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Convertible Notes

12 Months Ended

Dec. 31, 2023

Note 11 Convertible Notes

During the years ended December 31, 2021, 2022 and 2023, the Company issued several series of unsecured convertible notes with embedded conversion features and freestanding warrants. The Company evaluated the embedded conversion features and the warrants and concluded that they qualified as equity instruments under Accounting Standards Codification (ASC) 815, Derivatives and Hedging, and ASC 815-40, Contracts in Entity’s Own Equity.

Due to the limited trading activity and pricing transparency of the Company’s Common Stock, observable market inputs for valuing those instruments were determined to be unreliable. Specifically:

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The Company’s Common Stock is listed on the OTC Expert Market, which restricts public quotation and limits visibility to investors.

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The average daily trading volume of the Company’s Common Stock is approximately $1,000, and the share price has historically been highly volatile in its thinly traded status.

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Due to these limitations, valuation techniques that depend on quoted market prices cannot be reliably applied.

Accordingly, the Company applied a market-based valuation technique using the most recent private placement price of $0.018 per share (dated November 2, 2021) as a proxy for fair value. This valuation approach is considered a Level 3 fair value measurement within the fair value hierarchy due to the use of unobservable inputs. The fair value of the freestanding warrants as of the reporting date was estimated based on this Level 3 input, and the corresponding equity classified warrants has been recorded under additional paid-in capital. Management believes this approach provides the most reasonable estimate of fair value in the absence of observable market data.

Significant unobservable input used in the valuation was the private placement price of $0.018/share. No sensitivity analysis is presented due to the absence of a reliable market range of inputs.

Although the embedded conversion features meet the definition of equity classified instruments under ASC 815, the Company concluded that there is no reliable basis to estimate their fair value as of the reporting date. The features are highly sensitive to changes in various unobservable inputs, and due to the lack of active trading, volatility benchmarks, or comparable market data, any valuation would be purely speculative. Management assessed whether a Level 3 fair value estimate (e.g., using an option pricing model) could be developed, but concluded that input assumptions such as volatility and market-based discount rates were not supportable. As such, no value has been assigned to the embedded conversion features, and the recognized equity classified instruments pertains solely to the freestanding warrants. The Company will reassess the valuation of the conversion features in subsequent periods as market data becomes available.

Our convertible notes payable, all of which are liabilities as of the years ended December 31, 2023 and 2022, are as follows:

	December 31, 2023		December 31, 2022 (Restated) (Note 2)

Series 1	$	1,050,000	$	1,050,000

Series 2		470,000		250,000

Series 3		208,000		208,000

Series 4		220,000		220,000

Series 5		542,500		522,500

Series 6		55,000		55,000
Principal outstanding total		2,545,500		2,305,500
Less discount		14,303		234,814

Principal outstanding, net	$	2,531,197	$	2,070,686

Series 1

During the years ended December 31, 2021 and 2022, the Company issued convertible notes totaling $950,000 and $100,000, respectively.

Convertible notes issued during year ended December 31, 2021

Series 1-1

On August 31, 2021, the Company issued a series of convertible notes with total principal amount and cash proceeds of $950,000. Those convertible notes accrued interest at an annual rate of 6%. Upon the occurrence of an event of default, those convertible notes accrued default interest at an annual rate of 12%. Those convertible notes matured on December 31, 2022.

For the years ended December 31, 2022, and 2023, the Company recorded interest expense of $57,007 and $171,006 respectively, in the consolidated statements of operations. For the year ended December 31, 2022, the notes bore interest at 6% per annum and increased to 12% on January 1, 2023 when all of the Series 1-1 notes went into default.

Convertible notes issued during year ended December 31, 2022

Series 1-2

On April 5, 2022, the Company issued a convertible note with total principal amount and cash proceeds of $100,000. The convertible note accrued interest at an annual rate of 6%. Upon the occurrence of an event of default, the convertible note accrued default interest at an annual rate of 12%. The convertible note matured on December 31, 2022.

For the years ended December 31, 2022, and 2023, the Company recorded interest expense of $4,456 and $18,000 respectively, in the consolidated statements of operations.

Series 2

Convertible notes issued during year ended December 31, 2022

Series 2-1

On January 5, 2022, the Company issued a convertible note with a principal amount and cash proceeds of $250,000. The convertible note accrued interest at an annual rate of 12%. Upon the occurrence of an event of default, the note accrued default interest at an annual rate of 15%. The convertible note matured on April 5, 2022. As of December 31, 2022, the discount was fully amortized.

