| NOTE 2. DEBT | October
31, 2018 April
30, 2018
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 10,000
Note
payable – August 4, 2016. Interest at 8% and principal payable on demand. 35,000 35,000
Note
payable – September 27, 2016. Interest at 4% and principal payable on demand. 30,000 30,000
Note
payable – September 29, 2016. Interest at 4% and principal payable on demand. 5,000 5,000
Note
payable – September 29, 2016. Interest at 4% and principal payable on demand. 30,000 30,000
Note
payable – October 3, 2016. Interest at 4% and principal payable on demand. 20,000 20,000
Total
Notes payable $ 230,000 $ 230,000 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
October 31, 2018, the Company has accrued $20,693 of interest related to the promissory note and included in accrued interest
in the accompanying unaudited Balance Sheet. 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
October 31, 2018, the Company has accrued $963 of interest related to the promissory note and included in accrued interest in
the accompanying unaudited Balance Sheet. 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
(1) January 26, 2017, (2) February 16, 2017, (3) March 2, 2017 and (4) March 6, 2017, the Company repaid (1) $25,000, (2) $25,000
and (3) $20,000 and (4) $25,000 of principal and the outstanding balance of the promissory note is $35,000 at October 31, 2018.
Through October 31,2018, the Company has accrued $9,446 of interest related to the promissory note and included in accrued interest
in the accompanying unaudited Balance Sheet. 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
October 31, 2018, the Company has accrued $2,515 of interest related to the promissory note and included in accrued interest in
the accompanying unaudited Balance Sheet. 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
October 31, 2018, the Company has accrued $418 of interest related to the promissory note and included in accrued interest in
the accompanying unaudited Balance Sheet. 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
October 31, 2018, the Company has accrued $2,509 of interest related to the promissory note and included in accrued interest in
the accompanying unaudited Balance Sheet. 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
October 31, 2018, the Company has accrued $1,663 of interest related to the promissory note and included in accrued interest in
the accompanying unaudited Balance Sheet.
October
31, 2018 April
30, 2018
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. $ 2,300 $ 2,300
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. Additionally, on August 28, 2015, the
officer personally repaid $20,000 of notes payable (see below). As a result, the outstanding balance owed to the officer was $20,300
at April 30, 2016. On (1) January 17, 2017, (2) February 1, 2017 and (3) February 2, 2017, the Company repaid (1) $5,000, (2)
$2,000 and (3) $11,000 of principal and the outstanding balance of the note payable is $2,300 at October 31, 2018, recorded as
Notes Payable – Related Parties in the accompanying unaudited Balance Sheet. See Note 5 – Related Party Transactions.
October
31, 2018 April
30, 2018
Convertible
Unsecured Notes 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
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 Company’s common stock at the conversion price of $0.30 per share. Through October 31, 2018, the Company
has accrued $6,376 of interest related to the unsecured convertible promissory note and included in accrued interest in the accompanying
unaudited Balance Sheet. The unsecured convertible promissory note is in default at October 31, 2018 and the note holder has several
remedies including calling the principal amount and accrued interest due and payable immediately.
October
31, 2018 April
30, 2018
Convertible
Secured Note Payable:
Secured
convertible promissory note payable – originally issued March 9, 2016 - Interest accrued at 22% default rate - principal
and interest due June 9, 2017 $ 90,000 $ 100,000
Secured
convertible promissory note payable – originally issued May 17, 2018 - Interest accrued at 8% - principal and interest
due May 17, 2019 80,000 -
Less:
debt discount (49,754 ) -
Total
Convertible Secured Notes Payable, net of debt discount $ 120,246 $ 100,000 Convertible
Secured Note Payable - #1 On
March 9, 2016 (the Original Issue Date (OID), 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 with 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 are payable in one year
on March 9, 2017. Any amount of the principal or interest 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.
