CONVERTIBLE NOTES PAYABLE | 13. CONVERTIBLE NOTES PAYABLE Convertible notes payable consisted of the following: Balance Balance Interest Conversion February 28, February 28, Issued Maturity Rate Rate per Share 2019 2018 February 28, 2011 February 26, 2013 * 7% $0.015 (3) $ 32,600 $ 32,600 January 31, 2013 February 28, 2017 * 10% $0.010 (3) 119,091 119,091 May 31, 2013 November 30, 2016 * 10% $0.010 (3) 261,595 261,595 August 31, 2014 November 30, 2016 * 10% $0.002 (3) 355,652 355,652 November 30, 2014 November 30, 2016 * 10% $0.002 (3) 103,950 103,950 February 28, 2015 February 28, 2017 * 10% $0.001 (3) 63,357 63,357 May 31, 2015 August 31, 2017* 10% $1.000 (3) 65,383 65,383 August 31, 2015 August 31, 2017* 10% $0.300 (3) 91,629 91,629 November 30, 2015 November 30, 2018* 10% $0.300 (3) 269,791 269,791 February 29, 2016 February 28, 2019* 10% 60% discount (2) 95,245 95,245 May 31, 2016 May 31, 2019 10% $0.003 (3) 35,100 35,100 July 18, 2016 July 18, 2017* 10% $0.003 (3) 3,500 3,500 December 31, 2016 December 31, 2020 8% 35% discount (2) 65,000 65,000 January 15, 2017 January 15, 2021 8% 35% discount (2) 50,000 50,000 January 15, 2017 January 15, 2021 8% 35% discount (2) 100,000 100,000 January 16, 2017 January 16, 2021 8% 35% discount (2) 150,000 150,000 March 8, 2017 March 8, 2020 10% 40% discount (2) 100,000 100,000 March 9, 2017 March 9, 2021 8% 35% discount (2) 50,000 50,000 March 21, 2017 March 21, 2018* 8% 40% discount (2) — 30,000 April 4, 2017 December 4, 2017* 10% 40% discount (2) — 12,066 April 19, 2017 April 19, 2018* 15% 50% discount (2) 96,250 96,250 April 20, 2017 January 30, 2018* 8% 40% discount (1) — 28,000 April 26, 2017 April 26, 2018* 0% $0.001 68 67 May 1, 2017 May 1, 2021 8% 35% discount (2) 50,000 50,000 May 4, 2017 May 4, 2018* 8% 40% discount (2) 131,450 150,000 May 15, 2017 May 15, 2018* 0% $0.001 1,280 1,280 May 17, 2017 May 17, 2020 10% 40% discount (1) 85,000 85,000 June 7, 2017 June 7, 2018* 8% 40% discount (2) 180,964 200,000 June 16, 2017 June 16, 2018* 0% $0.001 750 750 July 6, 2017 July 6, 2018* 8% 40% discount (2) 200,000 200,000 August 8, 2017 August 8, 2018* 8% 40% discount (2) 125,000 125,000 Balance Balance Interest Conversion February 28, February 28, Issued Maturity Rate Rate per Share 2019 2018 July 28, 2017 July 28, 2018* 15% 50% discount (2) — 116,875 August 29, 2017 August 29, 2018* 15% 50% discount (2) 147,500 247,500 September 1 ,2017 September 1 ,2018* 0% lower of 50% discount/$0.005 (2) — 187,000 September 12 ,2017 September 12 ,2018* 8% 40% discount (2) — 128,000 September 25 ,2017 September 25 ,2018* 15% 50% discount (2) — 398,750 October 4, 2017 May 4, 2018* 8% 40% discount (2) 150,000 150,000 October 16, 2017 October 16, 2018* 15% 50% discount (2) 204,067 345,000 November 22 ,2017 November 22 ,2018* 15% 50% discount (2) 500,250 500,250 December 28 ,2017 December 28 ,2017* 10% 40% discount (2) 28,150 60,500 December 29 ,2017 December 29 ,2018* 15% 50% discount (2) 330,000 330,000 January 9,2018 January 9,2019* 8% 40% discount (2)(1) 79,508 82,500 January 30,2018 January 30, 2019* 15% 50% discount (2)(1) 300,000 300,000 February 21,2018 February 21,2019* 15% 50% discount (2)(1) 300,000 300,000 March 14, 2018 March 14, 2019 10% 40% discount (2) 50,000 — March 16, 2018 March 16, 2019 15% 50% discount (2) — — June 7, 2017 June 9 ,2019 8% 40% discount (2) 200,000 — April 9, 2018 April 9, 2019 15% 50% discount (2) 55,000 — March 21, 2017 March 21, 2018* 8% 40% discount (2) — — March 21, 2017 March 21, 2018* 8% 40% discount (2) 40,000 — April 17, 2018 April 17, 2019 8% 45% discount (2) — — April 20, 2018 April 20, 2019 8% 40% discount (2) 65,106 — May 2, 2018 December 2, 2018* 10% 40% discount (2) 70,682 — May 4, 2018 May 4, 2019 12% 50% discount (2) 123,750 — May 14, 2018 December 14, 2018* 10% 50% discount (2) 33,542 — May 23, 2018 May 23, 2019 10% 50% discount (2) 110,000 — June 6, 2018 June 6,2019 15% 50% discount (2) 282,949 — June 19, 2018 March 19, 2019 15% 50% discount (2) 87,274 — July 6, 2017 June 9 ,2019 8% 40% discount (2) 200,000 — August 1,2018 August 1,2019 15% 50% discount (2) 32,500 — August 23,2018 August 23,2019 8% 45% discount (2) 77,435 — September 13 ,2018 June 30, 2019 12% 45% discount (2) 79,500 — September 17 ,2018 March 17, 2019 10% 