In connection with the issuance of the convertible note, the Company also issued common share purchase warrants (the "Warrants") that entitle the holder to purchase 6,250,000 shares of the Company’s Common Stock at an exercise price of $0.021 per share at any time until July 1, 2024.

The fair value of the warrants of $80,221 was separated from the convertible note and accounted for as a reduction of the carrying amount of the convertible note with an increase to additional paid-in capital.

The fair value of the warrants was amortized to consolidated statements of operations over the term of the convertible note using the effective interest method.

For the year ended December 31, 2022, the Company recognized full amortization expense of $80,221 in the consolidated statements of operations.

For the years ended December 31, 2022 and 2023, the Company recorded interest expense of $57,411 and $67,501 respectively, in the consolidated statements of operations.

Series 2-2

On January 5, 2022, the Company issued a convertible note with a principal amount of $25,000 for cash proceeds of $25,000. The convertible note accrued interest at an annual rate of 12%. Upon the occurrence of an event of default, the note accrued default interest at an annual rate of 15%. The convertible note matured on August 5, 2022.

In connection with the issuance of the convertible note, the Company also issued common share purchase warrants (the "Warrants") that entitle the holder to purchase 600,000 shares of the Company’s Common Stock at an exercise price of $0.021 per share at any time until July 1, 2024.

The fair value of the warrants was amortized to consolidated statements of operations over the term of the convertible note using the effective interest method.

For the year ended December 31, 2022, the Company recognized full amortization expense of $7,801 in the consolidated statements of operations.

The note was fully paid during the year ended December 31, 2022.

For the years ended December 31, 2022, the Company recorded interest expense of $1,036 in the consolidated statements of operations.

Series 2-3

On January 15, 2022, the Company issued a convertible note with a principal amount of $50,000 for cash proceeds of $50,000. The convertible note accrued interest at an annual rate of 12%. Upon the occurrence of an event of default, the note accrued default interest at an annual rate of 15%. The convertible note matured on April 5, 2022.

In connection with the issuance of the convertible note, the Company also issued common share purchase warrants that entitle the holder to purchase 1,250,000 shares of the Company’s Common Stock at an exercise price of $0.020 per share at any time until February 5, 2024.

The fair value of the warrants of $16,044 was separated from the convertible note and accounted for as a reduction of the carrying amount of the convertible note with an increase to additional paid-in capital.

The fair value of the warrants was amortized to consolidated statements of operations over the term of the convertible note using the effective interest method.

For the year ended December 31, 2022, the Company recognized full amortization expense of $16,044 in the consolidated statements of operations.

The note was fully paid during year ended December 31, 2022.

For the years ended December 31, 2022, the Company recorded interest expense of $11,039 in the consolidated statements of operations.

Convertible notes issued during year ended December 31, 2023

Series 2-4

On January 10, 2023, the Company issued a convertible note with a principal amount of $110,000 for cash proceeds of $100,000. The convertible note accrued interest at an annual rate of 12%. Upon the occurrence of an event of default, the convertible note accrued default interest at an annual rate of 22%. The convertible note matured on January 10, 2024.

In connection with the issuance of the convertible note, the Company also issued common share purchase warrants that entitle the holder to purchase 20,000,000 shares of the Company’s Common Stock at an exercise price of $0.020 per share at any time until January 30, 2030.

The fair values of the warrants of $87,675 were separated from the convertible note and accounted for as a reduction of the carrying amount of the convertible note with an increase to additional paid-in capital.

The issuance of the convertible note resulted in an original issuance discount of $10,000, calculated as the difference between the principal amount and the cash proceeds. The total of the original issuance discount and the allocated fair value of the warrants were amortized to consolidated statements of operations over the term of the convertible note using the effective interest method.

For the year ended December 31, 2023, the Company recognized amortization expense of $86,137 in the consolidated statements of operations and the unamortized discount was $11,538 as of December 31, 2023.

For the year ended December 31, 2023, the Company recorded interest expense of $18,372 in the consolidated statements of operations.

Series 2-5

On January 10, 2023, the Company issued a convertible note with a principal amount and cash proceeds of $110,000. The convertible note accrued interest at an annual rate of 12%. Upon the occurrence of an event of default, the note accrued default interest at an annual rate of 22%. The convertible note matured on January 10, 2024. The note is in default.

For the year ended December 31, 2023, the Company recorded interest expense of $13,924 in the consolidated statements of operations.

Series 3

Convertible notes issued during year ended December 31, 2022

Series 3-1

On February 11, 2022, the Company issued a convertible note with a principal amount of $137,500 for cash proceeds of $125,000. The convertible note accrued interest at an annual rate of 11.25%. Upon the occurrence of an event of default, the convertible note accrued default interest at an annual rate of 22%. The convertible note matured on February 11, 2023.

