(The accompanying notes are an integral part of these condensed consolidated interim financial statements)
(The accompanying notes are an integral part of these condensed consolidated interim financial statements)
(The accompanying notes are an integral part of these condensed consolidated interim financial statements)
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
1.Nature of Operations and Continuance of Business
Verde Bio Holdings, Inc. (formerly Appiphany Technologies Holdings Corp.) (the “Company”) was incorporated in the State of Nevada on February 24, 2010. Currently, the Company is in the business of oil and gas exploration and investment.
Going Concern
These condensed consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As at January 31, 2020, the Company has not recognized significant revenue, has a working capital deficit of $2,643,673, and has an accumulated deficit of $6,970,208. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. The Company will continue to rely on equity sales of its common shares in order to continue to fund business operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year from the date these financial statements are issued. These condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2.Summary of Significant Accounting Policies
(a)Basis of Presentation and Principles of Consolidation
The accompanying unaudited interim condensed consolidated financial statements of the Company should be read in conjunction with the consolidated financial statements and accompany notes filed with the U.S. Securities and Exchange Commission for the year ended April 30, 2019. These interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
These interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. The condensed consolidated financial statements are comprised of the records of the Company and its wholly owned subsidiary, IP Control Risk Inc., a company incorporated in the State of Nevada, United States. All intercompany transactions have been eliminated on consolidation. The Company’s fiscal year end is April 30.
(b)Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the collectability of accounts receivable, fair value and estimated useful life of long-lived assets, fair value of convertible debentures, derivative liabilities, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates.
24
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHNOLOGIES HOLDINGS CORP.)
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
2.Summary of Significant Accounting Policies
(c)Basic and Diluted Net Loss per Share
The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of January 31, 2020, the Company had 2,120,644,619 (January 31, 2019 – 840,322,050) potentially dilutive common shares outstanding. The following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net income (loss) per share (the three-month periods are not included in the table below because the diluted net income (loss) per share are the same as the basic net income (loss) per share).
|
|
January 31, 2020
|
January 31, 2019
|
|
Net income (loss)
|
(1,023,870)
|
122,517
|
|
Add back: interest expense, convertible notes
|
–
|
41,133
|
|
Less: gain on change in fair value of derivative liability
|
–
|
(330,888)
|
|
Adjusted net income (loss) for dilutive EPS
|
(1,023,870)
|
(167,238)
|
|
Weighted average number of common shares - Basic
|
1,421,618
|
1,000,029
|
|
EPS – Basic
|
(0.72)
|
0.12
|
|
Effect of dilutive securities, convertible notes and preferred series A and B shares
|
–
|
840,322,050
|
|
Weighted average number of common shares – Dilutive
|
1,421,618
|
841,322,079
|
|
EPS - Dilutive
|
(0.72)
|
(0.00)
|
(d)Fair Value Measurements
The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by U.S. generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:
Level 1 – quoted prices for identical instruments in active markets;
Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and
Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Financial instruments consist principally of cash, other assets, accounts payable and accrued liabilities, notes payable, convertible debentures, derivative liabilities and amounts due to related parties. The fair value of cash is determined based on Level 1 inputs. The fair value of the derivative liabilities are
25
determined based on Level 3 inputs. There were no transfers into or out of “Level 3” during the periods presented. The recorded
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHNOLOGIES HOLDINGS CORP.)
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
2.Summary of Significant Accounting Policies (continued)
values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
(e)Recent Accounting Pronouncements
In February 2016, Topic 842, Leases was issued to replace the leases requirements in Topic 840, Leases. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. A lessee should recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term.
The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. Topic 842 will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual periods and is to be retrospectively applied. Earlier application is permitted. The Company adopted the standard on May 1, 2019. The adoption of this standard did not have a material impact on the Company´s consolidated financial statements.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
3.Related Party Transactions
During the nine months ended January 31, 2020, the Company incurred $33,000 (2018 - $nil) in management fees to the former President and Director of the Company, which was paid in Convertible Preferred Series B shares (see Note 7). The Company also incurred an amount payable of $31 related to payment of operating expenses.
4.Notes Payable
(a) As at January 31, 2020, the Company owed $3,626 (April 30, 2019 - $4,616) in notes payable to non-related parties. Under the terms of the notes, the amounts are unsecured, bear interest at 6% per annum, and were due on July 31, 2016. The notes bear a default interest rate of 18% per annum.
(b)As at January 31, 2020, the Company owed $10,000 (April 30, 2019 - $10,000) in notes payable to non-related parties. Under the terms of the note, the amount is unsecured, bears interest at 5% per annum, and was due on July 6, 2017. The note bears a default interest rate of 12% per annum.