50% discount (2) 4,945 — September 20 ,2018 September 20 ,2019 15% 50% discount (2) 39,350 — September 24 ,2018 June 24 ,2019 8% 40% discount (2) 44,000 — August 8 ,2017 June 9 ,2019 8% 40% discount (2) 125,000 — November 8 ,2018 August 15, 2019 12% 45% discount (2) 79,500 — November 26 ,2018 May 26 ,2019 10% 50% discount (2) 44,798 — $ 6,767,461 $ 6,136,681 Less: current portion of convertible notes payable (6,202,461 ) (5,536,582 ) Less: discount on noncurrent convertible notes payable (302,105 ) (505,039 ) Noncurrent convertible notes payable, net of discount $ 262,895 $ 95,060 Current portion of convertible notes payable $ 6,202,461 $ 5,536,582 Less: discount on current portion of convertible notes payable (718,015 ) (3,418,637 ) Current portion of convertible notes payable, net of discount $ 5,484,446 $ 2,117,946 __________ * The indicated notes were in default as of February 28, 2019. (1) The note is convertible beginning six months after the date of issuance. (2) The notes are convertible at a discount (as indicated) to the average market price and are accounted for and evaluated under ASC 480 as discussed in Note 4. (3) The conversion price is not subject to adjustment from forward or reverse stock splits. During the years ended February 28, 2019 and 2018, the Company incurred original issue discounts of $85,143 and $251,500, respectively, and debt discounts from derivative liabilities of $1,668,025 and $3,106,385, respectively, related to new convertible notes payable. These amounts are included in discounts on convertible notes payable and are being amortized to interest expense over the life of the convertible notes payable. During the years ended February 28, 2019 and 2018, the Company recognized interest expense related to the amortization of debt discount of $4,641,181 and $1,102,430, respectively. The Company recorded penalty interest of $343,970 during the year February 28, 2019 (February 2018-$0) that is payable upon maturity if not already converted or settled prior to maturity. All the notes above are unsecured. As of February 28, 2019, the Company had total accrued interest payable of $1,476,050, of which $1,390,706 is classified as current and $85,344 is classified as noncurrent. As of February 28, 2018, the Company had total accrued interest payable of $750,509, of which $694,592 is classified as current and $55,917 is classified as noncurrent See description below for description of the convertible notes issued during the years ended February 28, 2019 and 2018. Convertible notes issued The Company determined that the embedded conversion features in the convertibles notes described below should be accounted for as derivative liabilities as a result of their variable conversion rates. On January 5, 2018, the Company issued a convertible promissory note to an investor with an aggregate principal amount of $250,000, due on January 5, 2019 for cash proceeds of $225,000 payable in tranches, with an original issue discount of $25,000. Each tranche matures one year after disbursement. The promissory note is convertible into common shares of the Company and a conversion price equal to 60% of the lowest trading price of the Company’s common stock for the last 25 trading days prior to conversion, and has a 10% per annum interest rate commencing on January 5, 2018. On March 14, 2018, this note was amended to include the issuance of warrants to purchase 333,333 shares of the Company’s common stock with an exercise price of $0.15 with a 3-year maturity, and to change the date of the note to March 14, 2018, coinciding with the payment of the first tranche of $50,000 including cash proceeds of $43,000, fees of $2,000 and an original issue discount of $5,000. On March 1, 2018, the Company issued a convertible redeemable note to an investor with an aggregate principal amount of $95,000, due on March 1, 2019 for cash proceeds of $95,000. The promissory note is convertible into units of the Company comprised of one share of common stock and one warrant to purchase a share of common stock with a three-year maturity and a conversion price equal to 50% of the lowest bid price of the Company’s common stock for the last 40 trading days prior to conversion, and has a 15% per annum interest rate. In March 2018 and April 