Convertible Notes Payable
|9 Months Ended|
Mar. 31, 2018
|Debt Disclosure [Abstract]|
|Debt Disclosure [Text Block]||
Note 6 Convertible Notes Payable
As of March 31, 2018, and June 30, 2017, the Company had an original convertible note outstanding balance was $10,000 and $10,000, respectively. As of March 31, 2018, the outstanding convertible note has matured and payment is due. The convertible note which has not been repaid or converted continues to accrue interest at a rate of 8%.
During the quarter ended March 31, 2018, the Company issued two secured convertible promissory notes for gross proceeds of $700,000. The notes bear interest at a rate of 12% per annum and expire one year from issuance or 10 days after the closing of a financing of at least $10 million. The notes contain an optional conversion feature in which if the Company raises $20 million then, at the investor’s option, the notes would convert into the financing at a 20% discount of the financing terms. This conversion feature is a contingent beneficial conversion feature that is not calculated as a separate derivative until the contingent event has occurred. With the promissory note, the investor also received warrants to purchase 350,000 shares of common stock equal to one-half of the principal amount of the note. The warrants have an exercise price of $1.00 per share and are exercisable for five years from date of issuance.
The value of the proceeds of the notes were allocated to the warrants as discussed in Note 8 at an allocated fair value method. The discount on the notes is being amortized into interest expense over the life of the note. As of March 31, 2018, the outstanding balance of the secured convertible promissory note was $700,000 with a current discount outstanding of $89,783.
During the quarter ended March 31, 2018, the Company issued a secured convertible promissory note for gross proceeds of $500,000. The note bears interest at a rate of 15% per annum and expires one year from issuance. The notes contain an optional conversion feature in which if the Company raises $10 million then, at the investor’s option, the notes would convert into the financing at a 20% discount of the financing terms. With the promissory note, the investor also received warrants to purchase 500,000 shares of common stock which expire five years from date of issuance. The exercise price is to be determined to be 120% of the conversion price of the convertible note if a financing occurs or 120% of the average closing stock price of the Company for 10 days prior to July 1, 2018. The note also contains an embedded liability derivative for the acceleration of the maturity date as discussed in Note 2.
The value of the proceeds of the note was allocated to the warrant as discussed in Note 8 at an allocated fair value method. The value of the embedded derivative liability was then taken as a discount to the allocated value of the note. The discount on the note is being amortized into interest expense over the life of the note. As of March 31, 2018, the outstanding balance of the secured convertible promissory note was $500,000 with a current discount outstanding of $195,520.
On April 3, 2018 and April 11, 2018, the Company closed on a series of notes with gross proceeds of $4.1 million. The notes also include warrants to purchase common stock with the number of shares and exercise price to be determined at the time of the next financing. The notes bear interest at 12% per annum and matures one year from issuance. The notes are secured by a perfected security interest in the tangible assets of the Company. With the closing of these notes, the two notes for $700,000 and related warrants issued above were amended into the terms of this note financing.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://www.xbrl.org/2003/role/presentationRef