| CONVERTIBLE DEBENTURES | 9. CONVERTIBLE DEBENTURES
(a) On November 27,
2017, the Company entered into and closed on a Securities Purchase Agreement (“SPA”) with Bellridge Capital L.P.
(“Bellridge”), pursuant to which the Company issued a senior secured convertible promissory note in the aggregate
principal amount of $526,316 (“Note”) for an aggregate purchase price of $500,000, net of a $26,316 original issue
discount (“OID”) and $10,000 of legal fees. The Company also incurred additional debt issuance costs of $50,000.
The total debt issue costs of $86,316 have been netted against the principal and will be amortized over the term of
the loan using the effective interest method. In addition, the Company issued 7,894,737 warrants to Bellridge exercisable
after a period of six months at an exercise price equal to the lesser of (i) $2.00 per share and (ii) 70% of the lowest traded
price of the Company’s common stock during the prior twenty consecutive trading days. The Company also agreed to issue
139,665 shares to Bellridge in connection with the loan. The interest on the outstanding principal due under the Note
accrued at a rate of 5% per annum. All principal and accrued interest under the Note was due on November 27, 2018 and is convertible
into shares of the Company’s Common Stock at a conversion price equal to the lesser of (i) $2.00 and (ii) 70% of the
lowest traded market price in the 20 consecutive trading days prior to the conversion date.
The Company has
evaluated whether separate financial instruments with the same terms as the conversion features above would meet the characteristics
of a derivative instrument as described in paragraphs ASC 815-15-25. The terms of the contracts did not permit net settlement,
as the shares delivered upon conversion are not readily convertible to cash. The Company’s trading history indicated
that the shares are thinly traded and the market would not absorb the sale of the shares issued upon conversion without significantly
affecting the price. As the conversion features would not meet the characteristics of a derivative instrument as described
in paragraphs ASC 815-15-25, the conversion features were not required to be separated from the host instrument and accounted
for separately. As a result, at January 31, 2021, the conversion features and non-standard anti-dilutions provisions would
not meet derivative classification.
The relative fair
values of the convertible note, the warrants and the shares were $140,733, $284,751 and $100,832, respectively. The
effective conversion price was then determined to be $1.26. As the stock price at the issuance date was greater than the effective
conversion price, it was determined that there was a beneficial conversion feature. The Company recognized the relative fair
value of the shares issuable of $100,832 and an equivalent discount that reduced the carrying value of the convertible debt
to $425,484. The Company then recognized the relative fair value of the warrants of $284,751 as additional-paid-in capital
and an equivalent discount that further reduced the carrying value of the convertible debt to $140,733. The beneficial conversion
feature of $54,417, the OID of $26,316 and debt financing costs of $60,000 discounted the convertible debenture such that
the carrying value of the convertible debt on the date of issue was $0. The discount was being expensed over the term of the
loan to increase the carrying value to the face value of the loan. The Company determined that there was no derivative liability
associated with the debenture under ASC 815-15 Derivatives and Hedging.
On November 27, 2018, the Company
defaulted on the convertible note, resulting in the note becoming immediately due and payable. Upon default, the interest
rate increased to 29% per annum and the Company incurs a late fee at an interest rate equal to 18% per annum on any
overdue and unpaid interest under the convertible note. Additionally, the total amount owed on the convertible note upon
default is equal to 130% of the outstanding principal and accrued and unpaid interest. During the year ended April 30,
2019, the Company recorded a 30% default penalty of $191,297 as a result of default, which included $25,694 of interest
accrued up to the point of default. The default penalty increased the carrying value of the loan principal to $717,613.
During the nine months ended January 31, 2021, the Company issued 2,052,498 shares of common stock upon the conversion of
$150,904 of the Note, comprising of $107,769 principal amount and $43,135 interest (Note 12). As at January 31, 2021, the
carrying value of the principal amount was $609,844 (April 30, 2020 - $684,211), and the Company has recorded accrued
interest of $481,036 (April 30, 2020 - $372,243).