2018, an investor paid the Company $200,000 in exchange for a June 7, 2017 back-end note for $200,000, whose maturity was extended to June 9, 2019. The note is convertible into common shares of the Company and a conversion price equal to 60% of the lowest trading price of the Company’s common stock for the last 20 trading days prior to conversion, and has an 8% per annum interest rate. On April 9, 2018, the Company issued a convertible redeemable note to an investor with an aggregate principal amount of $55,000, due on April 9, 2019 for cash proceeds of $55,000. The promissory note is convertible into units of the Company comprised of one share of common stock and one warrant to purchase a share of common stock with a three-year maturity and a conversion price equal to 50% of the lowest bid price of the Company’s common stock for the last 40 trading days prior to conversion, and has a 15% per annum interest rate. In April 2018, the Company received $76,000 of proceeds from an investor for two back-end notes with a total principal amount of $80,000, including original issue discounts of $4,000 and a one-year maturity. The back-end notes are convertible into common shares of the Company at a conversion price equal to 60% of the lowest trading price of the Company’s common stock for the last 20 trading days prior to conversion, and have an 8% per annum interest rate. On May 2, 2018, the Company received $70,000 of proceeds from an investor for a promissory note with a principal amount of $77,000, including an original issue discounts of $7,000 and an eight-month maturity. The promissory note is convertible into common shares of the Company at a conversion price equal to 60% of the lowest trading price of the Company’s common stock for the last 20 trading days prior to conversion, and has a 10% per annum interest rate. On May 4, 2018, the Company received $71,500 of proceeds from an investor for a promissory note with a principal amount of $82,500, including an original issue discounts of $11,000 and a one-year maturity. The promissory note is convertible into common shares of the Company at a conversion price equal to 50% of the lowest trading price of the Company’s common stock for the last 20 trading days prior to conversion, and has a 12% per annum interest rate. On May 23, 2018, the Company received $90,108 of proceeds from an investor for a promissory note with a principal amount of $110,000, including an original issue discounts of $19,892 and an eight-month maturity. The promissory note is convertible into common shares of the Company at a conversion price equal to 50% of the lowest trading price of the Company’s common stock for the last 40 trading days prior to conversion, and has a 10% per annum interest rate. In July and August 2018,and December 2018 the Company received $180,000 of proceeds from an investor for a back-end note date July 6, 2017 principal amount of $200,000, including original issue discounts of $20,000 and a June 30, 2019 maturity. The promissory note is convertible into common shares of the Company at a conversion price equal to 60% of the lowest trading price of the Company’s common stock for the last 20 trading days prior to conversion, and has an 8% per annum interest rate. In July and August 2018, the Company received $32,500 of proceeds from an investor for a promissory note with a principal amount of $32,500, and a one-year maturity. The promissory note is convertible into common shares of the Company at a conversion price equal to 50% of the lowest trading price of the Company’s common stock for the last 20 trading days prior to conversion, and has a 15% per annum interest rate commencing on August 1, 2018. On September 13, 2018, the Company received $50,000 of proceeds from an investor for a promissory note with a principal amount of $53,000, including an original issue discounts of $3,000 and a nine-month maturity. The promissory note is convertible into common shares of the Company at a conversion price equal to 45% of the lowest trading price of the Company’s common stock for the last 20 trading days prior to conversion, and has a 12% per annum interest rate. On September 20, 2018, the Company received $39,350 of proceeds from an investor for a promissory note with a