5. Convertible Promissory Notes | 12 Months Ended |
Dec. 31, 2013 |
Convertible Promissory Notes | ' |
Convertible Promissory Notes | ' |
a. On 25 June 2010, the Company issued the $250,000 Convertible Note to Temasek bearing interest at a rate of 12% per annum on any unpaid principal balance, unsecured, with principal and interest amounts due upon maturity on 25 September 2010 (Note 3). | | | | | | | | | |
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Temasek has the option to convert any portion of the unpaid principal and/or accrued interest into conversion units (the “Temasek Units”) at any time up to 25 September 2010 at $0.25 per Temasek Unit. Each Temasek Unit consists of one common share of the Company and one share purchase warrant. Each warrant entitles Temasek to purchase an additional common share of the Company at an exercise price of $0.50 per share commencing 6 months after the date of issuance until one year from the date of issuance. |
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On 21 September 2011, the Company entered into the Settlement Agreement with Temasek whereby the $250,000 Convertible Note was cancelled (Notes 3 and 13). During the year ended 31 December 2012, the Company accrued interest expense of $Nil (2011 - $98,849, 2010 - $98,465, cumulative - $197,314), of which $Nil relates to the amortization of debt discount (2011 - $77,151, 2010 - $84,883, cumulative - $160,000) (Note 12). |
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b. On 25 June 2010, the Company issued the $3,250,000 Convertible Note to Temasek bearing interest at a rate of 12% per annum on any unpaid principal balance, unsecured, with interest amount payable annually and principal amount due upon maturity on 25 June 2013 (Note 3). | | | | | | | | | |
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Temasek has the option to convert any portion of the unpaid principal and/or accrued interest into Units at any time up to 25 June 2013 at $0.25 per Unit. Each Unit consists of one common share of the Company and one share purchase warrant. Each warrant entitles Temasek to purchase an additional common share of the Company at an exercise price of $0.50 per share commencing 6 months after the date of issuance until one year from the date of issuance. |
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On 21 September 2011, the Company entered into the Settlement Agreement with Temasek whereby the $3,250,000 Convertible Note was cancelled (Notes 3 and 13). During the year ended 31 December 2012, the Company accrued interest expense of $Nil (2011 - $783,562, 2010 - $562,027, cumulative - $1,345,589), of which $Nil relates to the amortization of debt discount (2011 - $501,479, 2010 - $359,014, cumulative - $860,493) (Note 12). |
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c. On 23 November 2011, the Company issued a convertible note to Asher in the amount of $37,500, bearing interest at a rate of 8% per annum on any unpaid principal balance, unsecured, with principal and interest amounts due and payable upon maturity on 28 August 2012 (the “Asher Note”). Any amount of principal or interest amount not paid on 28 August 2012 (the “Default Amount”) shall bear interest of 22% per annum commencing on 28 August 2012 to the date the amount is paid. | | | | | | | | | |
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Asher has the option to convert any portion of the unpaid principal balance plus accrued and unpaid interest plus the Default Amount into the Company’s common shares at any time commencing 6 months after the date of issuance up to the later of 28 August 2012 or the date of the Default Amount is paid, at a conversion price equal to 58% of the average of the lowest 3 trading prices for the common stock during the 10 trading day period ending on the latest complete trading day prior to the conversion date. |
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The Asher Note contains a provision limiting the number of shares of common stock into which the Asher Note is convertible to 4.99% of the outstanding shares of the Company’s common stock. However, the provision in the Asher Note may be waived by Asher upon 61 days’ prior notice. The Company has a right of prepayment of the Asher Note anytime from the date of the Asher Note until 180 days thereafter, subject to a prepayment penalty in the amount of 130% to 150% of the outstanding principal and interest of the Asher Note based on the date of prepayment. |
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The fair value of the beneficial conversion feature was estimated at $27,155 and was recorded as additional paid-in capital. During the year ended 31 December 2012, the Company issued a total of 42,182,653 common shares to Asher valued at $34,900 upon various conversions of Asher Note, reducing the principal amount to $2,600 as at 31 December 2012 (Notes 8, 12 and 15). |
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During the year ended 31 December 2012, the Company accrued interest expense of $27,331, of which $24,328 related to the amortization of debt discount. |
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The Company determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rate of 0.07%; Dividend rate of 0%; and, historical volatility rates ranging from 248,45% to 267,73%. Based on this calculation, the Company recorded a derivative liability of $5,897 and loss on derivative liability of $8,059. |
