Commitments and Contingencies | 10.) Commitments and Contingencies The Company entered into a five year operating lease for office and production facilities. The lease commenced on December 1, 2013 and expires on November 30, 2018. The base monthly rental is $1,390 plus the Company’s estimated portion of property taxes and operating expenses which are currently $847 per month. The Company has agreed to extend the lease to November 30, 2021. Under the terms of the extended lease the base monthly rental is $1,853 in 2019, $1,946 in 2020, and $2,039 in 2021. The future commitments pursuant to this lease extension, including property taxes and operating expenses for the fiscal periods ending March 31 are: 2018 (remaining) $ 6,867 2019 $ 28,685 2020 $ 32,763 2021 $ 33,875 2022 $ 23,500 For the three and nine month periods ended December 31, 2017, occupancy costs related to this lease were $6,544 and $19,679 (December 31, 2016 – $6,500 and $19,499). On March 11, 2014, and as amended on July 18, September 3, 2014, September 5, 2014, December 31, 2015 and again on December 20, 2016, the Company entered into a consulting agreement with Connectus, Inc. (“Connectus”) to assist and advise the Company in matters concerning corporate finance and the Company’s current and proposed financing activities for the period commencing April 1, 2014 and ending December 31, 2014. Pursuant to this agreement, the Company agreed to issue to Connectus, 625,000 warrants of the Company. Each warrant is exercisable at USD$0.04 ($0.054) per share for a period of three years. Of the warrants granted, 300,000 vested on September 3, 2014 with the unvested portion vesting pro-rata for each USD$250,000 ($335,675) raised in an offering, fully vesting upon USD$1,500,000 ($2,014,050) being raised. During the year ended March 31, 2015, the President of Connectus became a director of the Company. On December 31, 2015, the Company extended the contract to December 31, 2016. In consideration of the contract extension, the Company issued 93,000 common shares to Connectus as compensation, which has been recorded as professional fees on the statements of operations during the year ended March 31, 2016. On December 27, 2016, the Company extended the contract and expiry date of the warrants to December 31, 2017. On January 23, 2017, the Company approved the vesting of 100,000 warrants. Connectus assigned the warrants to Apollo Marketing, LLC. On January 15, 2018, the Company extended the contract and expiry date of the warrants to December 31, 2018. The Company agreed to extend the vested warrants to March 31, 2019. On April 23, 2014, the Company entered into employment agreements with three officers of the Company effective July 1, 2014. The initial contracts contain minimum aggregate commitments of approximately $427,000 per year for three years and additional contingent payments of up to approximately $600,000 in aggregate upon the occurrence of a change of control. As a triggering event has not taken place, the contingent payments have not been reflected in these financial statements. If employment is terminated by the Company other than upon a change of control or for just cause, the officers will be entitled to an amount equal to twelve months compensation including benefits, which shall be increased by one month for each full year of service completed. The employment agreements were amended whereby any salary from the commencement of the employment agreements has been waived until such a time when the Company is able to raise additional financing. Salaries will be earned based upon the Company’s success in raising future capital in accordance with the following schedule: Cumulative Funds Raised 1 Effective Monthly Salary % $ 100,000 10.0 % $ 175,000 15.0 % $ 250,000 25.0 % $ 375,000 37.5 % $ 500,000 50.0 % $ 750,000 62.5 % $ 1,000,000 75.0 % $ 1,250,000 87.5 % $ 1,500,000 100.0 % 1 On May 19, 2016, the Company signed a consulting agreement with an agent in connection with proposed placements of up to USD$10,000,000 ($13,427,000) in a combination of equity and or debt of the Company for a term of one year. Consideration payable under the consulting agreement include a non-refundable equity retainer of 100,000 common shares of the Company, a placement fee equal to 8% of the gross purchase price paid for equity of the Company, an administrative fee of 4% of the gross purchase price paid for equity, a placement fee of 4% of the gross purchase price paid for non-convertible debt and warrants to purchase common shares of the Company equal to 8% of the number of shares of common stock issuable by the Company upon exercise or conversion of any and all securities issued at each closing. On January 10, 2017, the Company entered into an addendum to the agreement signed on May 19, 2016 which provided for a grant of 900,000 warrants at an exercise price of USD$0.65 ($0.86) for a period of five years with a cashless exercise option. On August 15, 2017, the Company extended the contract for an additional year. On February 23, 2017, the Company entered into a three year sponsored research contract with the University of Waterloo commencing on April 1, 2017. Under the terms of the agreement the Company will contribute $130,000 upon start date of the project, $130,000 on completion of Year 1 and $130,000 on completion of Year 2, plus the Company will make an in-kind contribution valued at $70,000 in each of the 3 years. Any patents initiated by the Company from the sponsored research will be assigned to the Company and in return the Company will pay the researcher $10,000 per patent filed, $40,000 per patent issued by the U.S. patent office, $50,000 per product after the first commercial sale and $50,000 per product once the gross sales exceed $1,000,000. As of December 31, 2017, the Company has made a payment of $30,000 pursuant to this agreement. As of November 30, 2018 the Company has made payments totaling $130,000 under the terms of the payment schedule agreed to with the University. On March 13, 2017, the Company entered into a four year sponsored research contract with the University of Western Ontario commencing on April 1, 2017. Under the terms of the agreement the Company will contribute $210,000 upon execution of the agreement, $210,000 on completion of Year 1, $210,000 on completion of Year 2 and $210,000 on completion of Year 3, plus the Company will make an in-kind contribution valued at $62,500 in each of the 4 years. Any patents initiated by