| Convertible Promissory Notes [Text Block] | 8. Convertible Promissory Notes Summary of convertible promissory note at June 30, 2016 and December 31, 2016 is as follows:
June 30,
Principal
Accretion
Total
Transfer (Loan
Dec. 31,
2016
Issued
of Issuance
converted
Extinguished)
2016
Cost
February 13, 2013 $
21,908
$
-
$
-
$
-
$
-
$
21,908
July 22, 2014
185,314
-
-
(90,917
)
(15,304
)
79,093
August 22, 2014
15,768
-
-
-
(15,768
)
-
February 6, 2015
7,150
-
-
-
-
7,150
March 9, 2015
10,220
(10,220
)
-
February 24, 2015
76,239
-
-
-
(76,239
)
-
August 3, 2015
36,000
-
-
-
-
36,000
September 9, 2015
30,000
-
-
-
-
30,000
September 30, 2015
20,800
-
-
-
(20,800
)
-
November 06,2015
12,000
-
-
-
-
12,000
December 01, 2015
36,000
-
-
-
(18,000
)
18,000
December 03, 2015
17,000
-
-
-
(17,000
)
-
January 27, 2016
29,750
-
-
-
(5,000
)
24,750
February, 1, 2016
49,197
(49,197
)
-
March 01, 2016
13,200
-
-
-
-
13,200
March 24, 2016
12,100
-
-
-
-
12,100
March 28, 2016
42,986
-
-
(2,216
)
(70
)
40,700
April 19, 2016
197,067
(137,500
)
59,5657
May 16, 2016
30,250
-
-
-
-
30,250
August 12, 2016
-
40,000
2,453
-
-
42,453
September 7, 2016
-
100,000
4,700
(53,920
)
161,420
212,200
September 8, 2016
-
25,000
819
(60,570
)
120,000
85,249
September 9,2016
-
125,000
5,567
-
130,567
September 15, 2016
-
232,000
7,116
-
239,116
September 16, 2016
-
-
-
125,000
125,000
September 19, 2016
-
-
-
1,398,000
1,398,000
September 27, 2016
-
110,000
3,907
113,907
October 10, 2016
-
-
2,050
-
93,063
95,113
October 19, 2016
-
-
-
35,000
35,000
October 27, 2016
-
40,000
1,400
-
-
41,400
October 31, 2016
-
147,000
2,599
-
-
149,599
November 14, 2016
-
25,000
727
-
-
25,727
November 22, 2016
-
25,000
471
-
-
25,471
November 30, 2016
-
87,000
1,036
-
-
88,036
December 23, 2016
-
37,500
156
-
-
37,656
December 29, 2016
-
82,000
48
-
-
82,048
$
842,950
$
1,075,500
$
33,049
$
(207,623
) $
1,567,384
$
3,311,260
Less: Unamortized debt discount $
(223,181
) $
(976,166
)
Total note payable, net of debt discount $
619,769
$
2,335,094
Current portion $
619,769
$
2,335,094
Long term portion $
-
$
-
On September 8, 2016 Company had transferred an aggregate of $15,304
plus accrued interest of $104,696
in Convertible Promissory Notes from one debt holder to another. The transfer was treated as a modification of the Convertible Promissory Notes. The Convertible Promissory Notes matures on September 8, 2017. These notes bear
10% interest per annum and the Holder of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to
50% discount of the lowest trading price of the Common Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
The Company identified embedded derivatives related to the Convertible Promissory Notes. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $90,498
of the embedded derivative. The fair value of the embedded derivative was determined using the Black Scholes Model based on the following assumptions:
Dividend yield:
0.00%
Volatility
241.19%
Risk free rate:
.
85%
The initial fair values of the embedded debt derivative $78,957
was allocated as a debt discount of the note with the remainder $11,542
was charged to current period operations as interest expense.
On October 10, 2016 Company issued an aggregate of $102,369
Convertible Promissory Notes with no issuance costs that matures on October 10, 2017. These notes bear
10% interest per annum and the Holder of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to
50% discount of the lowest trading price of the Common Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
The Company identified embedded derivatives related to the Convertible Promissory Notes. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $74,334
of the embedded derivative. The fair value of the embedded derivative was determined using the Black Scholes Model based on the following assumptions:
Dividend yield:
0.00%
Volatility
241.19%
Risk free rate:
.
85%
The initial fair values of the embedded debt derivative $74,334
was allocated as a debt discount and no amounts allocated to interest expense.
On October 19, 2016 Company issued an aggregate of $35,000
Convertible Promissory Notes with no issuance costs that matures on October 19, 2017. These notes bear
8% interest per annum and the Holder of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to
65% discount of the lowest trading price of the Common Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
The Company identified embedded derivatives related to the Convertible Promissory Notes. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $44,093
of the embedded derivative. The fair value of the embedded derivative was determined using the Black Scholes Model based on the following assumptions:
Dividend yield:
0.00%
Volatility
241.19%
Risk free rate:
.
85%
The initial fair values of the embedded debt derivative $18,846
was allocated as a debt discount of the note with the remainder $25,247
was charged to current period operations as interest expense.