principal amount of $39,350 and a one-year maturity. The promissory note is convertible into common shares of the Company at a conversion price equal to 50% of the lowest trading price of the Company’s common stock for the last 20 trading days prior to conversion, and has a 15% per annum interest rate. On September 24, 2018, the Company received $40,000 of proceeds from an investor for a promissory note with a principal amount of $44,000, including an original issue discounts of $4,000 and a nine-month maturity. The promissory note is convertible into common shares of the Company at a conversion price equal to 40% of the lowest trading price of the Company’s common stock for the last 20 trading days prior to conversion, and has a 8% per annum interest rate. On November 1, 2018, the Company received $50,000 of proceeds from an investor for a promissory note with a principal amount of $53,000, including an original issue discounts of $3,000 maturing August 15, 2019. The promissory note is convertible into common shares of the Company at a conversion price equal to 45% of the lowest trading price of the Company’s common stock for the last 20 trading days prior to conversion, and has a 12% per annum interest rate. On November 30, 2018, the Company received $118,750 of proceeds from an investor for a back-end promissory note dated August 8, 2017 with a principal amount of $125,000, including an original issue discounts of $6,250 maturing June 9, 2019. The promissory note is convertible into common shares of the Company at a conversion price equal to 40% of the lowest trading price of the Company’s common stock for the last 20 trading days prior to conversion, and has a 8% per annum interest rate. During the year ended February 28, 2019, the Company also had the following convertible note activity: ● A debt holder transferred debt of $344,040, including accrued interest, to third parties who exchanged it for new convertible notes totaling $344,040, $100,000 with a one-year maturity, maturing on April 17, 2019, bearing interest at 8% per annum and are convertible into common shares of the Company at a conversion price equal to 50% of the lowest bid price of the Company’s common stock for the last 40 trading days prior to conversion; $144,404, with a one-year maturity, maturing on April 20, 2019, bearing interest at 8% per annum, and are convertible into common shares of the Company at a conversion price equal to 60% of the lowest bid price of the Company’s common stock for the last 30 trading days prior to conversion; and $100,000 with an eight-month maturity, maturing on December 14, 2018, bearing interest at 10% per annum, and are convertible into common shares of the Company at a conversion price equal to 55% of the lowest bid price of the Company’s common stock for the last 30 trading days prior to conversion. A gain on settlement of debt of $268,145 was recorded that includes the amount of associated derivative liability that was written-off. ● A debt holder transferred debt of $299,200, including accrued interest, to third parties who exchanged it for a replacement convertible note totaling $299,200, a one-year maturity, maturing on September 25, 2018, and bearing interest at 15% per annum. The replacement convertible note is convertible into units of the Company comprised of one share of common stock and one warrant to purchase a share of common stock with a three-year maturity and a conversion price equal to 50% of the lowest bid price of the Company’s common stock for the last 40 trading days prior to conversion. A loss on settlement of debt of $484,484 was recorded that includes the amount of associated derivative liability that was written-off. ● A debt holder transferred debt of $132,149, including accrued interest, to third parties who exchanged it for a replacement convertible note totaling $132,149, with an eight-month maturity, maturing on March 19, 2019, bearing interest at 15% per annum, and are convertible into common shares of the Company at a conversion price equal to 50% of the lowest bid price of the Company’s common stock for the last 40 trading days prior to conversion. A gain on settlement of debt of $71,100 was recorded that includes the amount of associated derivative liability that was