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During the year ended 31 December 2013 the Company accrued interest of $7. The note was extinguished through the issuance of 5,945,378 common shares in January 2013. |
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d. On 16 March 2012, the Company issued a convertible note to Asher in the amount of $37,500, bearing interest at a rate of 8% per annum on any unpaid principal balance, unsecured, with principal and interest amounts due and payable upon maturity on 20 December 2012 (the “Asher Note #2”). Any amount of principal or interest amount not paid on 20 December 2012 (the “Default Amount #2”) shall bear interest of 22% per annum commencing on 20 December 2012 to the date the amount is paid. | | | | | | | | | |
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Asher has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time commencing 6 months after the date of issuance up to the later of 20 December 2012 or the date of the Default Amount #2 is paid, at a conversion price equal to 58% of the average of the lowest 3 trading prices for the common stock during the 10 trading day period ending on the latest complete trading day prior to the conversion date. |
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The Asher Note #2 contains a provision limiting the number of shares of common stock into which the Asher Note #2 is convertible to 4.99% of the outstanding shares of the Company’s common stock. However, the provision in the Asher Note #2 may be waived by Asher upon 61 days’ prior notice. The Company has a right of prepayment of the Asher Note #2 anytime from the date of the Asher Note #2 until 180 days thereafter, subject to a prepayment penalty in the amount of 140% to 150% of the outstanding principal and interest of the Asher Note #2 based on the date of prepayment. |
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The fair value of the beneficial conversion feature was estimated at $27,155 and was recorded as additional paid-in capital. During the year ended 31 December 2012, the Company accrued interest expense of $29,696 (2011 - $Nil, 2010 - $Nil, cumulative - $29,696), of which $27,155 relates to the amortization of debt discount (2011 - $Nil, 2010 - $Nil, cumulative through December 31,2012- $27,155). |
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The Company determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from 0.04% to 0.10%; Dividend rate of 0%; and, historical volatility rates ranging from 152.69% to 457.37%. Based on this calculation, the Company recorded a derivative liability of $66,773 and loss on derivative liability of $70,572. |
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During the year ended 31 December 2013 the Company accrued interest of $1,964. The note was extinguished through the issuance of 47,527,322 common shares from February to April 2013. |
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e. On 6 June 2012, the Company issued a convertible note to Asher in the amount of $27,500, bearing interest at a rate of 8% per annum on any unpaid principal balance, unsecured, with principal and interest amounts due and payable upon maturity on 6 March 2013 (the “Asher Note #3”). Any amount of principal or interest amount not paid on 6 March 2013 (the “Default Amount #3”) shall bear interest of 22% per annum commencing on 6 March 2013 to the date the amount is paid. | | | | | | | | | |
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Asher has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time commencing 6 months after the date of issuance up to the later of 6 March 2013 or the date of the Default Amount #3 is paid, at a conversion price equal to 51% of the average of the lowest 3 trading prices for the common stock during the 10 trading day period ending on the latest complete trading day prior to the conversion date. |
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The Asher Note #3 contains a provision limiting the number of shares of common stock into which the Asher Note #3 is convertible to 4.99% of the outstanding shares of the Company’s common stock. However, the provision in the Asher Note #3 may be waived by Asher upon 61 days’ prior notice. The Company has a right of prepayment of the Asher Note #3 anytime from the date of the Asher Note #3 until 180 days thereafter, subject to a prepayment penalty in the amount of 140% to 150% of the outstanding principal and interest of the Asher Note #3 based on the date of prepayment. |
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The fair value of the beneficial conversion feature was estimated at $26,422 and was recorded as additional paid-in capital. During the year ended 31 December 2012, the Company accrued interest expense of $21,385 (2011 - $Nil, 2010 - $Nil, cumulative - $21,385), of which $20,131 relates to the amortization of debt discount (2011 - $Nil, 2010 - $Nil, cumulative through December 31,2012 - $20,131) |
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The Company determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from 0.01% to 0.08%; Dividend rate of 0%; and, historical volatility rates ranging from 302.73% to 418.02%. Based on this calculation, the Company recorded a derivative liability of $58,313 and loss on derivative liability of $39,634. |
