Quarterly report pursuant to Section 13 or 15(d)

CONVERTIBLE NOTES PAYBLE (Tables)

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CONVERTIBLE NOTES PAYBLE (Tables)
6 Months Ended
May 31, 2016
Debt Disclosure [Abstract]  
Schedule of convertible notes payable

    May 31, 2016     November 30, 2015  
Adar Bays, LLC Note (a):            
   Principal value   $ 115,000     $ 115,000  
   Fair value of bifurcated put option of Adar Bays, LLC Note     186,694       207,659  
   Debt discount     -       (40,411 )
      Carrying amount of Adar Bays, LLC Note     301,394       282,248  
                 
Union Capital, LLC Note (a):                
   Principal value     115,000       115,000  
   Fair value of bifurcated put option of Union Capital, LLC Note     186,611       207,536  
   Debt discount     -       (40,096 )
      Carrying amount of Union Capital, LLC Note     301,611       282,440  
                 
Typenex Co-Investement, LLC Note (b):                
   Principal value     87,500       87,500  
   Fair value of bifurcated put option of Typenex Co-Investement, LLC Note     373,733       380,858  
   Debt discount     (153 )     (28,130 )
      Carrying amount of Typenex Co-Investement, LLC Note     461,080       440,228  
                 
Gary Gelbfish Note (c):                
   Principal value     100,000       100,000  
   Fair value of bifurcated put option of Gary Gelbfish Note     203,030       118,391  
   Debt discount     -       -  
      Carrying amount of Gary Gelbfish Note     303,030       218,391  

 

JMJ Financial Note (d):            
   Principal value     60,500       60,500  
   Fair value of bifurcated put option of JMJ Financial Note     212,973       155,017  
   Debt discount     (30,160 )     (44,576 )
      Carrying amount of JMJ Financial Note     243,313       170,941  
                 
Black Mountain Equities, Inc. Note (e):                
   Principal value     42,670       55,000  
   Fair value of bifurcated put option of Black Mountain Equities, Inc. Note     57,516       81,951  
   Debt discount     (453 )     (28,028 )
      Carrying amount of Black Mountain Equities, Inc. Note     99,733       108,923  
                 
LG Capital Funding, LLC Note (f):                
   Principal value     50,000       50,000  
   Fair value of bifurcated put option of LG Capital Funding, LLC Note     76,462       94,905  
   Debt discount     -       -  
      Carrying amount of LG Capital Funding, LLC Note     126,462       144,905  
                 
GCEF Opportunitity Fund, LLC Note (g):                
   Principal value     27,500       27,500  
   Fair value of bifurcated put option of GCEF Opportunity Fund, LLC Note     39,809       50,532  
   Debt discount     (2,185 )     (15,973 )
      Carrying amount of GCEF Opportunitity Fund, LLC Note     65,124       62,059  
                 
Lord Abstract, LLC Note (h):                
   Principal value     8,800       8,800  
   Fair value of bifurcated put option of Lord Abstract, LLC Note     18,186       16,163  
   Debt discount     (699 )     (5,111 )
      Carrying amount of Lord Abstract LLC Note     26,287       19,852  
                 
JLA Realty Notes (i):                
   Principal value     160,600       -  
   Fair value of bifurcated conversion option of JLA Realty Notes     166,930       -  
   Debt discount     (156,451 )     -  
      Carrying amount of JLA Realty Notes     171,079       -  
                 
Other convertible notes payable (j):                
   Principal value     11,000       -  
   Fair value of bifurcated put option of other convertible notes payable     23,206       -  
   Debt discount     (9,232 )     -  
      Carrying amount of other convertible notes payable     34,974       -  
Total carrying amount of convertible notes   $ 2,134,387     $ 1,729,987  
Total short-term carrying amount of convertible notes   $ 1,928,334     $ -  
Total long-term carrying amount of convertible notes   $ 206,053     $ -  
                 
Total convertible notes payable:                
   Principal value   $ 778,570     $ 619,300  
   Fair value of bifurcated put option of other convertible notes payable     1,555,150       1,313,012  
   Debt discount     (199,333 )     (202,325 )
      Carrying amount of other convertible notes payable   $ 2,134,387     $ 1,729,987  

 

  (a)

