Quarterly report pursuant to Section 13 or 15(d)

NOTES PAYABLE

v3.8.0.1
NOTES PAYABLE
9 Months Ended
Dec. 31, 2017
Debt Disclosure [Abstract]  
Debt Disclosure [Text Block]
8.
NOTES PAYABLE
 
(a) Demand Notes payable
 
The Company repaid on December 31, 2017, all outstanding demand notes payable (“Notes”) except Notes in the aggregate principal amount of $50,000, which was deferred to June 30, 2018 acquired from IMT on April 21, 2016.
 
Balance, March 31, 2017
 
 
330,600
 
Accrued interest
 
 
7,018
 
Repayment of principal
 
 
(208,359)
 
Repayment of interest
 
 
(79,259)
 
Balance, December 31, 2017
 
$
50,000
 
 
Interest expense incurred on the Notes totaled $2,309 and $7,018 for the three months and nine months periods ended December 31, 2017 (December 31, 2016 - $2,367 and $3,467), which is included in accrued liabilities.
 
(b) Promissory Notes payable
 
In February 2014, the Company borrowed $200,000 from an existing investor under the terms of a secured promissory note (“Promissory Note”). The Promissory Note bore interest at a simple interest rate equal to 10% per annum and interest is payable quarterly. Interest expenses incurred on the Promissory Note totaled $3,059 and $12,957 for the three and none months ended December 31, 2017 (December 31, 2016 - $5,041 and $13,973). The Promissory Note was paid in full during the quarter.
 
Balance, March 31, 2017
 
 
236,548
 
Accrued interest
 
 
12,957
 
Repayment of principal
 
 
(200,000)
 
Repayment of interest
 
 
(49,505)
 
Balance, December 31, 2017
 
$
-
 
 
(c) Short term Loan
 
In December 2017, a company controlled by a Board member made a short-term loan to the Company of $400,000 with interest at 1.5% per month. Interest expenses incurred on the loan totaled $2,400 for the three and nine months ended December 31, 2017 (December 31, 2016 - $Nil and $Nil). The Company repaid this loan with interest of $3,200 in January 2018.
 
(d) Convertible Loans Payable
 
In December 2016, several shareholders of the Company agreed to advance the Company $1,500,000 of convertible notes in three tranches: $500,000 upon origination of the convertible loans and $500,000 on each of January 15, 2017 and February 15, 2017. A further $500,000 was advanced in March 2017 to bring the total of these convertible loans to approximately $2,000,000. The convertible loans bore interest at 6% until the original due date of March 31, 2017 and $17,488 was accrued and expensed as interest on these loans for the year ended March 31, 2017.
 
The convertible loans contain the following terms: convertible at the option of the holder at the price of the equity financing or payable on demand upon the completion of an equity financing greater than $5,000,000; automatically convertible at the price of the equity financing upon completion of an equity financing between $3,500,000 and $5,000,000; if no such equity financing is completed by November 15, 2017, then the loans shall become secured by a general security agreement over all assets of the Company; and, upon a change in control would either be payable on demand or convertible at the lesser of a price per share equal to that received by the parties in the change in control transaction or the market price of the shares. These conversion features were analyzed and determined to be contingent conversion features, accordingly, until the triggering event no beneficial conversion feature is recognized.
 
On August 14, 2017, the Company entered into an amendment to these convertible loans, whereby the interest was changed to a fixed rate of 12% per year from April 1, 2017 to August 14, 2017, and 3% per month from August 14, 2017 to maturity, which was extended to the earlier of March 31, 2018 or consummation of a qualified financing. The conversion feature was modified to contain the following terms: upon the consummation of an equity or equity-linked round of with an aggregate gross proceeds of $7,000,000, without any action on part of the Holder, the outstanding principal, accrued and unpaid interest and premium amount equal to (25%) of the principal amount less the accrued and unpaid interest, will be converted into shares of new round stock based upon the lesser of (a) the lowest issuance (or conversion) price of new round stock in case there is more than one tranche of new round stock or (b) ($0.25).
 
Further, the Company issued warrants to these debt holders amounting to 20% of the aggregate principal of the convertible loans divided by the exercise price, which would be determined as the lowest of a new round stock in a qualified financing, the average volume weighted average price for the sixty trading days prior to January 31, 2018 or $0.25. The warrants have a term of five years.
 
An additional $2,999,975 was received from these shareholders during the nine months ended December 31, 2017 for a total of $4,999,975. For the three months and nine months ended December 31, 2017, an additional $381,429 and $587,699 of interest was accrued and expensed on these convertible loans.
 
The Company has recognized a discount against the convertible loans for the relative fair value of the warrants and is accreting the discount using the effective interest rate method. The assumptions used in valuing the warrants using the binomial valuation model were as follows: exercise price of $0.25, volatility of 114%, risk-free interest rate of 1.91% and a term of five years.
 
The Company evaluated the fair value of the warrants attached to the convertible notes as $548,178 and recorded $290,375 of warrant accretion expense in the nine month period ended December 31, 2017.
 
Balance, March 31, 2017
 
 
2,017,488
 
Additional principal investment
 
 
2,999,975
 
Fair value of warrants
 
 
(548,178)
 
Accretion expense
 
 
290,375
 
Accrued Interest
 
 
587,699
 
Balance, December 31, 2017
 
$
5,347,359
 
 
(e) In May 2017, the Company’s Chinese joint venture partners loaned the Company $500,000 at an interest rate of 8% convertible into the Company’s common shares upon a capital raise (“Qualified Financing”) where gross proceeds exceed $3,000,000 at the lesser of $0.50 and the quotient of the outstanding balance on the conversion date by the price of the Qualified Financing. Additionally, the holders are entitled to warrants equaling 25% of the number of conversion shares to be issued at conversion. During the three and nine months ended December 31, 2017, $10,082 and $23,693 of interest was accrued and expensed on these convertible loans.
 
Balance, March 31, 2017
 
 
-
 
Additional principal investment
 
 
500,000
 
Accrued Interest
 
 
23,693
 
Balance, December 31, 2017
 
$
523,693
 
 
(f) In December 2017, investors of the Company advanced funds under a new convertible loan offering. These convertible loans bear interest at a fixed rate of 3% per month until the earlie of (a) January 31, 2018 and (b) the consummation of a qualified financing defined as gross proceeds of no less than $7,000,000 and up to $14,000,000 raised in one or more tranches. On the maturity date, without any action on the part of the Holder, the outstanding principal and accrued and unpaid interest under the notes will be converted into shares of new round stock based upon a (15%) discount to the lesser of (i) (A) the VWAP average of the last 30 days ending on the closing of the qualified financing (or, in the event of multiple closings, the lowest VWAP average of the last 30 days ending on each closing of a qualified financing) in the event of a maturity date referred to in clause (b) of the definition thereof, or (B) the VWAP average of the last 30 days before the maturity date in the event of a maturity date referred to in clause (a) of the definition thereof, and (ii) ($0.18).
 
$1,200,000 was received from these investors during the nine months ended December 31, 2017 and $8,800 of interest was accrued and expensed on these convertible loans for the three months and nine months ended December 31, 2017.
 
Balance, March 31, 2017
 
 
-
 
Additional principal investment
 
 
1,200,000
 
Accrued Interest
 
 
8,800
 
Balance, December 31, 2017
 
$
1,208,800