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During the year ended 31 December 2013 the Company recorded accrued interest of $14,576 ($826 related to stated interest and $13,750 related to a default penalty). The note was extinguished through the issuance of 60,393,177 common shares from April to May 2013. . |
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f. On 18 December 2012, the Company issued a convertible note to Asher in the amount of $27,500, bearing interest at a rate of 8% per annum on any unpaid principal balance, unsecured, with principal and interest amounts due and payable upon maturity on 20 September 2013 (the “Asher Note #4”). Any amount of principal or interest amount not paid on 20 September 2013 (the “Default Amount #4”) shall bear interest of 22% per annum commencing on 20 September 2013 to the date the amount is paid. | | | | | | | | | |
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The proceeds related to Asher Note #4 were received subsequent to the year ended 31 December 2012. |
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Asher has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time commencing 6 months after the date of issuance up to the later of 20 September 2013 or the date of the Default Amount #4 is paid, at a conversion price equal to 45% of the average of the lowest 3 trading prices for the common stock during the 30 trading day period ending on the latest complete trading day prior to the conversion date. |
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The Asher Note #4 contains a provision limiting the number of shares of common stock into which the Asher Note #4 is convertible to 4.99% of the outstanding shares of the Company’s common stock. However, the provision in the Asher Note #4 may be waived by Asher upon 61 days’ prior notice. The Company has a right of prepayment of the Asher Note #4 anytime from the date of the Asher Note #4 until 180 days thereafter, subject to a prepayment penalty in the amount of 140% to 150% of the outstanding principal and interest of the Asher Note #4 based on the date of prepayment. |
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The fair value of the beneficial conversion feature was estimated at $27,500 and was recorded as additional paid-in capital. During the year ended 31 December 2012, the Company accrued interest expense of $1,373 (2011 - $Nil, 2010 - $Nil, cumulative - $1,373), of which $1,295 relates to the amortization of debt discount (2011 - $Nil, 2010 - $Nil, cumulative through December 31,2012 - $1,295). |
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The Company determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from 0.07% to 0.10%; Dividend rate of 0%; and, historical volatility rates ranging from 191.75% to 548.83%. Based on this calculation, the Company recorded a derivative liability of $71,691 and loss on derivative liability of $41,940. |
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During the year ended 31 December 2013 the Company accrued interest of $1,278. The loan was extinguished through the issuance of 113,144,698 common shares from July to August 2013. |
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g. On 21 February 2013, the Company issued a convertible note to Asher in the amount of $27,500, bearing interest at a rate of 8% per annum on any unpaid principal balance, unsecured, with principal and interest amounts due and payable upon maturity on 25 November 2013 (the “Asher Note #5”). Any amount of principal or interest amount not paid on 25 November 2013 (the “Default Amount #5”) shall bear interest of 22% per annum commencing on 6 March 2013 to the date the amount is paid. | | | | | | | | | |
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Asher has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time commencing 6 months after the date of issuance up to the later of 25 November 2013 or the date of the Default Amount #5 is paid, at a conversion price equal to 45% of the average of the lowest 3 trading prices for the common stock during the 30 trading day period ending on the latest complete trading day prior to the conversion date. |
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The Asher Note #5 contains a provision limiting the number of shares of common stock into which the Asher Note #3 is convertible to 4.99% of the outstanding shares of the Company’s common stock. However, the provision in the Asher Note #5 may be waived by Asher upon 61 days’ prior notice. The Company has a right of prepayment of the Asher Note #5 anytime from the date of the Asher Note #5 until 180 days thereafter, subject to a prepayment penalty in the amount of 140% to 150% of the outstanding principal and interest of the Asher Note #5 based on the date of prepayment. |
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The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rate of 0.07%; Dividend rate of 0%; and, historical volatility rates ranging from 248,45% to 267,73%. Based on this calculation, the Company recorded a derivative liability of $71,766 and gain on derivative liability of $20,948. The Company also recorded a debt discount of $27,500 (to be amortized over the term of the debt). During the year ended 31 December 2013, the Company recorded interest expense of $73,136, of which $44,266 relates to origination interest, $27,500 related to debt discount amortization, and $1,370 relates to stated interest. |