The Adar Bays, LLC and Union Capital, LLC convertible notes payable were due and payable 12 months after issuance date of May 11, 2015 and bore interest at 8% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the notes were convertible into shares of the Company’s common stock at any time prior to maturity at a conversion price per share equal to a forty percent (40%) discount to the lowest trading price for the twenty (20) consecutive trading days immediately preceding the notice of conversion. If these notes were not paid at maturity, the outstanding principal due under these notes shall increase by 10%. In January 2016, the notes were amended to decrease the conversion price per share equal to a forty-five percent (45%) discount to the lowest trading price for the twenty-five (25) consecutive trading days immediately preceding the notice of conversion, and the pre-payment penalty was increased to 150%. The amendments did not result in a material change to the fair value of the notes. The notes were not repaid on the maturity date of May 12, 2016 and as such were in default as of May 31, 2016. The Company recorded in interest expense, including penalties, on the condensed statements of operations a one-time default penalty of $23,000 representing 10% of the outstanding principal balance of the Notes. As of May 31, 2016, there were 1,916,667 shares issuable upon conversion for each note.

 

On January 23, 2018, the Company, Adar Bays, LLC and Union Capital, LLC entered into Note Settlement and Termination Agreements. Pursuant to the terms of the settlement agreements, the Company agreed to satisfy each of the outstanding notes for $200,000 and 100,000 shares of common stock. The payments were made on January 26, 2018. The closing price of the Company's common stock on January 23, 2018 was $1.40 per share resulting in an aggregate value of $340,000 per note.

 

  (b) The Typenex Co-Investment, LLC convertible note payable is due and payable 13 months after issuance date of May 29, 2015 and bears interest at 10% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the note are convertible into shares of the Company’s common stock at any time prior to maturity at a conversion price per share equal to $1.30. However, in the event the Company’s market capitalization falls below $3.0 million at any time, the conversion price per share shall be equal to the lower of $1.30 or the market price at the date of conversion.  The note was not repaid on the maturity date of June 29, 2016 and was also in default of certain conditions of the note as of May 31, 2016. The Company recorded in interest expense, including penalties, on the condensed statements of operations a one-time default penalty of approximately $18,200. As of May 31, 2016, there were 2,966,548 shares issuable upon conversion of this note.

 

On or around April 19, 2016, the Company received from counsel for Typenex, a written demand to accelerate and demand payment of the entire outstanding balance of the Typenex note entered into between the Company and Typenex on May 29, 2015. On June 7, 2016, Typenex filed suit in the State of Utah, the Third Judicial District Court, County of Salt Lake, for repayment of all principal, default effects, late fee and accrued interest. According to the complaint, Typenex asserted an aggregate amount due, as of June 6, 2016, of $149,054. On April 4, 2017, the Company and Typenex agreed to settle the lawsuit for payment of $90,000, which was paid in April 2017. On May 9, 2017, an order of dismissal with prejudice was entered by the Third Judicial District Court.

 

  (c)

The Gary Gelbfish convertible note payable was due and payable six months after the issuance date of March 27, 2015 and bore interest at 10% per annum. If this note was not paid at maturity, at the election of the holder, outstanding principal and accrued but unpaid interest under the note was convertible into shares of the Company’s common stock at a conversion price per share equal to lesser of: (i) fifty percent (50%) discount to the average closing price for the twenty (20) consecutive trading days immediately preceding the maturity date or (ii) $0.50 per share. The note was not repaid on the maturity date of September 23, 2015 and as such was in default as of May 31, 2016 and remains in default as of the date of this report. As of May 31, 2016, there were 767,754 shares issuable upon conversion of this note.

 

  (d) The JMJ Financial convertible note payable is due and payable 24 months after issuance date of April 29, 2015 and bears interest at 12% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the notes are convertible into shares of the Company’s common stock at any time prior to maturity at a conversion price per share equal to a forty percent (40%) discount to the lowest trading price for the twenty-five (25) consecutive trading days immediately preceding the notice of conversion. As of May 31, 2016, there were 875,000 shares issuable upon conversion of this note. Between May 2018 and July 2018, the Company made payments of $35,000 on this note and the remaining principal balance of $25,500 remains in default as of the date of this report.

