Debt & Accounts Payable | Note 8 – Debt & Accounts payable (A)Accounts Payable and other Accrued Liabilities The following table represents breakdown of accounts payable and other accrued liabilities as of September 30, 2017 and December 31, 2016, respectively: September 30, 2017 December 31, 2016 Accrued salaries and benefits $ 83,365 $ 89,184 Accounts payable 49,276 83,354 $ 132,641 $ 172,538 (B)Accrued Contingencies and Penalties Following is a breakdown of accrued contingencies and penalties as at September 30, 2017 and December 31, 2016, respectively: September 30, 2017 December 31, 2016 Provision for potential damages - See Note 8(E) $ - $ 184,656 Provision for late filing fee of 2013 and 2014 Tax return (see below) 5,000 10,492 Other - 1,361 $ 5,000 $ 196,509 (C)Accounts Payable and Accrued Liabilities – Related Parties The following table represents the accounts payable and accrued liabilities to related parties as of September 30, 2017 and December 31, 2016, respectively: September 30, 2017 December 31, 2016 Accrued salaries and benefits $ 141,927 $ 52,587 Expenses payable 2,683 1,161 $ 144,610 $ 53,748 On September 26, 2017, all of the officers and directors of the Company decided to convert their partial accrued salaries balance amounting to $240,000 to the series “C” preferred stock at par value of $0.001 per share. (See Note 9(A)). As a result of this conversion, the Company issued following series “C” preferred stock to its officers and directors: ● 1,000,000 series “C” preferred shares to the Company´s CEO, having a par value of $0.001 per share or $1,000 for his accrued salary balance of $100,000. ● 1,000,000 series “C” preferred shares to the Company´s CFO, having a par value of $0.001 per share or $1,000 for his accrued salary balance of $100,000, and ● 400,000 series “C” preferred shares to the Company´s managing director, having a par value of $0.001 per share or $400 for his accrued salary balance of $40,000. (D)Loans Payable – Related Parties The Company received short term loans from one of its officers and directors. The loans were non-interest bearing, unsecured and due on demand. The following table represents the loans payable activity as of September 30, 2017: Balance, December 31, 2016 $ - Proceeds from loans 17,707 Repayments (17,707 ) Converted to common stock - Balance, September 30, 2017 $ - (E)Notes payable Following is the summary of all non-convertible notes, net of debt discount, including the accrued interest as at September 30, 2017: Date of Note Principal Accrued Interest Total payable October 9, 2013 $ - $ - $ - October 17, 2013 319,598 160,402 $ 480,000 November 26, 2013 - 37,971 37,971 October 13, 2016 - - - December 6, 2016 - - - Balance - September 30, 2017 $ 319,598 $ 198,373 $ 517,971 ● On October 9, 2013, the Company secured a two-month loan for GBP 75,000 (equivalent to $120,420) with the understanding that the Company will issue 10,000 common restricted shares, issued to the lender on December 7, 2013, and also repay 35,000 GBP (equivalent to $56,196) in lieu of interest. As the principal and interest was not paid back to the lender on time, the Company compensated the lender with an additional 20,000 common restricted shares and for this the lender agreed to a five-month extension. This stock compensation was issued to the lender also on December 12, 2013. Total accrued interest as at December 31, 2016 was $106,196. The Company also accrued $184,656 provision for potential damages due to the litigation in the Dubai Courts as of December 31, 2016, which was included in “Accrued contingencies and penalties” in the accompanying consolidated balance sheet. (See Note 8(B)). ● On June 5, 2017, a citizen of Republic of Thailand assumed the above principal loan amount of $120,420, accrued interest of $106,196 and accrued damages of $184,656 by way of a stock purchase and debt assumption agreement. Hence the Company’s liabilities in respect of this loan were transferred to the acquiring individual. (See Note 5) ● On October 17, 2013, the Company secured a three-month bridge loan for 200,000 GBP (equivalent to $319,598) with the agreement to repay the principal plus 5% per month interest on or before January 18, 2014. The note holder received, as a form of guarantee, 1,600,000 shares of Direct Security Integration Inc. and the note holder is currently trying to sell these shares. The shares used as a form of guarantee formed part of the assets of our Company. ● On September 18, 2015, the Company and the note holder agreed to amend the previous terms of the agreement and both parties agreed on the new terms whereby the company is now liable to pay $500,000 as full and final payment of the October 17, 2013 loan principal, accrued interest, and all other related penalties. This repayment will not accrue any further interest or penalties. As a result, the Company has reversed the excess accrued interest and monitoring fee payable amounting to $660,578 recognized as a gain on settlement; leaving the