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h. On 29 April 2013, the Company issued a convertible note to Asher in the amount of $32,500, bearing interest at a rate of 8% per annum on any unpaid principal balance, unsecured, with principal and interest amounts due and payable upon maturity on 31 January 2014 (the “Asher Note #6”). Any amount of principal or interest amount not paid on 31 January 2014 (the “Default Amount #6”) shall bear interest of 22% per annum commencing on 31 January 2013 to the date the amount is paid. | | | | | | | | | |
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Asher has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time commencing 6 months after the date of issuance up to the later of 31 January 2014 or the date of the Default Amount #6 is paid, at a conversion price equal to 45% of the average of the lowest 3 trading prices for the common stock during the 30 trading day period ending on the latest complete trading day prior to the conversion date. |
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The Asher Note #6 contains a provision limiting the number of shares of common stock into which the Asher Note #3 is convertible to 4.99% of the outstanding shares of the Company’s common stock. However, the provision in the Asher Note #6 may be waived by Asher upon 61 days’ prior notice. The Company has a right of prepayment of the Asher Note #6 anytime from the date of the Asher Note #5 until 180 days thereafter, subject to a prepayment penalty in the amount of 140% to 150% of the outstanding principal and interest of the Asher Note #6 based on the date of prepayment. |
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The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .01% to .10%; Dividend rate of 0%; and, historical volatility rates ranging from 353.55% to 852.32%. Based on this calculation, the Company recorded a derivative liability of $97,733, and loss on derivative liability of $174,610. The Company also recorded a debt discount of $32,500 (to be amortized over the term of the debt). During the year ended 31 December 2013, the Company recorded interest expense of $95,848, of which $65,233 related to origination interest, $28,863 related to debt discount amortization, and $1,752 related to stated interest. |
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i. On 8 August 2013, the Company issued a convertible note to Asher in the amount of $12,995, bearing interest at a rate of 8% per annum on any unpaid principal balance, unsecured, with principal and interest amounts due and payable upon maturity on May 12 2014 (the “Asher Note #7”). Any amount of principal or interest amount not paid on 12 May 2014 (the “Default Amount #7”) shall bear interest of 22% per annum commencing on 12 May 2014 to the date the amount is paid. | | | | | | | | | |
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Asher has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time commencing 6 months after the date of issuance up to the later of 12 May or the date of the Default Amount #7 is paid, at a conversion price equal to 45% of the average of the lowest 3 trading prices for the common stock during the 30 trading day period ending on the latest complete trading day prior to the conversion date. |
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The Asher Note #7 contains a provision limiting the number of shares of common stock into which the Asher Note #3 is convertible to 4.99% of the outstanding shares of the Company’s common stock. However, the provision in the Asher Note #7 may be waived by Asher upon 61 days’ prior notice. The Company has a right of prepayment of the Asher Note #7 anytime from the date of the Asher Note #7 until 180 days thereafter, subject to a prepayment penalty in the amount of 140% to 150% of the outstanding principal and interest of the Asher Note #7 based on the date of prepayment. |
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The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rate of 0.07%; Dividend rate of 0%; and, historical volatility rates ranging from 248,45% to 267,73%. Based on this calculation, the Company recorded a derivative liability of $71,766 and gain on derivative liability of $20,948. The Company also recorded a debt discount was $12,995 (to be amortized over the term of the debt). During the year ended 31 December 2013, the Company recorded interest expense of $19,445, of which $12,229 related to origination interest, $6,802 related to debt discount amortization, and $413 related to stated interest. |
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k. On 30 October 2013, the Company issued a convertible note to Asher in the amount of $16,500, bearing interest at a rate of 8% per annum on any unpaid principal balance, unsecured, with principal and interest amounts due and payable upon maturity on 1 August 2014 (the “Asher Note #8”). Any amount of principal or interest amount not paid on 1August 2014 (the “Default Amount #8”) shall bear interest of 22% per annum commencing on August 1,2014 to the date the amount is paid. | | | | | | | | | |
