Secured Convertible Promissory Notes | 9) SECURED CONVERTIBLE PROMISSORY NOTES THREE AND NINE MONTHS ENDED JANUARY 31, 2019 As of January 31, 2019, REGI had outstanding senior secured convertible promissory notes (the “Convertible Notes”) of $253,783 (net of unamortized discount of $28,901 issued to related parties and $1,378,472 (net of unamortized discount of $238,855) issued to non-related parties. During the nine months ended January 31, 2019 the Company issued Convertible Notes for service debt provided by related parties of $79,332and $16,357 to non-related parties. During the nine months ended January 31, 2019 the Company issued Convertible Notes for cash proceeds of $39,200 to related parties and $457,355 to non-related parties while redeeming $16,000 of related parties and $150,000 or non-related parties Convertible Notes for cash. The Convertible Notes are secured against all assets of the Company, repayable two years after the issuance, bearing simple interest rate of 10% during the term of the notes and simple interest rate of 20% after the due date with the exception of one Convertible Note of $140,278 (net of unamortized discount of $3,012) repayable nine months after issuance, bearing simple interest of 2% during the term of the note and simple interest rate of 15% after the due date. As of January 31, 2019, $17,436, $40,800, $1,682,576, $60,000 and $100,000 of the Convertible Notes are convertible at any time on or after ninety days from the issuance date into the Company’s common stocks at $0.174, $0.12, $0.10, $0.09 and $0.08 per share respectively. The Company analyzed the conversion option in the notes for derivative accounting treatment under ASC Topic 815, “Derivatives and Hedging,” and determined that the instrument does not qualify for derivative accounting. The Company determined that the conversion option was subject to a beneficial conversion feature and during the nine months ended January 31, 2019 the company recorded amortization of the beneficial conversion feature of $113,692 as interest expense. On November 30, 2018, the Company issued a Convertible Note to Labrys Fund LP (the “Labrys Note”) in the amount of $220,000, of which $198,000 of the actual amount was received in cash proceeds by the company and the remaining $22,000 was recognized as an Original Issuance Discount, to be amortized over the life of the note. The Labrys Note was due on May 30, 2019 and bore simple interest of 12% per annum. The Labrys Note allowed the holder to convert outstanding debt to shares of the Company’s common stock at a price other than a fixed conversion price per share. The conversion price of the Labrys Note is 60% of the lowest traded price of the Company’s common stock during the twenty consecutive trading day period immediately preceding any conversion notice. Management has determined that these provisions cause the conversion options to require derivative liability accounting (Note 10). In connection with Labrys Note, the Company also issued 2,000,000 shares of common stock (the “Returnable Shares”) to the holder as a commitment fee, provided however, the Returnable Shares must be returned to the Company’s treasury if the Note is fully repaid prior to 180 days after the issuance date. During the nine months ended January 31, 2020, the Company issued to related parties, two secured promissory notes in the amounts of $150,000 and $75,000, respectively. See Note 11 for further discussion. The Company used $220,000 of the proceeds from the notes to pay the outstanding balance of the Labrys Note. On June 5, 2019, Labrys returned 2,000,000 shares of common stock as the Labrys Note was repaid prior to 180 days of issuance. THREE AND NINE MONTHS ENDED JANUARY 31, 2020 The following is a summary of the activity related to the Convertible notes for the three months ended January 31, 2020: Number of notes Non-related party Related party Total Weighted average conversion price Beginning balance 129 $ 1,070,882 $ 671,683 $ 1,742,565 $ 0.06 Convertible notes issued for accounts payable 2 300 - 300 0.05 Convertible notes issued for accrued liabilities 6 500 10,000 10,500 0.05 Convertible notes issued for cash 0.06 Convertible notes issued (retired) for other debt, net 2 (500 ) - (500 ) 0.10 Conversion of notes for common shares (18 ) (159,275 ) (159,275 ) 0.11 Rollover of convertible notes (20 ) (305,500 ) (74,768 ) (380,268 ) 0.10 Issuance of convertible notes for rollover and accrued interest 12 382,476 88,800 471,276 0.05 Ending balance 113 $ 988,883 $ 695,715 $ 1,684,598 $ 0.06 The following is a summary of the activity related to the Convertible Notes for the nine months ended January 31, 2020. Number of notes Non-related party Related party Total Weighted average conversion price Beginning balance 146 $ 1,334,358 $ 334,683 $ 1,669,041 $ 0.10 Convertible notes issued for services 1 - 75,000 75,000 0.05 Convertible notes issued for accounts payable 2 300 20,000 20,300 0.05 Convertible notes issued for accrued liabilities 6 1,000 40,000 41,000 0.05 Convertible notes issued for cash 4 - 200,000 200,000 0.06 Convertible notes issued (retired) for other debt, net (3 ) 751 - 751 0.10 Repayment of convertible notes (1 ) (220,000 ) - (220,000 ) 0.07 Conversion of notes for common shares (34 ) (238,272 ) - (238,272 ) 0.11 Rollover of convertible notes (32 ) (474,349 ) (134,768 ) (609,117 ) 0.10 Issuance of convertible notes for rollover and accrued interest 24 585,095 160,800 745,895 0.05 Ending balance 113 $ 988,883 $ 695,715 $ 1,684,598 $ 0.06 The conversion price exceeded the closing price of the Company’s common stock on the date of issuance of several Convertible Notes for the nine months ended January 31, 2020. The Company determined the notes were subject to a beneficial conversion feature provisions and recorded a discount of beneficial conversion feature which shall be amortized over the remaining life of the respective note. The following is a summary of the activity related to the unamortized discount of beneficial conversion feature for the three months ended January 31, 2020: Non-related party Related party Total Beginning balance $ 89,328 $ 35,619 $ 124,947 Establish beneficial conversion feature 41,216 28,520 69,736 Amortization of beneficial conversion feature (38,037 ) (10,503 ) (48,540 ) Ending balance $ 92,507 $ 53,636 $ 146,143 The following is a summary of the activity related to the unamortized discount of beneficial conversion feature for the nine months ended January 31, 2020: Non-related party Related party Total Beginning balance $ 125,660 $ 31,390 $ 157,050 Establish beneficial conversion feature 121,592 64,078 185,670 Amortization of beneficial conversion feature (154,745 ) (41,832 ) (196,577 ) Ending balance $ 92,507 $ 53,636 $ 146,143 At January 31, 2020, balances on the secured convertible promissory notes are as follows: Principal balance Unamortized discount of beneficial conversion feature Net Related parties $ 695,715 $ (48,142 ) $ 647,573 Non-related parties 988,883 (98,001 ) 890,882 1,684,598 (146,143 ) 1,538,455 Less current portion (571,483 ) 2,062 (569,421 ) Convertible promissory note-long term portion $ 1,113,115 $ (144,081 ) $ 969,034 CONVERSION EQUIVALENTS The aggregate principal and accrued interest balance due to convertible note holders is convertible at any time after the original issue date into a number of shares of the Company’s common stock, determined by dividing the amount to be converted by a weighted average conversion price. As of January 31, 2020, the aggregate principal and accrued interest balance is convertible to common shares of the Company’s stock as follows: Principal Interest Total Average conversion price Conversion equivalents Related parties $ 695,715 $ 50,840 $ 746,555 $ 0.059 12,689,031 Non-related parties 988,883 90,299 1,079,182 0.060 17,980,060 $ 1,684,598 $ 141,139 $ 1,825,737 $ 0.060 30,669,091 |