Convertible debt with a variable conversion rate issued for cash
The Company is past due and in default on a convertible debenture in the amount of $115,000. The convertible debt bears interest at an annual rate of 6% and was due in October 2016. The lender can elect at any time to convert any portion of the debt into shares of common stock of the Company, subject to a limit of 4.99% of the outstanding shares, at a price discount of 30% of the price of the common stock as defined in the agreements.
The conversion price of the variable conversion price note is based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No. 815 - 40. The fair value of the notes was recognized as a derivative instrument at the issuance date and is measured at fair value at each reporting period. The Company determined that the fair value of the conversion feature was $163,714 at the issuance dates. The debt was recorded as a debt discount of $152,102 and is amortized to interest expense over the term of the note. The fair value of the conversion feature in excess of the principal amount allocated to the notes in the aggregate amount of $11,612 was expensed immediately as additional interest expense.
At August 31, 2016 and November 30, 2015, a total of $115,000 of variable-rate convertible debt that had been issued for cash was outstanding, respectively.
Convertible debt with a variable conversion rate assigned to lenders
At August 31 , 2016 and November 30, 2015, the Company owes one lender $67,750 as a result of an assignment in fiscal 2012. The convertible debt bears interest at 0% and is past due. The lender can elect at any time to convert any portion of the debt into shares of common stock of the Company at a price discount of 55% of the market price of the Company’s common stock as defined in the agreements.
At August 31, 2016 and November 30, 2015, a total of $320,750 of other convertible debt was outstanding, respectively.
Other short-term debt due to various lenders
During the six months ended May 31, 2016 and 2015, the Company received $0 and $50,000, respectively from lenders in exchange for notes payable that had no conversion features.
At August 31, 2016 and November 30, 2015 , the Company owed various lenders $212,607 and 224,448, respectively, for non-convertible notes. Cash payments were made on these notes of $11,840 and $60,368 d uring the nine months ended August 31, 2016 and 2015, respectively. Other short-term debt carries an interest rate of 0% to 17% over the term of the loans, and includes cash advances (the “Cash Advances”) from lenders that purchased future sales. The Company agreed to repay the Cash Advances at a premium to the amount received from the lender. For the three months ended August 31, 2016 and 2015, $0 and $18,158, respectively, of amortization of premium from the Cash Advances is included in interest expense. At August 31, 2016 and November 30, 2015, Cash Advances totaled $106,808 and 118,649, respectively. Assets of two subsidiaries of the Company secure the Cash Advances, which are currently in default.
Long-term debt
The Company acquired 90% of Canalytix LLC on March 25, 2015. Canalytix owes Flux Carbon Starter Fund $448,649 and $409,614, as of August 31, 2016 and November 30, 2015, respectively, under a secured senior term loan agreement, which is included in long-term debt in the Company’s consolidated financial statements. The debt bears an annual interest rate of 12% and matures on December 31, 2019. Principal payments are made periodically from cash flow. No principal payments are due until maturity.