At October 31, 2018, $80,908 of accrued interest was recorded in the accompanying unaudited Balance Sheet. 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. As
collateral security, the promissory note is secured by all collateral granted by a former 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 former 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” and due to the price protection in the promissory note, determined that there was a conversion option feature
that should be bifurcated and accounted for as a derivative liability in the balance sheet at fair value. The initial valuation
and recording of this derivative liability was $929,577 using the Binomial Lattice Option Pricing Model with the following assumptions;
stock price $0.93, conversion price $0.47, expected term of 1 year, expected volatility of 247% and discount rate of 0.30%. The
initial $929,577 derivative liability assumed that 1,161,972 shares would be issued upon conversion of the promissory note. The
Company evaluated the warrants and determined that there was no embedded conversion feature as the warrants contained a set exercise
price with an adjustment only based upon customary items including stock dividends and splits, subsequent rights offerings and
pro rata 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 and was recorded
as a debt discount with an offset to additional paid in capital in the accompanying financial statements. The warrant fair value
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
and were amortized over the one-year term of the note: (1) OID of $50,000, (2) debt issue costs of $55,000, (3) warrant fair value
of $239,069 and (4) conversion option liability of $205,931. 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. On
(1) February 1, 2017, (2) February 6, 2017, (3) February 8, 2017, (4) February 14, 2017, (5) February 21, 2017, (6) March 7, 2017,
(7) March 9, 2017, (8) March 13, 2017, (9) March 15, 2017, (10) March 28, 2017 and (11) April 12, 2017, the lender elected to
exercise their right to convert on each of the above dates for an aggregate total conversion amount of $185,000 of the principal
balance and the note payable balance was $170,000 at April 30, 2017. 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 principal balance. The
one-year term of the note matured on March 9, 2017 and the original debt discounts recorded as offsets to the note were amortized
in full including: (1) OID of $50,000, (2) debt issue costs of $55,000, (3) warrant fair value of $239,069 and (4) conversion
option liability of $205,931. The
Company evaluated the conversion option liability at April 30, 2017 and determined that the embedded feature qualifies for the
exception from derivative accounting pursuant to ASC 815-10-15-74(a) because the Company has subsequently increased its number
of authorized and unissued shares sufficient to cover the settlement of the embedded feature. For
the year ended April 30, 2017, the Company recorded $471,643 for amortization of the four debt discounts discussed above to interest
expense in the accompanying unaudited Statement of Operations. On
March 9, 2017, the Company and the Lender of the above convertible secured promissory note with a remaining principal balance
of $215,000 on that date, executed a forbearance agreement extending the note expiration date from March 9, 2017 to June 9, 2017.
The terms of the forbearance agreement included that the Company (1) will have paid all remaining principal and accrued interest
by June 9, 2017, (2) will issue 500,000 shares of common stock to the lender, (3) will pay the lender’s legal fees estimated
to be approximately $2,000 before April 30, 2017, (4) will issue the lender 500,000 warrants to purchase common stock at $0.10
per share with a three-year term and (5) the outstanding principal balance of the note will bear interest at the “Default
Interest” rate of twenty-two percent (22%), as defined in the note agreement. The
Company evaluated the forbearance agreement as to whether it was an extinguishment or modification of debt. In concluding on the
accounting, the Company evaluated ASC 470-50, Debtor’s Accounting for a Modification or Exchange of Debt Instruments. The
Company determined that the forbearance agreement was not an extinguishment of debt or a material modification. The Company adjusted
the carrying amount of the debt for any discount, including stock and warrant issuances, and was amortized over the modification
period of three months through June 9, 2017 as described below. The
Company evaluated the warrant and determined that there was no derivative treatment required as the warrant 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 outstanding principal of the note ($215,000)
and the warrant on March 9, 2017 utilizing the Black Scholes Pricing Model for the warrant. The Company allocated $28,015 to the
warrant which was recorded as a debt discount with an offset to additional paid in capital in the accompanying unaudited Balance
Sheet. The
Company valued the 500,000 shares of common stock issued to the lender based upon the quoted market price of $0.08 on March 9,
2017, the date of grant, or $40,000, recorded as a debt discount with an offset to additional paid in capital. In
total on the forbearance date of March 9, 2017, the Company recorded the following debt discounts as offsets to the note which
were amortized over the 90-day term of the forbearance agreement through June 9, 2017: (1) warrant relative fair value of $28,015
and (2) common stock relative fair value effective March 9, 2017. From March 9, 2017 through April 30, 2017, the Company recorded