In connection with the issuance of the convertible note, the Company also issued common share purchase warrants (the "Warrants") that entitle the holder to purchase 1,250,000 shares of the Company’s Common Stock at an exercise price of $0.10 per share at any time until February 11, 2027.

The fair values of the warrants of $22,568 were separated from the convertible note and accounted for as a reduction of the carrying amount of the convertible note with an increase to additional paid-in capital.

The issuance of the convertible note resulted in an original issuance discount of $12,500, calculated as the difference between the principal amount and the cash proceeds. The total of the original issuance discount and the allocated fair value of the warrants were amortized to consolidated statements of operations over the term of the convertible note using the effective interest method.

On October 25, 2022, the noteholder converted $67,000 of note principal and $13,004 of accrued interest into 4,000,216 shares of the Company’s common stock. The fair value of the common shares issued determined using the market quote approximated the amounts of converted principal and interest and allocated into par value of $4,000 and additional paid-in capital of $76,004 respectively.

For the years ended December 31, 2022 and 2023, the Company recognized amortization expense of $32,919 and $2,149 in the consolidated statements of operations. The discount was fully amortized on December 31, 2023.

For the years ended December 31, 2022 and 2023, the Company recorded interest expense of $13,731 and $30,635 in the consolidated statements of operations.

Series 3-2

On February 11, 2022, the Company issued a convertible note with a principal amount of $137,500 for cash proceeds of $125,000. The convertible note accrued interest at an annual rate of 11%. Upon the occurrence of an event of default, the convertible note accrued default interest at an annual rate of 15%. The convertible note matured on February 18, 2023.

For the years ended December 31, 2022 and 2023, the Company recognized amortization expense of $30,971 and $4,097 in the consolidated statements of operations. The discount was fully amortized on December 31, 2023.

For the years ended December 31, 2022 and 2023, the Company recorded interest expense of $13,731 and $42,235 in the consolidated statements of operations.

Series 4

Convertible notes issued during year ended December 31, 2022

Series 4-1

On May 5, 2022, the Company issued a convertible note with a principal amount of $110,000 for cash proceeds of $100,000. The convertible note accrued interest at an annual rate of 12%. Upon the occurrence of an event of default, the convertible note accrued default interest at an annual rate of 22%. The convertible note matured on May 5, 2023.

In connection with the issuance of the convertible note, the Company also issued common share purchase warrants (the "Warrants") that entitle the holder to purchase 5,000,000 shares of the Company’s Common Stock at an exercise price of $0.02 per share at any time until May 5, 2029.

The fair values of the warrants of $54,495 were separated from the convertible note and accounted for as a reduction of the carrying amount of the convertible note with an increase to additional paid-in capital.

For the years ended December 31, 2022 and 2023, the Company recognized amortization expense of $36,453 and $28,042 in the consolidated statements of operations. The discount was fully amortized at December 31, 2023.

For the years ended December 31, 2022 and 2023, the Company recorded interest expense of $8,715 and $29,111 in the consolidated statements of operations.

Series 4-2

On June 24, 2022, the Company issued a convertible note with a principal amount of $110,000 for cash proceeds of $100,000. The convertible note accrued interest at an annual rate of 12%. Upon the occurrence of an event of default, the convertible note accrued default interest at an annual rate of 22%. The convertible note matured on May 5, 2023.

The fair values of the warrants of $54,111 were separated from the convertible note and accounted for as a reduction of the carrying amount of the convertible note with an increase to additional paid-in capital.

For the years ended December 31, 2022 and 2023, the Company recognized amortization expense of $31,875 and $32,236 in the consolidated statements of operations. The discount was fully amortized at December 31, 2023.

For the years ended December 31, 2022 and 2023, the Company recorded interest expense of $6,907 and $29,111 in the consolidated statements of operations.

Series 5

Convertible notes issued during year ended December 31, 2022

Series 5-1

On May 5, 2022, the Company issued a convertible note with a principal amount of $82,500 for cash proceeds of $75,000. The convertible note accrued interest at an annual rate of 12%. Upon the occurrence of an event of default, the convertible note accrued default interest at an annual rate of 22%. The convertible note matured on May 5, 2023.

In connection with the issuance of the convertible note, the Company also issued common share purchase warrants (the "Warrants") that entitle the holder to purchase 3,750,000 shares of the Company’s Common Stock at an exercise price of $0.02 per share at any time until May 5, 2029.

