2019 2,500 - 50,000 - (50,000 ) - - - - -
5 Adar Capital LLC $ 50,000 3/15/2018 3/15/2019 2,500 - 50,000 - (50,000 ) - - - - -
6 Bellridge Capital LP $ 60,000 5/17/2018 5/17/2019 10,000 - 60,000 - (44,000 ) 16,000 - - (16,000 ) -
7 Auctus $ 100,000 4/27/2018 4/25/2019 10,000 - 100,000 - (59,877 ) 40,123 - - - 40,123
8 Bellridge Capital LP $ 60,000 9/17/2018 3/15/2019 10,000 - 60,000 - - 60,000 - - (3,286 ) 56,714
9 Eagles Equity $ 50,000 9/21/2018 3/15/2019 2,500 - 50,000 - (50,000 ) - - - - -
10 Adar Bay $ 50,000 10/4/2018 10/4/2018 2,500 - 50,000 - (50,000 ) - - - - -
11 Bellridge Capital LP $ 60,000 10/18/2018 10/18/2019 10,000 - 60,000 - - 60,000 - - - 60,000
12 Adar Alef Omnibus $ 64,500 11/28/2018 11/29/2019 4,125 - 64,500 - - 64,500 - - (39,057 ) 25,443
13 Adar Alef Debt Purchase $ 25,000 11/28/2018 11/29/2019 - 25,000 - (25,000 ) - - - - -
14 LG Capital Omnibus $ 64,500 11/28/2018 11/29/2019 4,125 - 64,500 - - 64,500 - - (6,630 ) 57,870
15 LG Capital Debt Purchase $ 25,000 11/29/2018 11/29/2018 - 25,000 - - 25,000 - - - 25,000
16 LG Capital Omnibus $ 105,000 12/13/2018 12/14/2019 5,000 - 105,000 - - 105,000 - - - 105,000
17 LG Capital Omnibus $ 115,000 1/15/2019 1/15/2020 5,750 - - - - 115,000 - - 115,000
18 Adar Alef Omnibus $ 132,720 2/7/2019 2/7/2020 6,000 - - - - 132,720 - - 132,720
19 Adar Alef Debt Note $ 108,055 2/7/2019 2/7/2019 8,371 - - - - 108,055 - (108,055 ) -
20 Adar Alef Omnibus $ 64,500 2/19/2019 2/19/2020 4,125 - - - - 64,500 - - 64,500
21 LG Capital Omnibus $ 55,125 2/19/2019 2/19/2020 2,500 - - - - 55,125 - - 55,125
22 LG Capital Omnibus $ 55,125 3/13/2019 3/13/2020 2,500 - - - - 55,125 - - 55,125
23 Adar Alef Omnibus #2 Back End $ 26,500 5/14/2019 2/20/2020 1,500 - - - - 26,500 - - 26,500
24 LG Capital Omnibus #5 $ 27,825 5/17/2019 5/15/2020 2,825 - - - - 27,825 - - 27,825
25 Adar Alef Omnibus #2 BE 3rd Tranche $ 53,500 8/1/2019 2/7/2020 3,500 - - - - 56,194 - - 56,194
26 LG Capital Omnibus #7 $ 55,125 8/6/2019 2/7/2020 5,125 - - - - 55,125 - - 55,125
27 Adar Alef Omnibus #2 BE 4th Tranche $ 5,350 10/3/2019 2/7/2020 5,000 - - - - 5,350 - - 5,350
28 LG Capital Omnibus #8 $ 6,825 10/25/2019 10/26/2020 5,000 - - - - 6,825 - - 6,825

Convertible note total 242,113 572,792 1,024,292 (50,000 ) (608,242 ) 938,842 708,344 (99,684 ) (239,411 ) 1,308,092


As additional consideration, the Company is to issue to Adar Bays Capital shares of common stock with a value equal to 25% if each note, determine at the time of signing of each note.



As of December 31, 2019, several notes were past maturity, in default and due on demand. As such, the Company accelerated the amortization of the remaining unamortized original issue and debt discounts.



The Company calculated a default reserve which represents the additional amount the Company would have to pay to all note holders in the event of the default. Management calculated the amount utilizing additional premiums, accrued interest and default accrued interest as per the agreements. As of December 31, 2019, the Company recorded a general default reserve of $1,769,791.



F-21



NOTE 11 – DERIVATIVE LIABILITIES



The Company classified certain conversion features in the convertible notes and preferred stock issued as embedded derivative instruments due to the variable conversion price feature and potential adjustments to conversion prices due to events of default. These conversion features are recorded as derivative liabilities at fair value in the consolidated financial statements. These fair value estimates were measured using inputs classified as Level 3 of the fair value hierarchy. The Company develops unobservable Level 3 inputs using the best information available in the circumstances, which might include its own data, or when it believes inputs based on external data better reflect the data that market participants would use, its bases its inputs on comparison with similar entities. Due to the existence of down round provisions, which create a path-dependent nature of the conversion prices of the convertible notes, the Company decided a Lattice-Based Simulation model, which incorporates inputs classified as Level 3 was appropriate.



The following table present the assumptions used in the Lattice-Based and Black-Scholes Simulation models to determine the fair value of the derivative liabilities as of December 31, 2019 and 2018:



December 31, 2019
Risk-free interest rates 1.74 – 2.63 %
Expected life (years) 0.05 – 1.00 years
Expected dividends 0 %
Expected volatility 226 – 736 %


December 31, 2018
Risk-free interest rates 2.22 - 2.69 %
Expected life (years) 0.20 - 1.08 years
Expected dividends 0 %
Expected volatility
270 – 796

%


During the year ended December 31, 2019, the Company recorded new derivative liabilities of $8,443,538 related to the issuance of convertible notes payable and Series D-2 Preferred Stock. and converted $2,255,704 in derivative liability to additional paid-in capital due to conversions of notes payable

into common stock.