the Company from the sponsored research will be assigned to the Company and in return the Company will pay the researcher $10,000 per patent filed, $40,000 per patent issued by the U.S. patent office, $50,000 per product after the first commercial sale and $50,000 per product once the gross sales exceed $1,000,000. As of December 31, 2017, the Company has made payments totaling $80,000 pursuant to this agreement. As of November 30, 2018, the Company had made additional payments totaling $230,000 pursuant to the terms of the agreement as agreed to with the University. On March 27, 2017, the Company entered into a one year agreement with Questrade, Inc. an Investment Dealer to provide guidance on the trading of the Company’s securities and guidance with respect to the promotion of the Company. The Company shall pay Questrade a monthly fee in an amount equal to USD$5,500 for consulting services rendered each month of the term. Questrade filed a statement of claim in the amount of $29,941 in small claims court and the matter has had an initial trial date with a subsequent date scheduled for March 14, 2019. On April 9, 2017, the Company signed a 12 month consulting agreement effective April 15, 2017 with an arm’s length organization, The Eversull Group, Inc. to provide financial public relations, investor, shareholder, press relations and capital search consulting services. Terms of the agreement include the provision of 100,000 restricted shares annually, a minimum monthly retainer of USD$2,000 plus a 3% introduction fee for all sources of funding introduced by The Eversull Group, Inc. and accepted by the Company. The Company terminated the agreement. On April 19, 2017, the Company announced plans to form a joint venture corporation with Avanti Rx Analytics Inc. (ARA). The Company would own 96% of the joint venture and ARA would own 4%. As a result of signing the letter of Intent with Bonify on August 10, 2017 (details provided below) the Company will not be proceeding with the joint venture. The plans for this venture were cancelled after the year end. On May 8, 2017, the Company signed a consulting agreement with Carter, Terry & Company in connection with the proposed raising of capital in a combination of equity and/or debt of the Company for a term of two years. Terms of the agreement include the issuance of 150,000 restricted common shares on signing (see Note 8(a)) plus future consideration payable under the consulting agreement, including a placement fee equal to 10% of the gross proceeds raised less than USD$1,000,000 and 8% for gross funds raised in excess of USD$1,000,000, plus the equivalent amount of restricted shares equal to 4% of the capital raised divided by the closing price of the stock on the date of close for a period of two years. Notification has been provided to the Carter, Terry & Company that the consulting agreement is cancelled and the Company will not be making any payments. This agreement was subsequently cancelled with no further obligations by the Company and the shares were not issued. On August 8 2017, the Company signed a non-binding Letter of Intent (LOI) with 6779264 Manitoba Ltd. dba Bonify (“Bonify”). Bonify is a licensed producer, pursuant to the Access to Cannabis for Medical Purposes Regulations in Canada. In the LOI, the Company and Bonify have outlined the following: i) The purchase and installation of cannabis oil extraction equipment with an estimated cost of $1,450,000 to be jointly agreed upon by the Company and Bonify with the equipment being located in Bonify’s facility. At the end of the agreement, full right and title to the equipment would be assigned to Bonify; ii) The processing of cannabis material supplied by Bonify and other licensed producers in the oil extraction facility; iii) The supply of cannabis oil and algae omega-3 oils to The University of Waterloo and University of Western Ontario to support the sponsored research agreements that the Company has in place with the two universities (See Note 10); iv) The sharing of direct expenses, and, after adjustment for the market value of cannabis material supplied by Bonify and third parties, sharing of revenues from the sale of cannabis oil and algae-cannabis oil products; and v) The negotiation of a definitive agreement no later than September 30, 2017. The definitive agreement was not completed. This letter of intent was subsequently abandoned and the Company has no additional obligations. The Company, as the industry partner, is the participant in a Project Grant of up to $400,000 from the Mitacs Accelerate program, that will be delivered directly to Western University through eligible internships. The financial contribution by the Company which is $180,000 for this grant is part of the funding included in the research agreement the Company signed with the university and announced on March 13, 2017. To-date the Company has paid the initial of two installments to Mitacs, with the remaining installments being invoiced by Mitacs to the Company throughout the duration of the project. The balance of the $400,000 award ($220,000) will be provided by Mitacs. The project started on December 1, 2017 and is scheduled to operate for two (2) years. The extent of the announced award from Mitacs of $400,000 to be paid directly to the university by Mitacs is dependent on the funding provided by the Company and the number of interns employed in the project. The Company has paid $30,000 with a further commitment of $24,000 in 2017 – 2018. The commitment by the Company for 2018 – 2019 is $66,000 and in 2019 – 2020 is $60,000. On August 15, 2017, the Company engaged a Canadian firm, Kernaghan and Partners Ltd. (the “Agent”) a fully regulated full service brokerage firm to conduct a capital raise in the Canadian market. In consideration of the services to be rendered, the Agent shall receive on the closing date of the offering: i) a work fee of $25,000; ii) cash commission (the “ iii) broker warrants entitling the Agent to purchase, equal to the issue price, the number of common shares that is equal to 6% of the number of common shares sold pursuant to the offering, except for sales to persons on the President’s List, in respect of which the broker warrants shall entitle the Agent to purchase the number of common shares that is equal to 2% of the number of common shares sold to such persons. The broker warrants shall have a term of 2 years and an exercise price equal to the offering price of the common shares. |