principal loan balance of $319,598 and accrued interest of balance $180,402 as on September 30, 2015. ● On December 21, 2015, the company repaid first installment of the accrued interest amounting to $20,000; leaving the accrued interest balance of $160,402 and principal loan balance of $319,598 as on December 31, 2015. The remaining installments totaling to $480,000, as per the amended agreement, have not been paid as of September 30, 2017. Loan granted in 2013 $ 319,598 Interest accrued in 2013 39,602 Balance at December 31, 2013 $ 359,200 Interest accrued in 2014 390,197 Balance at December 31, 2014 $ 749,397 Monitoring fee accrual 124,175 Interest accrued in 2015 287,006 Interest repayment (20,000 ) Excess interest and monitoring fee gain (660,578 ) Balance at December 31, 2015 $ 480,000 Interest accrued during the year - Balance at December 31, 2016 $ 480,000 Interest accrued during the period - Balance at September 30, 2017 $ 480,000 ● On October 13, 2016, the Company secured a six-month non-convertible loan for $135,000 carrying an original issue discount of $30,000. In addition, the company agreed to pay $5,000 to the note holder to cover their legal costs and the interest will not be accrued on the outstanding principal balance unless an event of default occurs. During the nine months ended September 30, 2017, $2,917 of the debt issuance costs and $17,500 of the debt discount balance was amortized to income statement, leaving an unamortized issue cost and discount balance of $0. Principal loan amount $ 135,000 Original issue discount (30,000 ) Issuance costs (5,000 ) Amortization of OID and issuance costs 35,000 Exchange of Note dated April 13, 2017 (See Note 8(F)) (135,000 ) Balance at September 30, 2017 $ - ● On December 6, 2016, the Company secured a six-month non-convertible loan for $167,500 carrying an original issue discount of $37,500. In addition, the company agreed to pay $5,000 to the note holder to cover their legal costs and the interest will not be accrued on the outstanding principal balance unless an event of default occurs. During the nine months ended September 30, 2017, $4,167 of the debt issuance costs and $31,250 of the debt discount balance was amortized to income statement, leaving an unamortized issue cost and discount balance of $0. Principal loan amount $ 167,500 Original issue discount (37,500 ) Issuance costs (5,000 ) Amortization of OID and issuance costs 42,500 Exchange of Note dated June 5, 2017 (See Note 8(F)) (167,500 ) Balance at September 30, 2017 $ - (F) Fixed price convertible notes payable Following is the summary of all fixed price convertible notes, net of debt discount, including the accrued interest as at September 30, 2017: Date of Note Principal (net of debt discount) Accrued Interest Total Payable July 1, 2016 $ - $ - $ - February 6, 2017 54,839 4,000 58,839 February 23, 2017 - - - April 13, 2017 84,400 - 84,400 June 5, 2017 184,250 - 184,250 August 9, 2017 51,444 - 51,444 Balance, September 30, 2017 $ 374,933 $ 4,000 $ 378,933 ● On August 27, 2015, the Company secured a six-month non-convertible loan for $135,000 carrying an original issue discount of $30,000. In addition, the company agreed to pay $5,000 to the note holder to cover their legal costs and the interest will not be accrued on the outstanding principal balance unless an event of default occurs. ● On March 18, 2016, the Company entered into an exchange agreement with the same lender whereby original purchase agreement dated August 27, 2015 was exchanged with the new agreement to extend the loan repayment term until April 17, 2016. The total exchange price for $135,000 of principal of the Old Note was as follows: ● $135,000 principal of New Note, and ● an issuance of 1,000,000 common shares to the lender as exchange shares. Also, in the new note, there was an addition of a conversion option that the lender has right at any time after the exchange date until the outstanding balance has been paid in full, to convert all or any part of the outstanding balance into common shares of the Company at a fixed conversion price of $0.025. There was no beneficial conversion feature as the conversion price was higher than the current market value of the Company´s stock at that time. Since a conversion option was added to the note in the March 18, 2016 modification, this modification was accounted for as a debt extinguishment on that date and $25,200 was recognized as loss on debt extinguishment. On April 28, 2016, St. George decided not to opt for converting the principal loan to common shares. Instead, on April 28, 2016, the Company renegotiated the loan terms, further extending the repayment to July 1, 2016. The terms of this further extension were a one-time 10% interest payment of $13,500 to be added to the principal of $135,000 and the issuance of 3,000,000 common shares. The Company accounted for this further extension as a debt extinguishment of previous extension dated March 18, 2016 and $58,200 was recognized as loss on