NOTES PAYABLE | 6. NOTES PAYABLE On April 27, 2016, the Company issued our CEO a 7% unsecured promissory note in the amount of $2,500 which matured six months from the date of issuance. On July 5, 2016, the Company issued our CEO a 7% unsecured note in the amount of $3,000 which matured six months from date of issuance. On November 17, 2016, the Company repaid the principal amount of the notes, or $5,500. The changes in these notes payable to related party consisted of the following during the nine months ended May 31, 2017 and the year ended August 31, 2016: May 31, August 31, 2016 Notes payable – related party at beginning of period $ 5,500 $ - Payments on notes payable – related party (5,500 ) - Borrowings on notes payable – related party 50 5,500 Convertible debenture – related party at end of period $ 50 $ 5,500 On May 17, 2016, the Company issued to Lyle Hauser, the Company’s largest shareholder, a 7% unsecured promissory note in the amount of $10,000 which matured six months from the date of issuance. On August 15, 2016, the Company issued a significant shareholder a 7% unsecured promissory note in the amount of $16,000 which matures six months from the date of issuance. On October 27, 2016, the Company issued a significant shareholder a 7% unsecured promissory note in the amount of $10,000 which matures six months from the date of issuance. The preceding notes have matured and remain unpaid at the quarter ended May 31, 2017. On November 14, 2016, the Company issued a significant shareholder 7% unsecured promissory note in the amount of $80,000 which matures six months from the date of issuance. On February 17, 2017, the Company issued a significant shareholder 7% unsecured promissory note in the amount of $30,000 which matures six months from the date of issuance. On March 31, 2017, the Company issued a significant shareholder 7% unsecured promissory note in the amount of $7,000 which matures six months from the date of issuance. The changes in notes payable to related party consisted of the following during the nine months ended May 31, 2017 and the year ended August 31, 2016: May 31, August 31, 2016 Notes payable – related party at beginning of period $ 26,000 $ - Payments on notes payable – related party - - Borrowings on notes payable – related party 127,000 26,000 Convertible debenture – related party at end of period $ 153,000 $ 26,000 On April 11, 2017, the Company executed a $540,000 Convertible Debenture with an original issue discount of $180,000. The note has a 9% interest rate and a term of two years. In connection with the note, the Company issued the lender an aggregate of 2,700,000 shares and 900,000 warrants. The relative fair value of the stock and warrants aggregating $202,490 was recognized as a discount to the note. Amortization of $11,351 was recognized during the nine months ended May 31, 2017. The conversion price of the outstanding balance is the lesser of $3.00 or 40% of the volume weighted average price of the 30 days at date of conversion; not to be less than $1.00. In connection with the note the lender is entitled to receive the greater of 5% every dollar raised through financing or every dollar of revenue generated through the earlier of maturity date and repayment of the principle. May 31, Convertible debenture $ 540,000 Unamortized discount (371,139 ) Convertible debenture, net of unamortized discount $ 168,861 |