CONVERTIBLE BONDS

6 Months Ended

Jun. 30, 2021

NOTE 4 – CONVERTIBLE BONDS

As of June 30, 2021 and December 31, 2020, the Company had the following convertible bonds outstanding:

	As of
	June 30, 2021				December 31, 2020
	Principal		Accrued Interest		Principal			Accrued Interest
November 2019 HK$1.5 million (equivalent to $192,308) convertible into common shares at $3.60 per share, 5% interest, due April 30, 2021	$	-	$	-	$	192,308		$	10,564
Less: Bond discount		-		-		(1,354	)		-
	$	-	$	-	$	190,954		$	10,564

Convertible bond agreements of HK$1.5 million

On November 26, 2019, a convertible bond agreement was signed including a HK$1.5 million (equivalent to $192,308) loan bearing interest of 5% per annum for six months. The convertible bond had a maturity date of May 25, 2020 with a conversion price of $3.60 per share. In addition, the Company recognized a beneficial conversion feature discount to the bond of $5,342 that was amortized over the period using the effective interest method. On May 11, 2020, the Company signed an extension letter with the bondholder to extend the maturity date from May 25, 2020 to September 30, 2020. Therefore, the Company recognized an additional beneficial conversion feature discount to the bond of $234 that was amortized over the period using the effective interest method. On September 11, 2020, the Company signed an extension letter with the bondholder to further extend the maturity date from September 30, 2020 to April 30, 2021. Therefore, the Company further recognized an additional beneficial conversion feature discount to the bond of $147 that is being amortized over the period using the effective interest method. For the year ended December 31, 2020, the Company amortized $3,340 of the discount and recognized non-cash interest of $9,634 to interest expenses. The unamortized debt discount on the convertible bond as of December 31, 2020 was $1,354.

For the six months and three months ended June 30, 2021, the Company amortized $1,354 and $341 of the discount and recognized non-cash interest of $3,161 and $790 to interest expenses. For the six months and three months ended June 30, 2020, the Company amortized $2,863 and $1,576 of the discount and recognized non-cash interest of $4,786 and $2,399 to interest expenses. All the debt discount on the convertible bond has been amortized as of June 30, 2021. On April 30, 2021, the Company signed a supplementary agreement with the bondholder to further extend the maturity date from April 30, 2021 to May 20, 2021, change the interest rate from 5% to 8%, and revoke the convertible option. As a result, the HK$1.5m is reclassified to other loans. The further development of the loan is disclosed in note 6.

Other convertible bond agreements

For the year ended December 31, 2020, four new convertible bond agreements were entered into between the Company, Arcus and third party investors. All of them matured during year 2020 and were settled by issuing 92,275 common shares at a price stated in the respective agreements, representing loans of HK$2.6 million and interest expenses of HK$5,521, for a total of HK$2,605,521 (equivalent to $334,027) (see note 8). In addition, the Company recognized a beneficial conversion feature discount to the bond of $7,390 that was amortized and recognized non-cash interest of $695 on these bonds during the year ended December 31, 2020.

TGS International Ltd. 10-Q