(a) On April 2, 2018,
April 5, 2018 and April 13, 2018, the Company amended (the “Amendments”) the November 27, 2017 Securities Purchase
Agreement. Pursuant to the Amendments the Company issued Bellridge warrants to purchase 4,250,000 shares of the Company’s
common stock at an exercise price of $2.00 per share. The Company also issued a senior secured convertible promissory note
in the aggregate principal amount of $315,790 (“Note”) for an aggregate purchase price of $295,000, net of a $15,790
OID and $5,000 of legal fees. The Company also incurred additional debt issuance costs of $30,000 and issued a warrant to
purchase 28,036 shares of the Company’s common stock at an exercise price of $2.00 per share. The total debt issue
costs of $50,672 have been netted against the principal and will be amortized over the term of the loan using the effective
interest method. The interest on the outstanding principal due under the Note accrued at a rate of 5% per annum. All principal
and accrued interest under the Note was due on December 20, 2018 and was convertible into shares of the Company’s Common
Stock at a conversion price equal to the lesser of (i) $2.00 and (ii) 70% of the lowest traded market price in the 20 consecutive
trading days prior to the conversion date.
The relative fair
values of the convertible note, the warrants and the shares were $6,208, $118 and $258,674, respectively. The effective
conversion price was then determined to be $0.02. As the stock price at the issuance date was greater than the effective conversion
price, it was determined that there was a beneficial conversion feature. The Company recognized the relative fair value of
the warrants of $258,792, as additional-paid-in capital and an equivalent discount that reduced the carrying value of the
convertible debt to $56,998. The beneficial conversion feature of $6,208, the OID of $15,790 and debt financing costs of $35,000
discounted the convertible debenture such that the carrying value of the convertible debt on the date of issue was $0. The
discount is being expensed over the term of the loan to increase the carrying value to the face value of the loan. The Company
determined that there was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging.
On December 20,
2018, the Company defaulted on the convertible note, resulting in the note becoming immediately due and payable. Upon default,
the interest rate increased to 29% per annum and the Company incurs a late fee at an interest rate equal to 18% per annum
on any overdue and unpaid interest under the convertible note. Additionally, the total amount owed on the convertible note
upon default is equal to 130% of the outstanding principal and accrued and unpaid interest. During the year ended April 30,
2019, the Company recorded a 30% default penalty of $109,341 as a result of default, which included $11,234 of interest accrued
up to the point of default. The default penalty increased the carrying value of the loan principal to $425,131. During the
nine months ended January 31, 2021, the Company recorded accretion of discount of $Nil (2019 - $Nil). As at January 31, 2021,
the carrying value of the principal amount was $425,131 (April 30, 2020 - $410,527), and the Company has recorded accrued
interest of $321,756 (April 30, 2020 - $206,584).
(b) On June 1, 2018,
the Company issued a senior secured convertible promissory note in the aggregate principal amount of $210,527 (“Note”)
for an aggregate purchase price of $200,000, net of a $10,527 OID. The Company also incurred additional debt issuance costs
of $20,000. The total debt issue costs of $30,527 have been netted against the principal and will be amortized over
the term of the loan using the effective interest method. The interest on the outstanding principal due under the Note accrues
at a rate of 5% per annum. All principal and accrued interest under the Note is due on June 1, 2019 and is convertible into
shares of the Company’s Common Stock at a conversion price equal to the lesser of (i) $2.00 and (ii) 70% of the lowest
traded market price in the 20 consecutive trading days prior to the conversion date.
As the stock price
at the issuance date was greater than the effective conversion price, it was determined that there was a beneficial conversion
feature. The Company then recognized the beneficial conversion feature of $144,908 as additional-paid-in capital and an equivalent
discount that further reduced the carrying value of the convertible debt to $65,619. The OID of $10,570 and debt financing
costs of $20,000 discounted the convertible debenture such that the carrying value of the convertible debt on the date of
issue was $35,092. The discount is being expensed over the term of the loan to increase the carrying value to the face value
of the loan. The Company determined that there was no derivative liability associated with the debenture under ASC 815-15
Derivatives and Hedging.
On December 20,
2018, the Company defaulted on the convertible note, resulting in the note becoming immediately due and payable. Upon default,
the interest rate increased to 29% per annum and the Company incurs a late fee at an interest rate equal to 18% per annum
on any overdue and unpaid interest under the convertible note. Additionally, the total amount owed on the convertible note
upon default is equal to 130% of the outstanding principal and accrued and unpaid interest. During the year ended April 30,
2019, the Company recorded a 30% default penalty of $70,836 as a result of default, which included $5,906 of interest accrued
up to the point of default. The default penalty increased the carrying value of the loan principal to $281,363. As at January
31, 2021, the carrying value of the principal amount was $281,363 (April 30, 2020 - $273,685), and the Company has recorded
accrued interest of $212,944 (April 30, 2020 - $135,152).
