CONVERTIBLE NOTES

3 Months Ended

Nov. 30, 2020

On July 21, 2020, the Company issued convertible notes in the amount of $500,000 and $560,000 to two unrelated parties in exchange for their assumption of the December 08, 2018 note and related party loans owed to Cayo for the same amounts. (See Note 4). The notes do not bear interest and mature on January 22, 2021. The note in the amount of $500,000 is convertible into common shares at the rate equivalent to 70% of the Company’s 30 day average stock price prior to conversion. The second note in the amount of $560,000 is convertible into common stock at the rate equivalent to 80% of the Company’s 30 day average stock price prior to conversion. During the three months ended November 30, 2020, the Company recorded amortization of debt discount in the amount of $375,876 on these notes.

On September 22, 2020 the Board approved the issuance of up to $5,000,000 in new convertible notes, in multiple tranches, convertible at maturity into common shares. At the date of this document the Company has received a total of $62,500 from an unrelated party under this facility. This note matures on March 31, 2021, and is convertible into common stock at the rate equivalent to 80% of the Company’s 30 day average stock price prior to conversion. During the three months ended November 30, 2020, the Company recorded a debt discount of $26,179 and amortization of debt discount in the amount of $9,507 on this note.

Due to these provisions, the embedded conversion option qualified for derivative accounting under ASC 815-15, Derivatives and Hedging.

A summary of value changes to the notes for the three months ended November 30, 2020 is as follows:

Carrying value of Convertible Notes as of August 31, 2020	$	464,650
New principal		62,500
Total principal		527,150
Less: discount related to fair value of the embedded conversion feature		(26,179	)
Add: amortization of discount		385,383
Carrying value of Convertible Notes as of November 30, 2020	$	886,354

BOATIM INC. 10-Q