debt extinguishment comprising of $13,500 of interest payment and $44,700 for issuance of 3,000,000 common shares of the Company valued at a fair value of $0.0149 on the date of new exchange. On July 1, 2016, after receipt of $148,500 from Mammoth Corporation (New Lender), St. George (Previous Lender) assigned and transferred to the Mammoth Corporation all of its rights, title and interest in and to the promissory note initially issued by the Company to St. George Investments LLC in the amount of $148,500 dated April 28, 2016. The Company re-negotiated the loan terms with new lender (Mammoth Corporation) after the above assignment and issued a restated 9-month convertible promissory note amounting to $163,350 dated July 1, 2016. The terms of this exchanged note were a one-time 10% increase in the principal loan of $14,850, increasing the principal sum from $148,500 to $163,350. The new lender also has a right, at any time after the issue date of revised note until the outstanding balance has been paid in full, to convert all or any part of the outstanding balance into common shares of the Company at a fixed conversion price of $0.017. The fair value of stock as on the date of exchange was $0.0197. This indicated a beneficial conversion feature (BCF) of the Note as the conversion price is lower than the fair value of the Company´s stock as on July 1, 2016. The Company accounted for the difference arising due to BCF amounting to $25,944 as a debt discount with a corresponding effect to additional paid in capital. Interest on unpaid principal balance shall not accrue during the term of the note unless an event of default occurs. The Company accounted for this exchange as a debt extinguishment of previous note dated April 28, 2016 and $14,850 was further recognized as loss on debt extinguishment. On September 16, 2016, the note holder partially converted $59,500 of the note to the common shares of the Company at an agreed fixed price of $0.017 per share. As a result of this conversion, the Company issued 3,500,000 common shares to Mammoth Corporation. On December 1, 2016, the note holder partially converted $53,850 of the note to the common shares of the Company at an agreed fixed price of $0.017 per share. As a result of this conversion, the Company issued 3,167,647 common shares to Mammoth Corporation. On February 2, 2017, the Company issued 5,000,000 common shares to Mammoth Corporation in order to settle remaining payable balance in full amounting to $50,000. The Company verbally agreed to a conversion price of $0.01 per share other than the contractual fixed price of $0.017 per share, in order to fully settle this obligation; thereby $39,324 was recognized as a loss on conversion of this note and remaining debt discount balance arising due to BCF amounting to $2,647 was fully amortized on the date of final conversion. ● On February 6, 2017, the Company secured from a private individual, a nine-month fixed price convertible loan amounting to $60,000 having an interest at 10% per annum and an agreed fixed conversion price of $0.012 per share. Fair value of the Company´s stock as on the date of exchange was $0.0198. This indicated a beneficial conversion feature (BCF) of the Note as the conversion price is lower than the fair value of the Company´s stock as on February 6, 2017. The Company accounted for the difference arising due to BCF amounting to $39,000 as a debt discount with a corresponding effect to additional paid in capital. During the nine months ended September 30, 2017, the company amortized $33,838 of debt discount balance arising due to BCF, leaving un-amortized debt discount balance of $5,162 as of September 30, 2017. The outstanding convertible note balance amounted to $60,000 as of September 30, 2017. ● On August 25, 2016, the Company secured a six-month non-convertible loan for $167,500 carrying an original issue discount of $37,500. In addition, the company agreed to pay $5,000 to the note holder to cover their legal costs and the interest will not be accrued on the outstanding principal balance unless an event of default occurs. During the nine months ended September 30, 2017, $1,667 of the debt issuance costs and $12,500 of the debt discount balance was amortized to income statement, leaving an unamortized issue cost and discount balance of $0. On February 23, 2017, St. George (Previous Lender) assigned and transferred to the Mammoth Corporation all of its rights, title and interest in and to the promissory note initially issued by the Company to St. George Investments LLC in the amount of $167,500 dated August 25, 2016. The Company re-negotiated the loan terms with new lender (Mammoth Corporation) after the above assignment and issued a restated 9 months fixed price convertible promissory note amounting to $184,250 dated February 23, 2017. The terms of this exchanged note were a one-time 10% increase in the principal loan of $16,750, increasing the principal sum from $167,500 to $184,250. The new lender also has a