As part of the SPA,
Bellridge is loaning the Company a minimum of $500,000 to a maximum of $1,500,000 (“Loan”). The first three tranches
were the $1,000,000 in the form of the Notes above. The next and final tranche of $500,000 will be funded upon the effectiveness
of the registration statement that the Company is required to file covering the shares of common stock issuable upon conversion
of the Notes.
As part of the Bellridge
Agreements, the Company also executed Registration Rights Agreement, Intellectual Property Security Interest Agreement, Subsidiary
Guaranty and a Security Interest Agreement in all the Company’s assets to Bellridge.
(c) On February 20,
2020, the Company entered into an additional securities purchase agreement with Bellridge, pursuant to which the Company issued
a convertible promissory note in the aggregate principal amount of $54,271 (“Note”) for an aggregate purchase
price of $44,337, net of a $4,934 OID and $5,000 of legal fees. The total debt issue costs of $9,934 have been netted
against the principal and will be amortized over the term of the loan using the effective interest rate method. The interest
on the outstanding principal due under the Note accrues at a rate of 10% per annum. All principal and accrued interest under
the Note is due on February 20, 2021. At any time after 180 days from the issuance date, the Note is convertible into shares
of the Company’s Common Stock at a conversion price equal to the lesser of (i) $0.094 and (ii) 70% of the lowest traded
market price in the 20 consecutive trading days prior to the conversion date.
As the stock price
at the issuance date was greater than the effective conversion price, it was determined that there was a beneficial conversion
feature. The Company then recognized the beneficial conversion feature of $44,337 as additional-paid-in capital and an equivalent
discount that further reduced the carrying value of the convertible debt to $9,934. The OID of $4,934 and debt financing costs
of $5,000 discounted the convertible debenture such that the carrying value of the convertible debt on the date of issue was
$0. The discount is being expensed over the term of the loan to increase the carrying value to the face value of the loan.
The Company determined that there was no derivative liability associated with the debenture under ASC 815-15 Derivatives and
Hedging. During the nine months ended January 31, 2021, the Company recorded accretion of discount of $38,265 increasing the
carrying value of the loan to $46,285. As at January 31, 2021, the Company has recorded accrued interest of $5,216 (April
30, 2020 - $1,055).
(d) On September 9,
2020, the Company entered into an additional securities purchase agreement with Bellridge, pursuant to which the Company issued
a convertible promissory note for loans provided in tranches, up to an aggregate principal amount of $1,000,000 (“September
2020 Note”). Each tranche provided under the terms of the Note is to be provided at an original issue discount (“OID”)
of 10%.
On September 17,
2020, the first tranche of the September 2020 Note was funded in the aggregate principal amount of $50,600 for an aggregate
purchase price of $46,000, net of a $4,600 OID. The total debt issue costs of $4,600 have been netted against the principal
and will be amortized over the term of the loan using the effective interest rate method. The interest on the outstanding
principal due under the September 2020 Note accrues at a rate of 10% per annum. All principal and accrued interest under the
September 2020 Note is due on September 9, 2021 and is convertible into shares of the Company’s Common Stock at a conversion
price equal to the lesser of (i) $0.14 and (ii) 70% of the lowest traded market price in the 20 consecutive trading days prior
to the conversion date.
As the stock price
at the issuance date was greater than the effective conversion price, it was determined that there was a beneficial conversion
feature. The Company then recognized the beneficial conversion feature of $46,000 as additional-paid-in capital and an equivalent
discount that further reduced the carrying value of the convertible debt to $4,600. The OID of $4,600 discounted the convertible
debenture such that the carrying value of the convertible debt on the date of issue was $0. The discount is being expensed
over the term of the loan to increase the carrying value to the face value of the loan. The Company determined that there
was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging. During the nine months
ended January 31, 2021, the Company recorded accretion of discount of $11,567 increasing the carrying value of the loan to
$11,567. As at January 31, 2021, the Company has recorded accrued interest of $1,911 (April 30, 2020 - $Nil).
On September 18,
2020, the second tranche of the September 2020 Note was funded in the aggregate principal amount of $33,000 for an aggregate
purchase price of $30,000, net of a $3,000 OID. The total debt issue costs of $3,000 have been netted against the principal
and will be amortized over the term of the loan using the effective interest rate method.
As the stock price
at the issuance date was greater than the effective conversion price, it was determined that there was a beneficial conversion
feature. The Company then recognized the beneficial conversion feature of $30,000 as additional-paid-in capital and an equivalent
discount that further reduced the carrying value of the convertible debt to $3,000. The OID of $3,000 discounted the convertible
debenture such that the carrying value of the convertible debt on the date of issue was $0. The discount is being expensed
over the term of the loan to increase the carrying value to the face value of the loan. The Company determined that there
was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging. During the nine months
ended January 31, 2021, the Company recorded accretion of discount of $7,514 increasing the carrying value of the loan to
$7,514. As at January 31, 2021, the Company has recorded accrued interest of $1,237 (April 30, 2020 - $Nil).
