DEBT | NOTE 2 DEBT January 31, 2017 April 30, 2016 Notes Payable: Note payable January 6, 2016. Interest at 8% and principal payable on demand. $ 100,000 $ 100,000 Note payable June 6, 2016. Interest at 4% and principal payable on demand. 10,000 Note payable August 4, 2016. Interest at 8% and principal payable on demand. 105,000 Note payable September 27, 2016. Interest at 4% and principal payable on demand. 30,000 Note payable September 29, 2016. Interest at 4% and principal payable on demand. 5,000 Note payable September 29, 2016. Interest at 4% and principal payable on demand. 30,000 Note payable October 3, 2016. Interest at 4% and principal payable on demand. 20,000 Total Notes payable $ 300,000 $ 100,000 On January 6, 2016, the Company received $100,000 of proceeds from the issuance of a promissory note and recorded as Note Payable. The terms of the promissory note include interest accrued at 8% annually and the principal and interest payable on demand. Through January 31, 2017, the Company has accrued $6,709 of interest related to the promissory note and included in accrued interest in the accompanying unaudited financial statements. On June 6, 2016, the Company received $10,000 of proceeds from the issuance of a promissory note and recorded as Note Payable. The terms of the promissory note include interest accrued at 4% annually and the principal and interest payable on demand. Through January 31, 2017, the Company has accrued $263 of interest related to the promissory note and included in accrued interest in the accompanying unaudited financial statements. On August 4, 2016, the Company received $130,000 of proceeds from the issuance of a promissory note and recorded as Note Payable. The terms of the promissory note include interest accrued at 8% annually and the principal and interest payable on demand. On January 26, 2017, the Company repaid $25,000 of the promissory note principal resulting in an outstanding principal balance of $105,000 at January 31, 2017. See Note 7 Subsequent Events. Through January 31, 2017, the Company has accrued $5,124 of interest related to the promissory note and included in accrued interest in the accompanying unaudited financial statements. On September 27, 2016, the Company received $30,000 of proceeds from the issuance of a promissory note and recorded as Note Payable. The terms of the promissory note include interest accrued at 4% annually and the principal and interest payable on demand. Through January 31, 2017, the Company has accrued $418 of interest related to the promissory note and included in accrued interest in the accompanying unaudited financial statements. On September 29, 2016, the Company received $5,000 of proceeds from the issuance of a promissory note and recorded as Note Payable. The terms of the promissory note include interest accrued at 4% annually and the principal and interest payable on demand. Through January 31, 2017, the Company has accrued $68 of interest related to the promissory note and included in accrued interest in the accompanying unaudited financial statements. On September 29, 2016, the Company received $30,000 of proceeds from the issuance of a promissory note and recorded as Note Payable. The terms of the promissory note include interest accrued at 4% annually and the principal and interest payable on demand. Through January 31, 2017, the Company has accrued $411 of interest related to the promissory note and included in accrued interest in the accompanying unaudited financial statements. On October 3, 2016, the Company received $20,000 of proceeds from the issuance of a promissory note and recorded as Note Payable. The terms of the promissory note include interest accrued at 4% annually and the principal and interest payable on demand. Through January 31, 2017, the Company has accrued $263 of interest related to the promissory note and included in accrued interest in the accompanying unaudited financial statements. January 31, 2017 April 30, 2016 Notes Payable, Related Party: Notes payable, related party. Seven (7) separate loans beginning on February 11, 2015 with last loan on August 28, 2015. No interest and principal payable on demand. $ 15,300 $ 20,300 Total Notes payable, related party $ 15,300 $ 20,300 From February to July 2015, an officer of the Company provided $15,300 of funds for working capital requirements. There is no formal agreement and no interest is being accrued by the Company with the principal due on demand. During the three months ending October 31, 2015, the Company repaid $15,000 of these funds leaving a balance outstanding of $300. Effective August 28, 2015, the