right, at any time after the issue date of revised note until the outstanding balance has been paid in full, to convert all or any part of the outstanding balance into common shares of the Company at a fixed conversion price of $0.017. Fair value of the Company stock as on the date of exchange was $0.0179. This indicated a beneficial conversion feature (BCF) of the Note as the conversion price is lower than the fair value of the Company stock as on February 23, 2017. The Company accounted for the difference arising due to BCF amounting to $9,754 as a debt discount with a corresponding effect to additional paid in capital. Interest on unpaid principal balance shall not accrue during the term of the note unless an event of default occurs. The Company accounted for this exchange as a debt extinguishment of previous note dated August 25, 2016 and $16,750 was recognized as loss on debt extinguishment. On March 28, 2017, the note holder partially converted $50,000 of the note to the common shares of the Company at a conversion price of $0.0080925 per share, this particular conversion price was less than the agreed fixed price of $0.017, due to the note entering into temporary default. As per the agreement, an event of default occurs when the closing bid price of the Company stock falls below the agreed level of $0.0135. This default clause can be remedied by trading over $0.0135 for 4 consecutive trading days. As a result of this conversion, the Company issued 6,178,560 common shares to Mammoth Corporation and $40,305 was recognized as a loss on conversion of this note. On April 13, 2017, the note holder partially converted $67,125 of the note to the common shares of the Company at a conversion price of $0.006565 per share. This conversion price was less than the agreed fixed price of $0.017, due to the note entering into temporary default. As a result of this conversion, the Company issued 10,224,676 common shares to Mammoth Corporation and $66,527 was recognized as a loss on conversion of this note based on the fair value of the common shares totaling to $133,652. On May 12, 2017, the note holder partially converted $33,562 of the note to the common shares of the Company at a conversion price of $0.00429 per share. This conversion price was less than the agreed fixed price of $0.017, due to the note entering into temporary default. As a result of this conversion, the Company issued 7,823,310 common shares to Mammoth Corporation and $54,981 was recognized as a loss on conversion of this note based on the fair value of the common shares totaling to $88,543. On June 2, 2017, the note holder converted remaining balance of the note amounting to $33,563 to the common shares of the Company at a conversion price of $0.003575 per share. This conversion price was less than the agreed fixed price of $0.017, due to the note entering into temporary default. As a result of this conversion, the Company issued 9,388,252 common shares to Mammoth Corporation and $58,570 was recognized as a loss on conversion of this note based on the fair value of the common shares totaling to $92,133. During the nine months ended September 30, 2017, the company fully amortized $9,754 of debt discount balance arising due to BCF, leaving un-amortized debt discount balance of $0 as of September 30, 2017. ● On October 13, 2016, the Company secured a six-month non-convertible loan for $135,000 carrying an original issue discount of $30,000. In addition, the company agreed to pay $5,000 to the note holder to cover their legal costs and the interest will not be accrued on the outstanding principal balance unless an event of default occurs. During the nine months ended September 30, 2017, $2,917 of the debt issuance costs and $17,500 of the debt discount balance was amortized to income statement, leaving an unamortized issue cost and discount balance of $0. On April 13, 2017, after receipt of $135,000 from Mammoth Corporation (New Lender), St. George (Previous Lender) assigned and transferred to the Mammoth Corporation all of its rights, title and interest in and to the promissory note initially issued by GEQU to St. George Investments LLC in the amount of $135,000 dated October 13, 2016. The Company re-negotiated the loan terms with new lender (Mammoth Corporation) after the above assignment and issued a restated 9 months fixed price convertible promissory note amounting to $162,000 dated April 13, 2017. The terms of this exchanged note were a one-time 20% increase in the principal loan of $27,000, increasing the principal sum from $135,000 to $162,000. The new lender also has a right, at any time after the issue date of the revised note until the outstanding balance has been paid in full, to convert all or any part of the outstanding balance into common shares of the Company at a fixed conversion price of $0.012. Fair value of the Company´s stock as on the date of exchange was $0.0106. Hence, there was no beneficial conversion feature (BCF) of the Note, as the agreed conversion