written-off. ● The Company exchanged a replacement note issued on April 17, 2018 with a principal of $100,000 and a one-year maturity, maturing on April 17, 2019, and bearing interest at 8% per annum for another replacement note issued on August 23, 2018 with a principal of $100,000 and a one-year maturity, maturing on August 23, 2019, and bearing interest at 8% per annum, and are convertible into common shares of the Company at a conversion price equal to 55% of the lowest bid price of the Company’s common stock for the last 30 trading days prior to conversion. A gain on settlement of debt of $90,629 was recorded that includes the amount of associated derivative liability that was written-off. ● A debt holder transferred debt of $103,984, including accrued interest, to third parties who exchanged it for new convertible notes totaling $344,040: $50,000 with a six-month maturity, maturing on March 17, 2019, bearing interest at 10% per annum, and are convertible into common shares of the Company at a conversion price equal to 50% of the lowest bid price of the Company’s common stock for the last 20 trading days prior to conversion; $53,984, with a six-month maturity, maturing on May 26, 2019, bearing interest at 10% per annum, and are convertible into common shares of the Company at a conversion price equal to 50% of the lowest bid price of the Company’s common stock for the last 20 trading days prior to conversion. A gain on settlement of debt of $121,305 was recorded that includes the amount of associated derivative liability that was written-off. ● The Company settled a September 1, 2017 note for repayment $125,000, and a gain of $64,441 was recorded due to the associated derivative liability that was written-off. ● During the year ended February 28, 2019, holders of certain convertible note payables elected to convert principal and accrued interest in the amounts shown below into shares of common stock. No gain or loss was recognized on conversions as they occurred within the terms of the agreement that provided for conversion. Accordingly, for the year ended February 28, 2019, holders of certain convertible notes payable elected to convert a total of $889,811 of principal and $35,782 accrued interest, and $12,000 of fees into 199,010,627 shares of common stock and warrants to purchase 20,430,476 shares of common stock (see Note 18 for detail of warrants issued). During the year ended February 28, 2018 the Company also had the following convertible note activity: In September 2017, the Company settled the March 8, 2017 note and paid $72,762, including the remaining $50,000 of principal balance and $1,929 in accrued interest, and a prepayment penalty of $20,833. The Company incurred this penalty to avoid additional costs related to the conversion of this note. The Company recorded a gain on settlement of debt of $84,507 related to the write-off of the associated derivative liability. During the year ended February 28, 2018, the Company repaid principal on convertible notes payable of $50,000. During the year ended February 28, 2018, a debt holder transferred debt of $337,958 and accrued interest of $147,713 to a third party who exchanged it for new convertible note for $300,000, maturing September 1, 2018 and bearing no interest. A gain on settlement of debt of $1,090,521 was recorded that includes the amount of associated derivative liability that was written off. During the year ended February 28, 2018, holders of certain convertible note payables elected to convert principal and accrued interest in the amounts shown below into shares of common stock. No gain or loss was recognized on conversions as they occurred within the terms of the agreement that provided for conversion. Accordingly, for the year ended February 28, 2018, holders of certain convertible notes payable elected to convert a total of $123,000 of principal into 230,167 shares of common stock. During the year ended February 28, 2018 and prior to the reverse merger, the Company canceled 600,000 shares of common stock. The shares had been issued during the year ended February 28, 2017 for the conversion of principal of a convertible note payable of $600. As a result of the shares being canceled, $600 was added back to the principal of the note. |