amortization of the debt discount to interest expense in the amounts of (1) $16,187 against the warrant relative fair value of
$28,015 and (2) $16,947 against the common stock relative fair value. At April 30, 2017, the remaining combined warrant and stock
unamortized debt discount was $24,213 and classified as an offset to the $170,000 note balance. From
May 1, 2017 through April 30, 2018, the Company recorded amortization of the remaining debt discount of $24,213 to interest expense
in the accompanying unaudited Statement of Operations in amounts of (1) $11,829 against the warrant relative fair value $12,384
against the common stock relative fair value. As a result, the debt discount was amortized in full at April 30, 2018. From
March 9, 2016 through April 30, 2017, the lender elected to convert $380,000 of the principal amount of the note into 5,409,226
shares of common stock resulting in a note balance of $170,000 at April 30, 2017. From May 1, 2017 through April 30, 2018, the
lender elected to convert $70,000 of the principal amount of the note into 2,168,193 shares of common stock resulting in a note
balance of $100,000 at April 30, 2018. On May 18, 2018, the lender elected to convert $10,000 of the principal amount of the note
into 819,672 shares of common stock resulting in a note balance of $90,000 at October 31, 2018. The
promissory note was due and payable on June 9, 2017 and as a result, is in default at October 31, 2018. However, the lender has
not notified the Company of the default in writing but, the lender has several remedies including calling the principal amount
and accrued interest due and payable immediately. The
promissory note includes customary affirmative and negative covenants of the Company and at October 31, 2018, the Company is in
default of a covenant to (1) be quoted or listed on at least one of the OTC Markets (OTCQX, OTCQB or OTC-Pink) or an equivalent
replacement exchange, the Nasdaq National Market, the Nasdaq Small-Cap Market, the New York Stock Exchange, or the American Stock
Exchange and (2) the Company shall be in compliance with (as “current”), or otherwise comply with the reporting requirements
of the Exchange Act. On January 8, 2019, the Company received a waiver from the lender for these items through March 31, 2019
and is no longer in default of these specific items. Convertible
Secured Note Payable - #2 On
May 17, 2018, the Company received $75,000 of net proceeds for working capital purposes from the issuance of a $80,000 face value
convertible secured promissory note with debt issue costs paid to or on behalf of the lender of $5,000. The terms include interest
accrued at 8% annually and the principal and interest payable are payable in one year on May 17, 2019. Any amount of the principal
or interest which is not paid when due shall bear Interest at the rate of Eighteen Percent (18%), from the due date thereof until
the same is paid. 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 Sixty Percent
(60%) of the of the lowest trade of the Common Stock during the ten (10) trading Days immediately preceding a conversion date.
The Conversion Price is subject to “full ratchet” and other customary anti-dilution protections. The
promissory note includes customary affirmative and negative covenants of the Company and at October 31, 2018, the Company is in
default of a covenant to (1) be quoted on or before July 17, 2018 or listed on at least one of the OTC Markets (OTCQX, OTCQB or
OTC-Pink) or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq Small-Cap Market, the New York Stock Exchange,
or the American Stock Exchange and (2) after July 17, 2018, the Company shall be in compliance with (as “current”),
or otherwise comply with the reporting requirements of the Exchange Act. On January 8, 2019, the Company received a waiver from
the lender for these items through March 31, 2019 and is no longer in default. The
Company evaluated the secured convertible promissory note in accordance with ASC 815 “ Derivatives and Hedging On
the note issue date of May 17, 2018, the Company recorded the following debt discounts as offsets to the $80,000 promissory note
and will be amortized over the one-year term of the promissory note: (1) debt issue costs of $5,000 and (2) debt discount from
conversion option liability of $75,000. As a result, the Company recorded $39,132 for the initial fair value of the conversion
option liability in Other Income (Expense) in the accompanying unaudited Statement of Operations. For
the period from the note issue date of May 17, 2018 to October 31, 2018, the Company recorded $30,246 for amortization of the
debt discounts discussed above and recorded to interest expense in the accompanying unaudited Statement of Operations. The
Company performed a revaluation of the conversion option liability using the Binomial Lattice Pricing Model at October 31, 2018
that resulted in a calculated value of $53,968. As a result, the Company recorded $21,032 of income for the change in the fair
value of conversion option liability, and recorded in Other Income (Expense) in in the accompanying unaudited Statement of Operations. The
revaluation of the conversion option liability at October 31, 2018 was calculated using the Binomial Lattice option pricing model
with the following assumptions; stock price $0.01, conversion price $0.006, expected term of 0.50 years, expected volatility of
326% and discount rate of 2.29%. The change in the conversion option liability assumed that 13,333,333 shares would be issued
upon conversion of the promissory note at October 31, 2018. |
