Quarterly report pursuant to Section 13 or 15(d)

Convertible Debenture

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Convertible Debenture
3 Months Ended
Jun. 30, 2014
Convertible Debenture  
Convertible Debenture
5. Convertible Debenture

 

On May 27, 2014, the Company entered into a $200,000 convertible debenture with a non-related party. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and is due on May 27, 2015. Pursuant to the agreement, should any portion of loan remain outstanding past maturity the interest will increase to 15% per annum. The note is convertible into shares of common stock 180 days after the date of issuance (November 27, 2014) until maturity at a conversion rate of 75% of the average closing bid prices of the Company’s common stock for the 45 days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. As at June 30, 2014, the Company recorded accrued interest of $1,918 (March 31, 2014 - $nil), which has been included in accounts payable and accrued liabilities.

 

The Company analyzed the conversion option under ASC 815, and determined that the conversion feature should be classified as a liability and recorded at fair value due to there being no explicit limit to the number of shares to be delivered upon settlement of the conversion option. As the note does not become convertible until November 27, 2014, the Company has not yet recognized any derivative liability associated with this note.