Authorized Shares
6,000,000,000
03/28/2019
Outstanding Shares
4,262,786,083
03/28/2019
Promissory Notes - Issued in fiscal year 2017
During the year ended February 28, 2017, the Company issued a total of $227,500 notes with the following terms:
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Terms ranging from 9 months to 2 years.
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Annual interest rates of 10% - 12%.
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Convertible at the option of the holders either at issuance or 180 days from issuance. The note dated June 6, 2016 is convertible at September 6, 2016.
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Conversion prices are typically based on the discounted (35% to 60% discount) lowest trading prices of the Company’s shares during various periods prior to conversion. Certain notes allow for the conversion price to be the lower of the closing sale price or the discounted trading price.
Certain notes allow the Company to redeem the notes at rates ranging from 125% to 145% depending on the redemption date provided that no redemption is allowed after the 180th day. Likewise, certain notes include original issue discounts totaling to $34,600 and the Company received cash of $192,900.
During the nine months ended November 30, 2017, the Company amended the term of one convertible note issued in fiscal year 2017 and recorded loss on debt extinguishment of $164,277.
The Company identified conversion features embedded within certain notes and warrants issued during 2016. The Company has determined that the conversion feature of the Notes represents an embedded derivative since the conversion price is variable and the Notes include a reset provision which could cause adjustments upon conversion. Accordingly, the Notes are not considered to be conventional debt and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. On issuance, the warrants were exercisable into 1,875,000 and 10,181,704 shares of common stock, for a period of five years from issuance, at a price of $0.10 and $0.0059 per share, respectively. We accounted for the issuance of the Warrants as a derivative. As a result of the reset features, the warrants increased by 2,707,906,392 and 20,363,408 during the nine months November 30, 2017, respectively, the total warrants are exercisable into 2,562,499,994 and 30,545,112 shares of common stock at $0.00004 and $0.00085 per share, respectively. We accounted for the issuance of the Warrants as a derivative.
The Company determined that the conversion feature met the definition of a liability in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock and therefore bifurcated the embedded conversion option once the note becomes convertible and accounted for it as a derivative liability. The fair value of the conversion feature was recorded as a debt discount and amortized to interest expense over the term of the note.
Promissory Notes - Issued in fiscal year 2018
During the nine months ended November 30, 2017, the Company issued a total of $390,000 note with the following terms:
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Terms ranging from 9 months to 2 years.
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Annual interest rates of 10 - 12%.
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Convertible at the option of the holders at issuance.
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Conversion prices are typically based on the discounted (40% to 60% discount) lowest trading prices of the Company’s shares during various periods prior to conversion.
The notes allow the Company to redeem the note at rates of 125%. Likewise, the note includes original issue discounts totaling to $65,000 and the Company received cash of $325,000.
The Company identified conversion features embedded within certain notes and warrants issued during the period ended November 30, 2017. The Company has determined that the conversion feature of the Notes represents an embedded derivative since the conversion price is variable and the Notes include a reset provision which could cause adjustments upon conversion. Accordingly, the Notes are not considered to be conventional debt and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. The warrants are exercisable into 129,629,630 shares of common stock, for a period of five years from issuance, at a price of $0.0059 per share. As a result of the reset features, the warrants increased by 259,259,260 and the total warrants exercisable into 388,888,890 shares of common stock at $0.00004 per share. We accounted for the issuance of the Warrants as a derivative.
The Company determined that the conversion feature met the definition of a liability in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock and therefore bifurcated the embedded conversion option once the note becomes convertible and accounted for it as a derivative liability. The fair value of the conversion feature was recorded as a debt discount and amortized to interest expense over the term of the note.
The Company valued the conversion feature using the Black Scholes valuation model. The fair value of the derivative liability for all the note and warrants that became convertible for nine months ended November 30, 2017 amounted to $1,440,974. $382,500 of the value assigned to the derivative liability was recognized as a debt discount to the notes while the balance of $1,115,974 was recognized as a “day 1” derivative loss.
Conversion
During the nine months ended November 30, 2017, the Company converted notes with principal amounts and accrued interest of $315,307 into 1,804,666,649 shares of common stock. The corresponding derivative liability at the date of conversion of $2,158,959 was credited to additional paid in capital.
