Convertible Debt

12 Months Ended

Mar. 31, 2012

5.	Convertible Debt

	(a)	On December 3, 2010, the Company issued a $55,000 convertible note which bears interest at 8% per annum and matured on September 3, 2011. The note is convertible into shares of common stock 180 days after the date of issuance (June 1, 2011) at a conversion rate of 58% of the average of the three lowest closing bid prices of the Company’s common stock for the ten trading days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. On July 25, 2011, the conversion rate was amended to 31% of the average of the three lowest closing bid prices of the Company’s common stock for the ten trading days ending one trading day prior to the date of conversion. Upon an event of default, the entire principal balance and accrued interest outstanding is due immediately, and interest shall accrue on the unpaid principal balance at 22% per annum.

		In accordance with ASC 470-20, “Debt with Conversion and Other Options”, the Company recognized the intrinsic value of the embedded beneficial conversion feature of $16,019 as additional paid-in capital and an equivalent discount which will be charged to operations over the term of the convertible note. On June 1, 2011, the Company recorded a derivative liability of $89,014 and a further discount of $38,981 which has charged to operations over the term of the convertible note. During the year ended March 31, 2012, the Company issued 64,994,350 shares of common stock pursuant to the conversion of $55,000 and accrued interest of $2,200. The fair value of the conversion option derivative liability related to this converted amount of $192,447 was recorded as additional paid-in capital. During the year ended March 31, 2012, the Company recorded a loss on the change in fair value of the conversion option derivative liability of $145,073. As at March 31, 2012, the convertible note had been fully converted.

	(b)	On January 14, 2011, the Company issued a $42,500 convertible note which bears interest at 8% per annum and matured on October 18, 2011. The note is convertible into shares of common stock 180 days after the date of issuance (July 13, 2011) at a conversion rate of 58% of the average of the three lowest closing bid prices of the Company’s common stock for the ten trading days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. On July 25, 2011, the conversion rate was amended to 31% of the average of the three lowest closing bid prices of the Company’s common stock for the ten trading days ending one trading day prior to the date of conversion. Upon an event of default, the entire principal balance and accrued interest outstanding is due immediately, and interest shall accrue on the unpaid principal balance at 22% per annum.

		In accordance with ASC 470-20, “Debt with Conversion and Other Options”, the Company recognized the intrinsic value of the embedded beneficial conversion feature of $29,105 as additional paid-in capital and an equivalent discount which will be charged to operations over the term of the convertible note. On July 13, 2011, the Company recorded a derivative liability of $60,250 and a further discount of $13,395 which will be charged to operations over the term of the convertible note. The Company records accretion expense over the term of the convertible note up to its face value of $42,500. As at March 31, 2012, $42,500 had been accreted increasing the carrying value of the convertible note to $42,500. During the year ended March 31, 2012, the Company recorded a loss on the change in fair value of the conversion option derivative liability of $104,897 and as of March 31, 2012, the fair value of the conversion option derivative liability was $147,399.


	(c)	On July 26, 2011, the Company issued a $37,500 convertible note which bears interest at 8% per annum and matures on April 30, 2012. The note is convertible into shares of common stock 180 days after the date of issuance (January 22, 2012) at a conversion rate of 58% of the average of the three lowest closing bid prices of the Company’s common stock for the ten trading days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. Upon an event of default, the entire principal balance and accrued interest outstanding is due immediately, and interest shall accrue on the unpaid principal balance at 22% per annum.

		In accordance with ASC 470-20, “Debt with Conversion and Other Options”, the Company recognized the intrinsic value of the embedded beneficial conversion feature of $37,500 as additional paid-in capital and an equivalent discount which will be charged to operations over the term of the convertible note. The Company records accretion expense over the term of the convertible note up to its face value of $37,500.

		On October 6, 2011, the conversion rate was amended to be 35% of the average of the three lowest closing bid prices of the Company’s common stock for the ten trading days ending one trading day prior to the date of conversion. In accordance with ASC 470-60, “Debt - Troubled Debt Restructurings by Debtors”, the Company determined that the creditor did not grant a concession as the only modification to the debt was the decrease in the conversion price. The modification was then analyzed under ASC 470-50, “Debt - Modifications and Extinguishments”. The change of the fair value of the conversion feature was greater than 10% of the carrying value of the debt. As a result, in accordance with ASC 470-50, the Company deemed the terms of the amendment to be substantially different and treated the July 26, 2011 convertible note extinguished and exchanged for new convertible note. The Company recorded a loss on extinguishment of debt of $34,871.

		Prior to the modification, the Company recorded $2,629 of accretion expense related to the original convertible debt, and the carrying value of the original note was $2,629 at October 6, 2011. In accordance with ASC 470-20, “Debt with Conversion and Other Options”, the Company recognized the intrinsic value of the embedded beneficial conversion feature of $37,500 as additional paid-in capital and an equivalent discount which will be charged to operations over the term of the modified convertible note. The Company records accretion expense over the term of the modified convertible note up to its face value of $37,500. As at March 31, 2012, the Company recorded $22,198 of accretion expense related to the modified convertible note increasing the carrying value of the convertible note to $22,198.

		On January 22, 2012, the Company recorded a derivative liability of $37,500. During the year ended March 31, 2012, the Company recorded a loss on the change in fair value of the conversion option derivative liability of $65,659 and as of March 31, 2012, the fair value of the conversion option derivative liability was $103,159.

	(d)	On October 12, 2011, the Company issued a $32,500 convertible note which bears interest at 8% per annum and matures on July 17, 2012. The note is convertible into shares of common stock 180 days after the date of issuance (April 10, 2012) at a conversion rate of 35% of the average of the three lowest closing bid prices of the Company’s common stock for the ten trading days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. Upon an event of default, the entire principal balance and accrued interest outstanding is due immediately, and interest shall accrue on the unpaid principal balance at 22% per annum.

		In accordance with ASC 470-20, “Debt with Conversion and Other Options”, the Company recognized the intrinsic value of the embedded beneficial conversion feature of $32,500 as additional paid-in capital and an equivalent discount which will be charged to operations over the term of the convertible note. The Company records accretion expense over the term of the convertible note up to its face value of $32,500. As at March 31, 2012, $7,111 had been accreted increasing the carrying value of the convertible note to $7,111.

	(e)	On March 29, 2012, the Company issued a $32,500 convertible note which bears interest at 8% per annum and matures on January 2, 2013. The note is convertible into shares of common stock 180 days after the date of issuance (September 25, 2012) at a conversion rate of 45% of the average of the three lowest closing bid prices of the Company’s common stock for the ten trading days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. Upon an event of default, the entire principal balance and accrued interest outstanding is due immediately, and interest shall accrue on the unpaid principal balance at 22% per annum. As at March 31, 2012, the Company had not received the proceeds from the holder of the convertible note.

	(f)	The Company paid $10,500 in financing costs relating to the above convertible debt. As at March 31, 2012, the Company had deferred financing costs of $1,236 (2011 – $3,472).

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References+ Details

Convenience TV Inc. 10-K