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Asher has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time commencing 6 months after the date of issuance up to the later of 1 August 2014 or the date of the Default Amount #8 is paid, at a conversion price equal to 45% of the average of the lowest 3 trading prices for the common stock during the 30 trading day period ending on the latest complete trading day prior to the conversion date. |
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The Asher Note #8 contains a provision limiting the number of shares of common stock into which the Asher Note #8 is convertible to 4.99% of the outstanding shares of the Company’s common stock. However, the provision in the Asher Note #8 may be waived by Asher upon 61 days’ prior notice. The Company has a right of prepayment of the Asher Note #8 anytime from the date of the Asher Note #8 until 180 days thereafter, subject to a prepayment penalty in the amount of 140% to 150% of the outstanding principal and interest of the Asher Note #8 based on the date of prepayment. |
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The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rate of .12%; Dividend rate of 0%; and, historical volatility rates ranging from 412.87% to 425.91%. Based on this calculation, the Company recorded a derivative liability of $62,095, and loss on derivative liability of $81,235. The Company also recorded a debt discount was $16,500 (to be amortized over the term of the debt). During the year ended 31 December 2013, the Company recorded interest expense of $49,539, of which $45,494 related to origination interest, $3,720 related to debt discount amortization, and $224 related to stated interest. |
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l. On 24 December 2013, the Company issued a convertible note to Asher in the amount of $16,500, bearing interest at a rate of 8% per annum on any unpaid principal balance, unsecured, with principal and interest amounts due and payable upon maturity on 30 August 2014 (the “Asher Note #9”). Any amount of principal or interest amount not paid on 30 September 2014 (the “Default Amount #9”) shall bear interest of 22% per annum commencing on September 30,2014 to the date the amount is paid. | | | | | | | | | |
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Asher has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time commencing 6 months after the date of issuance up to the later of 30 September 2014 or the date of the Default Amount #9 is paid, at a conversion price equal to 45% of the average of the lowest 3 trading prices for the common stock during the 30 trading day period ending on the latest complete trading day prior to the conversion date. |
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The Asher Note #9 contains a provision limiting the number of shares of common stock into which the Asher Note #8 is convertible to 4.99% of the outstanding shares of the Company’s common stock. However, the provision in the Asher Note #9 may be waived by Asher upon 61 days’ prior notice. The Company has a right of prepayment of the Asher Note #9 anytime from the date of the Asher Note #9 until 180 days thereafter, subject to a prepayment penalty in the amount of 140% to 150% of the outstanding principal and interest of the Asher Note #9 based on the date of prepayment. |
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The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .09% to .10%; Dividend rate of 0%; and, historical volatility rates ranging from 283.69% to 461.93%. Based on this calculation, the Company recorded a derivative liability of $180,020, and gain on derivative liability of $36,192. The Company also recorded a debt discount was $16,500 (to be amortized over the term of the debt). During the year ended 31 December 2013, the Company recorded interest expense of $163,958, of which $163,520 related to origination interest, $413 related to debt discount amortization, and $25 related to stated interest. |
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l. The following is the summary of convertible promissory notes that are issued and outstanding as at 31 December 2013 and 2012: | | | | | | | | | |
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| | | 2012 | | | 2013 | |
| | | | $ | | | | $ | |
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Asher Note | Principal net of debt discount | | | 2,600 | | | | 32,500 | |
| Accrued interest | | | 3,253 | | | | | |
| | | | | | | | | |
| | | | 5,853 | | | | | |
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Asher Note #2 | Principal net of debt discount | | | 37,500 | | | | 12,995 | |
| Accrued interest | | | 2,541 | | | | | |
| | | | | | | | | |
| | | | 40,041 | | | | | |
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Asher Note #3 | Principal net of debt discount | | | 21,209 | | | | 16,500 | |
| Accrued interest | | | 1,254 | | | | | |
| | | | | | | | | |
| | | | 22,463 | | | | | |
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Asher Note #4 | Principal net of debt discount | | | 1,295 | | | | 16,500 | |
| Accrued interest | | | 78 | | | | | |
| | | | | | | | | |
| | | | 1,373 | | | | | |
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Total | | | | 69,730 | | | | 78,495 | |
Unamortized Discount | | | | | | | | (38,697 | ) |
Note | | | | | | | | 39,978 | |