CONVERTIBLE PROMISSORY NOTES

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

CONVERTIBLE PROMISSORY NOTES

NOTE 7.               CONVERTIBLE PROMISSORY NOTES

Issuance of New 1% Convertible Promissory Notes, due 2025 in 2020

On January 14, 2020, the Company entered into a Subscription Agreement with Tsang Wai Yee Terri (“the Subscriber”) under which the Subscriber agreed to purchase the 1% Senior Unsecured Convertible Note Agreement from the Company for an agreement purchase price of six hundred and forty-five thousand US Dollars ($645,000). On the same date, the Company signed the 1% Senior Unsecured Convertible Note Agreement under which the Company may sell and issue to the Subscriber up to an aggregate maximum amount of $645,000 in principal amount of Convertible Notes prior to January 13, 2025. The Convertible Promissory Notes issued to the Investor are convertible at the holder’s option into shares of Company common stock at $1.00 per share.

Issuance of New 1% Convertible Promissory Notes, due 2027 in 2022

On January 18, 2022, the Company entered into a Subscription Agreement under which the Subscriber agreed to purchase the 1% Senior Unsecured Convertible Note Agreement from the Company for an agreement purchase price of two million five hundred thousand US Dollars ($2,500,000). On the same date, the Company signed the with 1% Senior Unsecured Convertible Note Agreement under which the Company may sell and issue to the Subscriber up to an aggregate maximum amount of $2,500,000 in principal amount of Convertible Notes prior to January 19, 2027. The Convertible Promissory Notes issued to the Investor are convertible at the holder’s option into shares of Company common stock at $1.25 per share.

The following table details the accounting treatment of the convertible promissory notes:

Schedule of convertible promissory notes
	New 1% Convertible Promissory Notes, due in 2025		New 1% Convertible Promissory Notes, due in 2027			Total
Net carrying value of convertible promissory notes as of December 31, 2021	$	645,000	$	-		$	645,000
Proceeds of new 1% convertible promissory note		-		2,500,000			2,500,000
Less: Allocated intrinsic value of beneficial conversion feature (Note a)				(400,000	)		(400,000	)
Add: Accumulated amortization of debt discount				18,785			18,785
Net carrying value of convertible promissory notes as of March 31, 2022	$	645,000	$	2,118,785		$	2,763,785

Note:

(a) At the time of issuance, the Company evaluated the intrinsic value of the beneficial conversion feature (“BCF”) associated with the conversion feature of the convertible promissory note. The BCF was recorded into additional paid-in capital. Additionally, the convertible promissory note was considered to have an embedded BCF because the effective conversion price was less than the fair value of the Company’s common stock on notes issuance date. The value of the BCF was recorded as a discount on the convertible promissory note. Hence, in connection with the issuance of the convertible promissory note, the Company recorded a total debt discount of $400,000 that will be amortized over the term of the Note using effective interest rate method.

Amortization of debt discount

The following table details the amortization of debt discount:

Schedule of amortization of debt discount
	For the Three Months Ended
	March 31, 2022		March 31, 2021
New 1% convertible promissory notes, due in 2025	$	-	$	-
New 1% convertible promissory notes, due in 2027		18,785		-
Total	$	18,785	$	-

Interest Expense

The following table details the interest expenses:

Schedule of interest expenses
	For the Three Months Ended
	March 31, 2022		March 31, 2021
New 1% convertible promissory notes, due in 2025	$	1,590	$	1,607
New 1% convertible promissory notes, due in 2027		4,932		-
Total	$	6,522	$	1,607