price is higher than the fair value of the Company´s stock as on April 13, 2017. The Company accounted for this exchange as a debt extinguishment of previous note dated October 13, 2016 and $27,000 was recognized as loss on debt extinguishment. On July 10, 2017, the note holder partially converted $23,400 of the note to the common shares of the Company at a conversion price of $0.00234 per share. This conversion price was less than the agreed fixed price of $0.012, due to the note entering into temporary default. As a result of this conversion, the Company issued 10,000,000 common shares to Mammoth Corporation and $31,395 was recognized as a loss on conversion of this note based on the 0.0039 per share fair value of the 8,050,000 excess common shares issued. On August 2, 2017, the note holder partially converted $20,400 of the note to the common shares of the Company at a conversion price of $0.00204 per share. This conversion price was less than the agreed fixed price of $0.012, due to the note entering into temporary default. As a result of this conversion, the Company issued 10,000,000 common shares to Mammoth Corporation and $31,540 was recognized as a loss on conversion of this note based on the 0.0038 per share fair value of the 8,300,000 excess common shares issued. On September 11, 2017, the note holder partially converted $33,800 of the note to the common shares of the Company at a conversion price of $0.00169 per share. This conversion price was less than the agreed fixed price of $0.012, due to the note entering into temporary default. As a result of this conversion, the Company issued 20,000,000 common shares to Mammoth Corporation and $68,733 was recognized as a loss on conversion of this note based on the 0.004 per share fair value of the 17,183,333 excess common shares issued. The outstanding convertible note balance amounted to $84,400 as of September 30, 2017. ● On December 6, 2016, the Company secured a six-month non-convertible loan for $167,500 carrying an original issue discount of $37,500. In addition, the company agreed to pay $5,000 to the note holder to cover their legal costs and the interest will not be accrued on the outstanding principal balance unless an event of default occurs. During the nine months ended September 30, 2017, $4,167 of the debt issuance costs and $31,250 of the debt discount balance was amortized to income statement, leaving an unamortized issue cost and discount balance of $0. On June 5, 2017, after receipt of $167,500 from Mammoth Corporation (New Lender), St. George (Previous Lender) assigned and transferred to the Mammoth Corporation all of its rights, title and interest in and to the promissory note initially issued by GEQU to St. George Investments LLC in the amount of $167,500 dated December 6, 2016. The Company re-negotiated the loan terms with new lender (Mammoth Corporation) after the above assignment and issued a restated 9 months fixed price convertible promissory note amounting to $184,250 dated June 5, 2017. The terms of this exchanged note were a one-time 10% increase in the principal loan of $16,750, increasing the principal sum from $167,500 to $184,250. The new lender also has a right, at any time after the issue date of the revised note until the outstanding balance has been paid in full, to convert all or any part of the outstanding balance into common shares of the Company at a fixed conversion price of $0.012. Fair value of the Company´s stock as on the date of exchange was $0.0071. Hence, there was no beneficial conversion feature (BCF) of the Note, as the agreed conversion price is higher than the fair value of the Company´s stock as on June 5, 2017. The Company accounted for this exchange as a debt extinguishment of previous note dated December 6, 2016 and $16,750 was recognized as loss on debt extinguishment. The outstanding convertible note balance amounted to $184,250 as of September 30, 2017. ● On August 9, 2017, the Company secured a 9 months fixed price convertible loan for $56,500 carrying an original issue discount of $6,500. Interest will not be accrued on the outstanding principal balance unless an event of default occurs. The lender has a right, at any time after the issue date of the note until the outstanding balance has been paid in full, to convert all or any part of the outstanding balance into common shares of the Company at a fixed conversion price of $0.012 subject to change based on certain default provisions as defined in the Note. Fair value of the Company´s stock as on the date of issuance of this note was $0.0045. Hence, there was no beneficial conversion feature (BCF) of the Note, as the agreed conversion price is higher than the fair value of the Company´s stock as on August 9, 2017. During the nine months ended September 30, 2017, $1,444 of the debt discount balance was amortized to income statement, leaving an unamortized discount balance of $5,056. The outstanding convertible note balance amounted to $56,500 as of September 30, 2017. |