Note 10 - Loans Payable |
6 Months Ended | ||||||||||||||||||||||||
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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:
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.
During the six months ended December 31, 2017, the Company accrued interest expense of $16,363 (2016 - $nil ).
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.
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