Note 6 - Notes Payable: | Note 6 Notes Payable: Notes payable consisted of the following: April 30, 2016 January 31, 2016 Current Long Term Total Current Long Term Total Convertible notes $2,465,000 $ - $2,465,000 $2,410,000 $ - $2,410,000 Mortgage 222,760 85,369 308,129 211,273 145,737 357,010 Settlement and Equipment Note 100,100 - 100,100 50,000 50,000 $2,787,860 $ 85,369 $2,873,229 $2,671,273 $145,737 $2,817,010 On March 20, 2014, the Company issued a convertible note in the amount of $850,000 (the Note) to an individual. This Note was subsequently amended, and the unpaid principal balance was converted into common stock, as more fully described below. The Note had an interest rate of 25%, payable monthly, and was scheduled to mature on September 21, 2014. The outstanding principal balance of the Note, plus any accrued but unpaid interest on the Note, was convertible at any time on or before the maturity date at $1 per common share. The Note was personally guaranteed by our majority shareholder and by an officer and director of the Company. On July 16, 2014, the terms of the Note were amended (Amendment) wherein the holder of the Note elected to convert $200,000 of the principal of the Note into 293,000 of our common shares of stock at a price of $.6825 per share. As a component of the Amendment, we in turn elected to prepay the remaining principal balance of the Note, after the scheduled payment of the principal and accrued interest due the holder on June 24, 2014, and to pay a prepayment penalty of $11,250. The difference of $93,000 in the premium of the per-share price of $0.6825 per share per the Amendment and the $1 per share per the Note, plus the amount of the prepayment penalty was charged to the loss on the early extinguishment of debt and interest expense, respectively. On January 31, 2015, the Company entered into three convertible notes totaling up to $2,500,000, of which $2,465,000 had been received by the Company at April 30, 2016. The convertible notes were funded by the noteholders in varying amounts from approximately $50,000 to $550,000 per month. The convertible notes are unsecured, have an interest rate of 25%, with the interest payable monthly. The principal amount of the convertible notes are due on January 1, 2017. At any time prior to the due date of the convertible notes, the unpaid principal amount of the convertible note, plus any accrued but unpaid interest, may be converted into common stock of the Company at a per-share price of $1 per share. The convertible loans are personally guaranteed by Shawn Phillips, a former officer of the Company and affiliate, and Erin Phillips, the majority shareholder of the Company. The conversion feature associated with the convertible notes provided for a rate of conversion that is below market value, and thus, a beneficial conversion feature was recorded and classified as a debt discount on the balance sheet at the time of issuance of each convertible note with a corresponding credit to additional paid-in capital. During the year ended January 31, 2016, the Company recorded a beneficial conversion feature of $650,000 in connection with the issuance of the above convertible notes, and amortized to interest expense $336,117 and $313,883 during the three months ended April 30, 2016 and the year ended January 31, 2016, respectively. As of January 31, 2016, the Company was in default under the terms of the convertible notes in that it had not paid the full amount of the monthly accrued interest as it became due. As a result, all principal, plus accrued and unpaid interest owing under the terms of the convertible notes, are classified as current liabilities as of January 31, 2016. However, effective June 30, 2016, the Company entered into a debt modification agreement with the lenders. Pursuant to the agreement, the Company will pay the lenders $84,482 each month for ten months, with the first payment due on August 15, 2016. The $84,482 consists of past due interest of $32,482 plus current monthly interest of $52,000. Beginning June 15, 2017 only current monthly interest of $52,000 will be due the lenders. In addition to the above: · · · On July 26, 2014 the company entered into a mortgage payable for the purpose of purchasing a commercial operating property that contains a cultivation facility and retail store, which we lease to one of the Regulated Entities. The amount of the mortgage is $595,000, has a three year term, and has no stated rate of interest. In accordance with ASC 835-30, we imputed an interest rate for the mortgage payable of 21.36%. The mortgage is payable in varying amounts from $11,000 to $36,000 per month, which includes interest at a stated amount of $6,000 per month, with a balloon payment of $126,000 due in the thirty-sixth month of the term. We account for the mortgage on a straight line basis with an imputed monthly payment of principal and interests in the amount of $22,301 per month. The difference between the imputed monthly payment amount and actual payment amounts is recorded as an increase or decrease to deferred interest expense, at the time a monthly payment is made. The amount of principal and interest payments on the notes for the five year period ending January 31, 2021 are, as follows: The amount of principal and interest payments on the notes for the five year period ending April 30, 2021 are, as follows: April 30, 2017 2018 2019 2020 2021 Convertible notes - interest only $618,900 $ - $ - $ - $ - Convertible notes - principal 2,465,000 - - - - Mortgage principal plus interest 232,000 184,000 - - - Settlement and Equipment advance 100,100 - $3,416,000 $184,000 $ - $ - $ - |