Promissory Notes

12 Months Ended

Dec. 31, 2024

Promissory Notes

Promissory Notes

Note 5 Promissory Notes

During the years ended December 31, 2021, 2022 and 2023, the Company issued several promissory notes with warrants. The Company evaluated the warrants and concluded that those warrants 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 the warrants were determined to be unreliable. Specifically:

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

● 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.

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.

Promissory note issued during year ended December 31, 2021

On December 28, 2021, the Company issued a promissory note with a principal amount and cash proceeds of $500,000. The promissory note accrued interest at an annual rate of 12%. Upon the occurrence of an event of default, the promissory note accrued default interest at an annual rate of 15%. The promissory note matured on April 5, 2022.

In connection with the issuance of the promissory note, the Company also issued common share purchase warrants (the "Warrants") that entitle the holder to purchase 500,000 shares of the Company’s Common Stock at an exercise price of $0.025 per share at any time until December 31, 2023.

The fair value of the warrants of $9,130 was separated from the convertible note and accounted for as a reduction of the carrying amount of the promissory note with an increase to additional paid-in capital.

The fair value of the warrants that represented a discount was amortized to consolidated statements of operation over the term of the promissory note using the effective interest method.

For the years ended December 31, 2024 and 2023, the Company recorded interest expense of $135,372 and $135,002, respectively, in the consolidated statements of operations. As of December 31, 2024 and 2023, $500,000 in principal was outstanding.

Promissory notes issued during year ended December 31, 2022

(a) On January 14, 2022, the Company issued a promissory note with a principal amount and cash proceeds of $165,000. The promissory note required a $15,000 fee payment on maturity date.

The promissory note accrued interest at an annual rate of 10%. Upon the occurrence of an event of default, the promissory note accrued default interest at an annual rate of 15%. The convertible note matured on February 14, 2022.

The fee payable of $15,000 was amortized to consolidated statements of operation over the term of the promissory note.

For the years ended December 31, 2024 and 2023, the Company recorded interest expense of $41,358 and $41,246, respectively, in the consolidated statements of operations.

As of December 31, 2024 and 2023, $165,000 in principal was outstanding.

(b) On January 14, 2022, the Company issued a promissory note with a principal amount and cash proceeds of $150,000. The promissory note required a $15,000 fee payment on maturity date. The promissory note accrued interest at an annual rate of 10%. Upon the occurrence of an event of default, the promissory note accrued default interest at an annual rate of 15%. The convertible note matured on December 31, 2022.

The fee payable of $15,000 was amortized to consolidated statements of operations over the term of the promissory note.

For the years ended December 31, 2024 and 2023, the Company recorded interest expense of $37,603 and $37,500, respectively, in the consolidated statements of operations.

As of December 31, 2024 and 2023, $165,000 in principal was outstanding.

(c) On April 27, 2022, the Company issued a promissory note with a principal amount of $125,000 for cash proceeds of $112,500. Upon the occurrence of an event of default, the promissory note accrued default interest at an annual rate of 20%. The promissory note matured on December 31, 2022.

In connection with the issuance of the promissory note, the Company also issued common share purchase warrants that entitle the holder to purchase 2,500,000 shares of the Company’s Common Stock at an exercise price of $0.025 per share at any time until December 15, 2024.

The fair value of the warrants of $36,222 was separated from the convertible note and accounted for as a reduction of the carrying amount of the promissory note with an increase to additional paid-in capital.

The original issuance discount of $12,500 and the fair value of the warrants of $36,222 that represented a reduction of face value of the note was amortized to consolidated statements of operations over the term of the promissory note using the effective interest method.

For the years ended December 31, 2024 and 2023, the Company recorded interest expense of $25,067 and $25,000, respectively, in the consolidated statements of operations. As of December 31, 2024 and 2023, $125,000 in principal was outstanding.

Promissory notes issued during year ended December 31, 2023

In February 2023, the Company issued a promissory note $44,950 to a third party that is non-interest bearing, unsecured and repayable on demand.

On February 3, 2023, the Company entered into a securities purchase agreement with a lender pursuant to which the Company borrowed $88,760 and issued a promissory note that accrues interest a 12% per annum and is repayable in 10 monthly instalments starting March 15, 2023. As of December 31, 2023, the outstanding balance was $79,884, which was in default for failure to make required payments. Upon the occurrence of an event of default, the promissory note accrued default interest at an annual rate of 22%. 

For the years ended December 31, 2024 and 2023, the Company recorded interest expense of $27,235 and $8,745, respectively, in the consolidated statements of operations.