 

  (e) The Black Mountain Equities, Inc. convertible note payable is due and payable 12 months after issuance date of June 4, 2015 and bears interest at 10% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the note is convertible into shares of the Company’s common stock at any time prior to maturity at a conversion price per share equal to the lesser of: (i) forty percent (40%) discount to the lowest trading price for the twenty-five (25) consecutive trading days immediately preceding the notice of conversion or (ii) $1.06 per share. As of May 31, 2016, there were 627,024 shares issuable upon conversion of this note. The Note was not repaid on the maturity date of June 4, 2016 and remains in default as of the date of this report.

 

  (f) The LG Capital Funding, LLC convertible note payable was due and payable 13 months after issuance date of November 3, 2014 and bore interest at 8% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the note were convertible into shares of the Company’s common stock, at any time after 180 days from the date of issuance, at a conversion price per share equal to a forty percent (40%) discount to the lowest trading price for the twenty (20) consecutive trading days immediately preceding the notice of conversion. In January, 2016, the note was amended to grant LG Capital 75,000 warrants with an exercise price of $0.30 per share, and to permit the Company to re-pay the LG Capital Note with a pre-payment penalty of 120%. The amendment did not result in a material change to the fair value of the note. The fair value of the warrants was $26,250, which was expensed at the time of issuance due to the short-term nature of the note. The note was not repaid on the maturity date and as such is in default as of May 31, 2016 and as of the date of this report. Upon default, the note accrues interest at 24% per annum. As of May 31, 2016, there were 694,444 shares issuable upon conversion of this note.

 

  (g) The GCEF Opportunity Fund, LLC convertible note payable is due and payable 12 months after issuance date of June 30, 2015 and bears interest at 10% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the note are convertible into shares of the Company’s common stock, at any time after 30 days from the date of issuance, at a conversion price per share equal to the lower of: (i) a forty percent (40%) discount to the lowest closing price for the twenty (20) consecutive trading days immediately preceding the notice of conversion or (ii) $1.00. If this note is not paid at maturity, then the interest rate shall increase to 24% thereafter. As of May 31, 2016, there were 381,944 shares issuable upon conversion of this note. On March 9, 2017, the Company issued an aggregate of 216,946 shares of its common stock as full repayment of the principal and accrued interest on the note.

 

  (h) The Lord Abstract, LLC convertible note payable is due and payable 12 months after issuance date of June 30, 2015 and bears interest at 10% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the note are convertible into shares of the Company’s common stock, at any time after 30 days from the date of issuance, at a conversion price per share equal to a forty percent (40%) discount to the lowest closing price for the twenty (20) consecutive trading days immediately preceding the notice of conversion. If this note is not paid at maturity, then the interest rate shall increase to 24% thereafter. As of May 31, 2016, there were 122,222 shares issuable upon conversion of this note. Between June 2016 and August 2016, the Company made payments of $7,500 on this note and the remaining principal balance of $1,300 remains in default as of the date of this report.

 

  (i) The JLA Realty convertible note payable is due and payable 36 months after proceeds have been received by the Company, which occurred between April 25, 2016 and May 4, 2016 and bears interest at 12% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the note is convertible into shares of the Company’s common stock at any time prior to maturity at a fixed price per share equal to $0.15. In connection with the issuance of the JLA Realty note described above, the Company recognized a debt discount of $146,000 and a loss on issuance of $68,522 during the three months ended May 31, 2016, which represents the excess of the fair value of the bifurcated conversion feature at initial issuance of approximately $215,000 over the principal amount of convertible debt issued.  The fair value of the bifurcated conversion feature is separately measured at fair value, with changes in fair value recognized in operations.  During the three and six months ended May 31, 2016, the Company recognized interest expense of $4,151 resulting from amortization of the debt discount for the JLA Realty note. As of May 31, 2016, the bifurcated conversion option has a fair value of $166,930 and is presented on a combined basis with the related loan host in the Company’s Condensed Consolidated Balance Sheet at May 31, 2016. As of May 31, 2016, there were 1,070,607 shares issuable upon conversion of this note.

 

  (j) The other convertible notes payable are due and payable 36 months after issuance and bear interest at 10% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the note are convertible into shares of the Company’s common stock, at any time after six months from the date of issuance, at a conversion price per share equal the lesser of: (i) fifty percent (50%) discount to the volume weighted average price over the twenty (20) consecutive trading days immediately preceding the notice of conversion. As of May 31, 2016, there were 110,609 shares issuable upon conversion of these notes.