The fair values of the warrants of $40,872 were separated from the convertible note and accounted for as a reduction of the carrying amount of the convertible note with an increase to additional paid-in capital.

The issuance of the convertible note resulted in an original issuance discount of $7,500, calculated as the difference between the principal amount and the cash proceeds. The total of the original issuance discount and the allocated fair value of the warrants were amortized to consolidated statements of operations over the term of the convertible note using the effective interest method.

For the years ended December 31, 2022 and 2023, the Company recognized amortization expense of $27,340 and $21,032 in the consolidated statements of operations. The discount was fully amortized at December 31, 2023.

For the years ended December 31, 2022 and 2023, the Company recorded interest expense of $6,538 and $21,839 in the consolidated statements of operations.

Series 5-2

On May 5, 2022, the Company issued a convertible note with a principal amount of $110,000 for cash proceeds of $100,000. The convertible note accrued interest at an annual rate of 11%. Upon the occurrence of an event of default, the convertible note accrued default interest at an annual rate of 22%. The convertible note matured on May 5, 2023.

For the years ended December 31, 2022 and 2023, the Company recorded interest expense of $8,170 and $28,286 in the consolidated statements of operations.

Series 5-3

On October 14, 2022, the Company issued a convertible note with a principal amount of $110,000 for cash proceeds of $110,000. The convertible note accrued interest at an annual rate of 12%. Upon the occurrence of an event of default, the convertible note accrued default interest at an annual rate of 22%. The convertible note matured on February 23, 2023.

The fair value of the warrants of $51,262 were separated from the convertible note and accounted for as a reduction of the carrying amount of the convertible note with an increase to additional paid-in capital.

The fair value of the warrants was amortized to consolidated statements of operations over the term of the convertible note using the effective interest method.

For the years ended December 31, 2022 and 2023, the Company recognized amortization expense of $25,837 and $25,425 in the consolidated statements of operations. The discount was fully amortized at December 31, 2023.

For the years ended December 31, 2022 and 2023, the Company recorded interest expense of $2,821 and $29,611 in the consolidated statements of operations.

Series 5-4

On December 15, 2022, the Company issued a convertible note with a principal amount of $220,000 for cash proceeds of $200,000. The convertible note accrued interest at an annual rate of 12%. Upon the occurrence of an event of default, the convertible note accrued default interest at an annual rate of 22%. The convertible note matured on January 10, 2024.

In connection with the issuance of the convertible note, the Company also issued common share purchase warrants (the "Warrants") that entitle the holder to purchase 10,000,000 shares of the Company’s Common Stock at an exercise price of $0.02 per share at any time until May 5, 2029.

The fair values of the warrants of $73,111 were separated from the convertible note and accounted for as a reduction of the carrying amount of the convertible note with an increase to additional paid-in capital.

The issuance of the convertible note resulted in an original issuance discount of $20,000, calculated as the difference between the principal amount and the cash proceeds. The total of the original issuance discount and the allocated fair value of the warrants were being amortized to consolidated statements of operations over the term of the convertible note using the effective interest method.

For the years ended December 31, 2022 and 2023, the Company recognized amortization expense of $2,926 and $87,420 in the consolidated statements of operations and the unamortized discount was $2,765 as of December 31, 2023.

For the years ended December 31, 2022 and 2023, the Company recorded interest expense of $1,230 and $26,399 in the consolidated statements of operations.

Convertible notes issued during year ended December 31, 2023

Series 5-5

On February 2, 2023, the Company issued a convertible note with a principal amount of $20,000 for cash proceeds of $20,000. The convertible note accrued interest at an annual rate of 12%. Upon the occurrence of an event of default, the convertible note accrued default interest at an annual rate of 22%. The convertible note matured on December 31, 2023.

For the years ended December 31, 2023, the Company recorded interest expense of $2,190 in the consolidated statements of operations.

Series 6

Convertible notes issued during year ended December 31, 2022

Series 6-1

On September 16, 2022, the Company issued a convertible note with a principal amount of $55,000 for cash proceeds of $50,000. The convertible note accrued interest at an annual rate of 6% starting from January 1, 2023. Upon the occurrence of an event of default, the convertible note accrued default interest at an annual rate of 12%. The convertible note matured on September 16, 2023.

The original issuance discount of $5,000 and the fair value of the embedded conversion feature were amortized to consolidated statements of operations over the term of the convertible note using the effective interest method.

For the years ended December 31, 2022 and 2023, the Company recognized amortization expense of $1,395 and $3,605 in the consolidated statements of operations.

For the years ended December 31, 2022 and 2023, the Company recorded interest expense of $Nil and $6,601 in the consolidated statements of operations.