On October 27, 2016 Company issued an aggregate of $48,400
Convertible Promissory Notes with issuance cost of $8,400
that matures on October 27, 2017. These notes bear
10% interest per annum and the Holder of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to
50% discount of the lowest trading price of the Common Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
The Company identified embedded derivatives related to the Convertible Promissory Notes. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $27,583
of the embedded derivative. The fair value of the embedded derivative was determined using the Black Scholes Model based on the following assumptions:
Dividend yield:
0.00%
Volatility
241,19%
Risk free rate:
.
85%
The initial fair values of the embedded debt derivative $27,583
was allocated as a debt discount up to the proceeds of the note and no amounts allocated to interest expense.
On October 31, 2016 Company issued an aggregate of $163,334
Convertible Promissory Notes with issuance cost of $16,334
that matures on October 31, 2017. These notes bear
10% interest per annum and the Holder of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to lesser of $0.005
or
50% discount of the lowest trading price of the Common Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
The Company identified embedded derivatives related to the Convertible Promissory Notes. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $63,303
of the embedded derivative. The fair value of the embedded derivative was determined using the Black Scholes Model based on the following assumptions:
Dividend yield:
0.00%
Volatility
241.19%
Risk free rate:
.
85%
The initial fair values of the embedded debt derivative $63,303
was allocated as a debt discount and no amounts allocated to interest expense.
On November 14, 2016 Company issued an aggregate of $31,111
Convertible Promissory Notes with issuance cost of $6,111
that matures on November 14, 2017. These notes bear
10% interest per annum and the Holder of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to lesser of $0.005
or
50% discount of the lowest trading price of the Common Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
The Company identified embedded derivatives related to the Convertible Promissory Notes. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $47,670
of the embedded derivative. The fair value of the embedded derivative was determined using the Black Scholes Model based on the following assumptions:
Dividend yield:
0.00%
Volatility
241.19%
Risk free rate:
.
85%
The initial fair values of the embedded debt derivative $25,000
was allocated as a debt discount of the note with the remainder $22,670
was charged to current period operations as interest expense.
On November 22, 2016 Company issued an aggregate of $29,700
Convertible Promissory Notes with issuance cost of $4,700
that matures on November 22, 2017. These notes bear
10% interest per annum and the Holder of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to
50% discount of the lowest trading price of the Common Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
The Company identified embedded derivatives related to the Convertible Promissory Notes. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $19,950
of the embedded derivative. The fair value of the embedded derivative was determined using the Black Scholes Model based on the following assumptions:
Dividend yield:
0.00%
Volatility
241.19%
Risk free rate:
.
59%
The initial fair values of the embedded debt derivative $19,950
was allocated as a debt discount.
On November 30, 2016 Company issued an aggregate of $100,000
Convertible Promissory Notes with issuance cost of $13,000
that matures on November 30, 2017. These notes bear
10% interest per annum and the Holder of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to lesser of $0.005
or
50% discount of the lowest trading price of the Common Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
The Company identified embedded derivatives related to the Convertible Promissory Notes. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $63,665
of the embedded derivative. The fair value of the embedded derivative was determined using the Black Scholes Model based on the following assumptions:
Dividend yield:
0.00%
Volatility
241.19%
Risk free rate:
.
59%
The initial fair values of the embedded debt derivative $63,665
was allocated as a debt discount and no amounts allocated to interest expense.
On December 23, 2016 Company issued an aggregate of $45,100
Convertible Promissory Notes with issuance cost of $7,600
that matures on December 23, 2017. These notes bear
10% interest per annum and the Holder of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to
50% discount of the lowest trading price of the Common Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
The Company identified embedded derivatives related to the Convertible Promissory Notes. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $22,112
of the embedded derivative. The fair value of the embedded derivative was determined using the Black Scholes Model based on the following assumptions:
Dividend yield:
0.00%
Volatility
241.19%
Risk free rate:
.
85%
The initial fair values of the embedded debt derivative $22,112
was allocated as a debt discount and no amounts allocated to interest expense.
On December 29, 2016 Company issued an aggregate of $91,111
Convertible Promissory Notes with issuance cost of $9,111
that matures on December 29, 2017. These notes bear
10% interest per annum and the Holder of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock at a price equal to lesser of $0.005
or
50% discount of the lowest trading price of the Common Stock as reported on the OTC Markets for the twenty prior trading days including the day upon which a Notice of Conversion is received.
The Company identified embedded derivatives related to the Convertible Promissory Notes. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $68,524
of the embedded derivative. The fair value of the embedded derivative was determined using the Black Scholes Model based on the following assumptions:
Dividend yield:
0.00%
Volatility
241.19%
Risk free rate:
.
85%
The initial fair values of the embedded debt derivative $68,524
was allocated as a debt discount up to the proceeds of the note and no amounts allocated to interest expense.