officer personally repaid $20,000 of notes payable for the Company resulting in a balance outstanding of $20,300. During the three months ending January 31, 2017, the Company repaid $5,000 of these funds and the outstanding balance owed to the officer was $15,300 at January 31, 2017, recorded as Notes Payable Related Parties in the accompanying unaudited financial statements. See Note 5 Related Party Transactions and Note 7 Subsequent Events. January 31, 2017 April 30, 2016 Convertible Unsecured Note Payable: Unsecured convertible promissory note payable Interest accrued at 5% and principal and interest due 12 months from the issuance date. 50,000 50,000 Less: Debt discount (6,574 ) (31,780 ) Total Convertible Unsecured Note Payable, net of debt discount $ 43,426 $ 18,220 On April 14, 2016, the Company received $50,000 of proceeds from the issuance of an unsecured convertible promissory note for working capital purposes. The terms include interest accrued at 5% annually and the principal and interest payable in one year on April 14, 2017. The note holder at its sole discretion, has the right to convert the principal amount, along with all accrued interest, into shares of the Companys common stock at the conversion price of $0.30 per share. Through January 31, 2017, the Company accrued $2,006 of interest related to the unsecured convertible promissory note and included in accrued interest in the accompanying financial statements. In accordance with ASC 470-20, the Company determined that a beneficial conversion feature (BCF) existed and utilizing the Black-Scholes Pricing Model, determined that the BCF fair value was $33,333 and recorded the $33,333 BCF as a debt discount with an offset to additional paid in capital. The initial $33,333 BCF assumed that 166,667 shares would be issued upon conversion of the promissory note. The debt discount is being amortized as additional interest expense ratably over the one-year term of the note and during the nine months ended January 31, 2017, the Company recorded $25,206 of interest expense with a corresponding reduction to the debt discount. The debt discount has a balance of $43,426 at January 31, 2017. The Company used the following assumptions in the calculation: Stock Price (issue date) $ 0.50 Conversion Price $ 0.30 Expected Remaining Term 1 year Volatility 247 % Annual Rate of Quarterly Dividends 0.00 % Risk Free Interest Rate 0.22 % January 31, 2017 April 30, 2016 Convertible Secured Note Payable: Secured convertible promissory note payable issued March 9, 2016 - Interest accrued at 10% and principal and interest due one year from the issuance date. $ 550,000 $ 550,000 Less: conversion of $195,000 of principal to common stock (195,000 ) Less: debt discount (55,754 ) (471,644 ) Total Convertible Secured Notes Payable, net of debt discount $ 299,246 $ 78,356 On March 9, 2016 (Effective Date), the Company received $445,000 of net proceeds for working capital purposes from the issuance of a $550,000 face value convertible secured promissory note net of an original issue discount of $50,000 and debt issue costs paid to or on behalf of the lender of $55,000. The terms include interest accrued at 10% annually and the principal and interest payable is payable in one year on March 9, 2017. See Note 7 Subsequent Events. Any amount of the principal or interest on this Note which is not paid when due shall bear Interest at the rate of the lower of Twenty-Two Percent (22%) per annum, or the highest rate permitted by law, from the due date thereof until the same is paid. Through January 31, 2017, 2017, $48,084 of accrued interest was recorded in the accompanying unaudited financial statements. The lender has the right at any time after the effective date, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest into shares of common stock of the Company, subject to certain conversion limitations set forth in the promissory note and certain price protection described below, as per the conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price. The Conversion Price is equal to seventy percent (70%) of the average of the lowest three VWAPs of the Common Stock during the twenty (20) Trading Days immediately preceding a Conversion Date. The promissory note contains customary affirmative and negative covenants of the Company. The Conversion Price is subject to full ratchet and other customary anti-dilution protections. In relation to the convertible secured promissory note, the Company issued the lender two warrants, a Series A warrant with a three (3) year term to acquire 250,000 shares of common stock of the Company at an exercise