Quarterly report pursuant to Section 13 or 15(d)

Note 10 - Loans Payable

v3.10.0.1
Note 10 - Loans Payable
6 Months Ended
Dec. 31, 2017
Notes to Financial Statements  
Loan Payable [Text Block]
NOTE
1
0
LOAN
S
PAYABLE
 
During the
six
months ended
December 31, 2017,
the Company had the following loan agreements outstanding, summarized as follows:
 
 
(a)
On
January 1, 2016,
the Company entered into a short-term loan agreement with an original maturity date of
July 1, 2016,
for
$110,000.
A
one
-time interest charge of
5%
or
$5,500
was due as of
July 1, 2016.
The loan was entered into to settle marketing fees payable and had a conversion feature in the event of loan default.
 
 
(b)
On
October 24, 2016,
the Company entered into a promissory note agreement and received a total of
$12,000.
The note is due
November 9, 2016.
In addition, the Company issued
75,000
common shares within
14
days of the start of the note. In the event of default (non-payment), the balance of the promissory note will increase by
140%.
These shares were measured at the agreement date fair value with
$10,500
recognized as interest expense and additional paid in capital.
 
On
November 29, 2016,
the maturity date of the promissory note was extended to
January 30, 2017.
As consideration for the extension, the Company agreed to issue
225,000
shares (issued). The shares were measured at the fair value on the agreement date with
$27,000
recognized as additional paid in capital and loss on extinguishment of debt. During the
six
months ended
December 31, 2017,
the remaining balance of
$16,800
was settled with
925,000
common shares measured at the issued date fair value of
$27,750
with the difference of
$10,950
recognized as a loss on extinguishment.
 
 
(c)
During
July
and
August 2017,
the Company entered into a short-term loan agreement as follows:
 
 
(i)
On
July 25, 2017,
the Company borrowed a total of
$10,000
together with monthly interest of
$200
due
April 27, 2018;
 
(ii)
On
August 14, 2017,
the Company borrowed a total of
$100,000
together with monthly interest of
$750
due
May 14, 2018;
and
 
(iii)
On
August 22, 2017,
the Company borrowed a total of
$162,400
together with monthly interest of
$750
due
May 23, 2018.
 
(iv)
On
October 5, 2017,
the Company borrowed a total of
$90,000
together with monthly interest of
$750
due
July 5, 2018.
 
During the
six
months ended
December 31, 2017,
the Company accrued interest expense of
$16,363
(
2016
-
$nil
).
 
 
(d)
On
November 16, 2017,
the Company entered into a debt agreement with JMJ Financial. A total of
$200,000
was received. The convertible debenture is due within
180
days and becomes payable
2
days after the license agreement is entered into and cash is received.
 
The note becomes convertible if the Company defaults on repayment on day
180.
As at
December 31, 2017,
the note was
not
convertible. The conversion price is the lesser of
$0.05
or
50%
of the lowest trade price in the
25
trading days previous to the conversion. The lender is limited to holding
no
more than
4.99%
of the issued and outstanding common stock at the time of conversion. After the expiration of
120
days following the delivery date of any consideration, the Company will have
no
right of prepayment without written consent of the lender.
 
In addition to the debt, the Company issued
4,000,000
share purchase warrants with an expiry date of
November 16, 2022.
The exercise price of the warrants will be the lessor of
$0.05
per share, the lowest trade price in the
10
days previous to exercise or the adjusted price.
 
At any time while the warrants are outstanding, any subsequent sale of shares of common stock, or any agreement whereby the holder
may
acquire common stock at an effective exercise price per share less than the warrant exercise price in effect, the exercise price of these warrants will automatically adjust to this new lower exercise price. Further, these warrants are cashless, and the number of shares received will be equivalent to the gain between the market price of shares at the time of exercise and the exercise price of warrant.
 
For any reason at the lender’s sole discretion, the lender
may
at any time prior to selling those warrant shares, rescind such exercise.
 
At inception of the debt, the total net proceeds allocated to the derivative warrant liability component was
$200,000
with the residual net proceeds of
$nil
allocated to the debt component at inception.
 
During the
six
months ended
December 31, 2017,
the Company recognized a fair value loss of
$157,009
on the derivative warrants and debt discount amortization of
$49,995
on the debt component. The derivative warrants are measured using the following Black-Sholes option pricing model assumptions: share price
$0.05;
conversion price
$0.02;
expected life
4.88
years; volatility
112.58%;
dividend yield and estimated forfeitures
$nil.