The modification of the Notes was evaluated under FASB Accounting Standards Codification (“ASC”) Topic No. 470-50-40, “Debt Modification and Extinguishments”. Therefore, according to the guidance, the instruments were determined to be substantially different, and the transaction qualified for extinguishment accounting. During the six months ended December 31, 2016, $1,539,701
was recorded as loss on extinguishment of debt due to settlement agreement with note holders. The $1,539,701
consists of net increase in principal of convertible promissory notes of $1,429,501
(net of extinguished interests of $137,883), increase in principal of non-convertible promissory notes of $520,000, extinguished derivative liabilities for debt and warrants with fair values on date of conversion was $298,728
and $111,072
respectively.
During the three and six months period ended December 31, 2016 the Company amortized the debt discount on all the notes of $404,026
and $546,358, respectively to operations as expense including $28,957
and $33,052, respectively, for accretion expenses. During the three and six months period ended December 31, 2015 the Company amortized the debt discount on all the notes of $149,379
and $320,322, respectively, to operations as expense.
Derivative Liability - Debt
The fair value of the described embedded derivative on all debt was valued at $1,812,194
and $1,162,058
at December 31, 2016 and June 30, 2016, respectively, which was determined using the Black Scholes Model with the following assumptions:
December 31, 2016 June 30, 2016
Dividend yield:
0%
0%
Volatility
241.2
–
267.9%
346.6
–
453.3%
Risk free rate:
0.62%-0.85%
0.39%-0.66%
The Company recorded fair value of the derivative liability on debt to market resulting in non-cash, non-operating gain of $270,809
and $1,070,492
for the six months ended December 31, 2016 and 2015, respectively. For the three months ending December 31, 2016 and 2015, a non-cash, non-operating gain of $1,239,892
and $8,660,230
was recorded respectively.
During the period ended December 31, 2016 and June 30, 2016 the Company reclassed the derivative liability of $305,763
and $768,175, respectively, to additional paid in capital on conversion of convertible note.
The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of December 31, 2016 and June 30, 2016:
Derivative
Liability (convertible
promissory notes)
Balance, June 30, 2015 $
1,646,448
Initial fair value at note issuances
1,027,009
Fair value of liability at note conversion
(768,175
)
Mark-to-market at June 30, 2016
(743,224
)
Balance, June 30, 2016 $
1,162,058
Initial fair value at note issuances
1,525,435
Fair value of liability at note conversion
(305,763
)
Extinguishment of derivative liability
(298,728
)
Mark-to-market at December 31, 2016
(270,809
)
Balance, December 31, 2016 $
1,812,193
Net gain for the period included in earnings relating to the liabilities held at December 31, 2016 $
270,809
Derivative Liability- Warrants Along with the promissory notes, the Company issued warrants that bear a cashless exercise provision. The warrants also include anti-dilution protection with respect to lower priced issuances of common stock or securities convertible or exchangeable into common stock, which provision resulted in derivative liability treatment under ASC 480. The warrants are recorded at fair value using the Black-Scholes option pricing model and marked-to-market at each reporting period, with the changes in the fair value recorded in the consolidated statement of operations and comprehensive income (loss). During the period ended December 31, 2016 and the year ended June 30, 2016 no warrants were issued along with convertible note.
The fair value of the described embedded derivative on all warrants was valued at $270,055
at December 30, 2016 and $268,611
at June 30, 2016 which was determined using the Black Scholes Model with the following assumptions:
December 31, June 30, 2016
2016
Dividend yield:
0
%
0%
Volatility
240.7
–
291.9
%
229.1
–
275.4%
Risk free rate:
0.88
-
1.47
%
0.71
–
1.01%
Warrants
Weighted
Weighted
Outstanding
Average
Average
Exercise
Remaining
Price
life
Balance, June 30, 2015
27,092
$
100.98
3.79
years
Exercised
(120
)
280.00
-
Issued
-
-
-
Expired
-
-
-
Cancelled
-
-
-
Balance, June 30, 2016
26,972
$
100.20
2.79
years
Exercised
-
-
-
Issued
-
-
-
Expired
-
-
-
Cancelled
(10,834
)
164.80
-
Balance, December 31, 2016
16,138
$
211.60
2.91
years
The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of December 31, 2016 and June 30, 2016:
Derivative
Liability (warrants)
Balance, June 30, 2015 $
143,375
Initial fair value of warrant derivatives at note issuances
-
Fair value of warrant exercised
(22,476
)
Mark-to-market at June 30, 2016 – warrant liability
147,712
Balance, June 30, 2016 $
268,611
Fair value of warrant cancelled
(111,073
)
Mark-to-market at December 31, 2016 – warrant liability
112,517
Balance, December 31, 2016 $
270,055
Net loss for the year included in earnings relating to the liabilities held at December 31, 2016 $
112,517
The Company recorded fair value of the derivative liability on warrants to market resulting in non-cash, non-operating gain of $68,730
and $245,829
for the three months ended December 31, 2016, and 2015, respectively and non-cash, non-operating loss of $112,517
and $606,206
for the six months ended December 31, 2016, and 2015, respectively.
During the period ended December 31, 2016 and June 30, 2016 the Company reclassed the derivative liability on warrants of $Nil
and $22,476, respectively, to additional paid in capital on exercise of warrants. |