price of $1.02 per share and a Series B warrant with a three (3) year term to acquire 250,000 shares of common stock of the Company at an exercise price of $1.19 per share. The principal amount of the promissory note, initially $550,000, may be prepaid in full solely during the dates set forth below, which shall be subject to the following upward adjustments, subject to the payment period upon which the date all amounts hereunder are paid in full by the Borrower occurs, as follows: Date of Note Satisfaction Principal Amount of this Note 0 to 30 days after the OID $ 605,000 31 to 60 days after the OID $ 632,500 61 to 90 days after the OID $ 660,000 91 - 120 days after the OID $ 687,500 Subsequent to 120 days after the Issue Date, the Company has no right or option to prepay the principal amount of the promissory note. As of July 9, 2016, the Company did not prepay the principal and this option is no longer available. As collateral security, the promissory note is secured by all collateral granted by an officer of the Company to the Holder, including but not limited to two million (2,000,000) shares of Common Stock, in accordance with the terms and conditions of a Pledge Agreement by and between the officer and the lender, dated as of the OID. The Company evaluated the secured convertible promissory note and the related warrants in accordance with ASC 815 Derivatives and Hedging Derivatives and Hedging The Company evaluated the warrants and determined that there was no derivative treatment required as the warrants contained a fixed exercise price with an adjustment only based upon customary items including stock dividends and splits, subsequent rights offerings and pro rate distributions. The Company calculated the relative fair value between the note and the warrants on the issue date utilizing the Black Scholes Pricing Model for the warrants. As a result, the Company allocated $239,069 to the warrants which was recorded as a debt discount with an offset to additional paid in capital in the unaudited financial statements. The warrant calculation used the following assumptions; stock price $0.93, Class A warrant exercise price $1.02, Class B warrant exercise $1.19, expected term of 3 years, expected volatility of 287% and discount rate of 0.30%. On the note issue date of March 9, 2016, the Company recorded the following debt discounts as offsets to the $550,000 note payable which will be amortized over the one-year term of the note: (1) OID of $50,000, (2) debt issue costs of $55,000, (3) warrant relative fair value of $239,069 and (4) embedded conversion option liability of $205,931. As a result, the Company recorded a $723,646 expense for the initial fair value of embedded conversion derivative, recorded as a separate item in other income (expense) in the accompanying financial statements. The Company performed a revaluation of the embedded conversion liability using the Black Scholes Pricing Model at April 30, 2016 that resulted in a calculated value of $462,531. On (1) September 13, 2016, (2) September 30, 2016 and (3) October 26, 2016, the lender elected to exercise their right to convert $15,000 on each of the above dates or a total conversion amount of $45,000 of the principal balance and the note payable balance was $505,000 at October 31, 2016 (See Note 4 Common Stock). The Company performed a revaluation of the embedded conversion liability using the Black Scholes Pricing Model on each of the three conversion dates that resulted in a calculated embedded conversion liability value of (1) $544,400, (2) $410,038 and (3) $385,429. The Company recorded a total expense of $139,642 for the change in the fair value of compound embedded derivative, recorded to other income (expense) in the unaudited financial statements. Additionally, the Company reclassified$38,540 of embedded conversion option liability to additional paid in capital for the change in the fair value of compound embedded derivative related to the share conversion on the respective dates. For the three conversion dates of 1) September 13, 2016, (2) September 30, 2016 and (3) October 26, 2017, the revaluation of the embedded conversion liability was calculated using the Black Scholes Pricing Model with the following assumptions; stock price (1) $0.29, (2) $0.24 and (3) $0.22, conversion price (1) $0.18, (2) 0.17 and (3) $0.15, expected term of (1) 0.48 years (2) 0.44 years and (3) 0.37 years, expected volatility of (1) 181%, (2) 175% and (3) 179% and discount rate of (1) 0.25%, (2) 0.20% and (3) 0.25%. The change in the derivative liability assumed that (1) 3,142,857, (2) 3,240,318 and (3) 3,496,593 