On November 12,
2020, the third tranche of the September 2020 Note was funded in the aggregate principal amount of $55,000 for an aggregate
purchase price of $50,000, net of a $5,000 OID. The total debt issue costs of $5,000 have been netted against the principal
and will be amortized over the term of the loan using the effective interest rate method.
As the stock price
at the issuance date was greater than the effective conversion price, it was determined that there was a beneficial conversion
feature. The Company then recognized the beneficial conversion feature of $50,000 as additional-paid-in capital and an equivalent
discount that further reduced the carrying value of the convertible debt to $5,000. The OID of $5,000 discounted the convertible
debenture such that the carrying value of the convertible debt on the date of issue was $0. The discount is being expensed
over the term of the loan to increase the carrying value to the face value of the loan. The Company determined that there
was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging. During the nine months
ended January 31, 2021, the Company recorded accretion of discount of $9,451 increasing the carrying value of the loan to
$9,451. As at January 31, 2021, the Company has recorded accrued interest of $1,222 (April 30, 2020 - $Nil).
On November 25,
2020, the fourth tranche of the September 2020 Note was funded in the aggregate principal amount of $65,262 for an aggregate
purchase price of $59,329, net of a $5,933 OID. The total debt issue costs of $5,933 have been netted against the principal
and will be amortized over the term of the loan using the effective interest rate method.
As the stock price
at the issuance date was greater than the effective conversion price, it was determined that there was a beneficial conversion
feature. The Company then recognized the beneficial conversion feature of $35,647 as additional-paid-in capital and an equivalent
discount that further reduced the carrying value of the convertible debt to $29,615. The OID of $5,933 discounted the convertible
debenture such that the carrying value of the convertible debt on the date of issue was $23,682. The discount is being expensed
over the term of the loan to increase the carrying value to the face value of the loan. The Company determined that there
was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging. During the nine months
ended January 31, 2021, the Company recorded accretion of discount of $6,419 increasing the carrying value of the loan to
$30,101. As at January 31, 2021, the Company has recorded accrued interest of $1,215 (April 30, 2020 - $Nil).
On December 21,
2020, the fifth tranche of the September 2020 Note was funded in the aggregate principal amount of $22,000 for an aggregate
purchase price of $20,000, net of a $2,000 OID. The total debt issue costs of $2,000 have been netted against the principal
and will be amortized over the term of the loan using the effective interest rate method.
As the stock price
at the issuance date was greater than the effective conversion price, it was determined that there was a beneficial conversion
feature. The Company then recognized the beneficial conversion feature of $20,000 as additional-paid-in capital and an equivalent
discount that further reduced the carrying value of the convertible debt to $2,000. The OID of $2,000 discounted the convertible
debenture such that the carrying value of the convertible debt on the date of issue was $0. The discount is being expensed
over the term of the loan to increase the carrying value to the face value of the loan. The Company determined that there
was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging. During the nine months
ended January 31, 2021, the Company recorded accretion of discount of $3,064 increasing the carrying value of the loan to
$3,064. As at January 31, 2021, the Company has recorded accrued interest of $251 (April 30, 2020 - $Nil).
On December 29,
2020, the sixth tranche of the September 2020 Note was funded in the aggregate principal amount of $27,500 for an aggregate
purchase price of $25,000, net of a $2,500 OID. The total debt issue costs of $2,500 have been netted against the principal
and will be amortized over the term of the loan using the effective interest rate method.
As the stock price
at the issuance date was greater than the effective conversion price, it was determined that there was a beneficial conversion
feature. The Company then recognized the beneficial conversion feature of $25,000 as additional-paid-in capital and an equivalent
discount that further reduced the carrying value of the convertible debt to $2,500. The OID of $2,500 discounted the convertible
debenture such that the carrying value of the convertible debt on the date of issue was $0. The discount is being expensed
over the term of the loan to increase the carrying value to the face value of the loan. The Company determined that there
was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging. During the nine months
ended January 31, 2021, the Company recorded accretion of discount of $3,614 increasing the carrying value of the loan to
$3,614. As at January 31, 2021, the Company has recorded accrued interest of $252 (April 30, 2020 - $Nil). |