shares would be issued upon conversion of the promissory note. The Company performed a revaluation of the embedded conversion liability using the Black Scholes Pricing Model at October 31, 2016 that resulted in a calculated value of $358,230. The Company recorded $27,299 of income for the change between October 26, 2016 and October 31, 2016 in the fair value of compound embedded derivative, recorded as a separate item in other income (expense) in the accompanying unaudited financial statements. The revaluation of the embedded conversion liability at October 31, 2016 was calculated using the Black Scholes option pricing model with the following assumptions; stock price $0.20, conversion price $0.14, expected term of 0.35 years, expected volatility of 175% and discount rate of 0.20%. The change in the derivative liability assumed that 3,567,177 shares would be issued upon conversion of the promissory note at October 31, 2016. On (1) November 2, 2016, (2) November 15, 2016, (3) December 13, 2016, (4) December 16, 2016, (5) December 23, 2016, (6) December 29, 2016, (7) January 6, 2017, (8) January 12, 2017, (9) January 23, 2017 and (10) January 24, 2017, the lender elected to exercise their right to convert on each of the above dates for an aggregate total conversion amount of $150,000 of the principal balance and the note payable balance is $355,000 at January 31, 2017 (See Note 4 Common Stock). The Company performed a revaluation of the embedded conversion liability using the Black Scholes Pricing Model on each of the ten conversion dates that resulted in a calculated embedded conversion liability value of (1) $380,511, (2) $328,745, (3) $297,684, (4) $431,000, (5) $295,424, (6) $260,433, (7) $251,876, (8) $242,909, (9) $$186,323 and (10) $497,281. The Company recorded a total expense of $139,051 for the change in the fair value of compound embedded derivative, recorded to other income (expense) in the unaudited financial statements. Additionally, the Company reclassified $112,824 of embedded conversion option liability to additional paid in capital for the change in the fair value of compound embedded derivative related to the share conversion on the respective dates. For the ten conversion dates of (1) November 2, 2016, (2) November 15, 2016, (3) December 13, 2016, (4) December 16, 2016, (5) December 23, 2016, (6) December 29, 2016, (7) January 6, 2017, (8) January 12, 2017, (9) January 23, 2017 and (10) January 24, 2017, the revaluation of the embedded conversion liability was calculated using the Black Scholes Pricing Model with the following assumptions; stock price (1) $0.21, (2) $0.17 (3) $0.14, (4) $0.17, (5) $0.13, (6) $0.12, (7) $0.10, (8) $0.10, (9) $0.08 and (10) $0.12, conversion price (1) $0.14, (2) $0.12, (3) $0.10, (4) $0.09, (5) $0.09, (6) $0.08, (7) $0.07, (8) $0.07, (9) $0.06 and (10) $0.05, expected term of (1) 0.35 years (2) 0.31 years, (3) 0.24 years, (4) 0.23 years, (5) 0.21 years, (6) 0.19 years, (7) 0.17 years, (8) 0.15 years, (9) 0.12 years and (10) 0.12 years, expected volatility of (1) 175%, (2) 177%, (3) 175%, (4) 175%, (5) 176%, (6) 176%, (7) 174%, (8) 173%, (9) 179% and (10) 179% and discount rate of (1) 0.36%, (2) 0.50%, (3) 0.54%, (4) 0.50%, (5) 0.51%, (6) 0.46%, (7) 0.52%, (8) 0.51%, (9)0.51% and (10) 0.50%. The change in the derivative liability assumed that (1) 3,500,000, (2) 3,924,206 (3) 4,655,067, (4) 4,718,254, (5) 4,924,539, (6), 4,941,867, (7) 5,551,213, (8) 5,851,953, (9) 6,553,350 and (10) 7,108,836 shares would be issued upon conversion of the promissory note. The Company performed a revaluation of the embedded conversion liability using the Black Scholes Pricing Model at January 31, 2017 that resulted in a calculated value of $596,602. The Company recorded $99,321 of expense for the change between January 24, 2017 and January 31, 2017 in the fair value of compound embedded derivative, recorded as a separate item in other income (expense) in the accompanying unaudited financial statements. The revaluation of the embedded conversion liability at January 31, 2017 was calculated using the Black Scholes option pricing model with the following assumptions; stock price $0.14, conversion price $0.05, expected term of 0.10 years, expected volatility of 181% and discount rate of 0.52%. The change in the derivative liability assumed that 6,748,354 shares would be issued upon conversion of the promissory note at January 31, 2017. For the nine months ended January 31, 2017, the Company recorded $415,890 for amortization of the four debt discounts discussed above to interest expense in the accompanying unaudited financial statements. |