26
(c)As at January 31, 2020, the Company owed $2,500 (April 30, 2019 - $2,500) in notes payable to non-related parties. Under the terms of the note, the amount is unsecured, bears interest at 5% per annum, and was due on February 1, 2018. The note bears a default interest rate of 12% per annum.
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHNOLOGIES HOLDINGS CORP.)
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
4.Notes Payable (continued)
(d)As at January 31, 2020, the Company owed $15,000 (April 30, 2019 - $15,000) in notes payable to a non-related party. The note payable was issued as a commitment fee and was recorded to additional paid-in capital. Under the terms of the note, the amount is unsecured, bears interest at 8% per annum, and was due on September 15, 2017. The note bears a default interest rate of 20% per annum.
5.Convertible Debentures
(a)On February 13, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $105,000. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $94,500. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and was due on November 13, 2017. The debenture is convertible into common shares of the Company at a conversion price equal to 60% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note. In the event of default, the conversion price decreases to 50% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the year ended April 30, 2019, the Company incurred $1,020 in penalties that were added to the principal balance of the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $105,000, of which $20,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $105,000. As at January 31, 2020, the loan was in default, the carrying value of the note was $8,990 (April 30, 2019 - $8,990), and the unamortized total discount was $nil (2018 - $nil).
(b)On February 24, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $33,000. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum pre-default and 20% per annum thereafter, and was due on November 30, 2017. The debenture is convertible into common shares of the Company at a conversion price equal to 58% of the average of the lowest two trading prices of the Company’s common stock of the fifteen prior trading days immediately preceding the issuance of the note. During the nine months ended January 31, 2020, the Company incurred a $nil (year ended April 30, 2019 - $38,965) default fee on the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging. As at January 31, 2020, the loan was in default and the carrying value of the note was $93,965 (April 30, 2019 - $93,965).
(c)On May 9, 2017, the Company issued a convertible debenture, to a non-related party, totaling $36,450. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and was due on February 9, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to 60% of the lowest trading price of the Company’s common stock of the past ten trading days prior to notice of conversion. In the event of default, the conversion price decreases to 50% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the nine months ended
27
January 31, 2020, the Company incurred $nil (year ended April 30, 2019, $27,902) in penalties that were added to the principal balance of the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHNOLOGIES HOLDINGS CORP.)
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
5.Convertible Debentures (continued)
of $36,450, of which $6,450 of the discount resulted from debt issuance costs. The carrying value of the convertible note was accreted over the term of the convertible note up to the face value of $36,450. As at January 31, 2020, the loan was in default and the carrying value of the note was $64,352 (April 30, 2019 - $64,352).
(d)On June 28, 2017, the Company issued a convertible debenture, to a non-related party, totaling $57,250. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price and proceeds received was $49,500. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum, and was due on March 28, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past twenty-five trading days prior to notice of conversion or the issuance of the note. In the event of default the interest rate increases to 24%.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $57,250, of which $7,750 of the discount resulted from debt issuance costs. The carrying value of the convertible note was accreted over the term of the convertible note up to the face value of $57,250. During the nine months ended January 31, 2020, the Company issued 417,948 shares of common stock for the conversion of $18,044 of accrued interest and $3,000 of conversion fees and finance costs. During the year ended April 30, 2019, the Company issued 167,930 shares of common stock for the conversion of $1,569 of the note and $2,712 of accrued interest and $2,500 of conversion fees and finance costs. As at January 31, 2020, the loan was in default and the carrying value of the note was $55,341 (April 30, 2019 - $55,341).
(e)On July 19, 2017, the Company issued a convertible debenture, to a non-related party, in the amount of $33,333. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $28,000. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum, and was due on July 19, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to 50% of the lowest trading price of the Company’s common stock of the past twenty-five trading days prior to notice of conversion or the issuance of the note. In the event of default the interest rate increases to 24%. During the year ended April 30, 2019, the Company incurred $854 in penalties that were added to the principal balance of the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,333, of which $5,333 of the discount resulted from debt issuance costs. The carrying value of the convertible note was be accreted over the term of the convertible note up to the face value of $33,333.
During the nine months ended January 31, 2020, the Company issued 255,475 shares of common stock for the conversion of $6,496 of the note and $2,446 of accrued interest. During the year ended April 30, 2019, the Company issued 277,661 shares of common stock for the conversion of $13,196 of the note and $1,395 of accrued interest. As at January 31, 2020, the loan was in default, the carrying value of the note was $2,902 (April 30, 2019 - $9,398), and the unamortized total discount was $nil (April 30, 2019 - $nil).
28
Included in the convertible debenture agreement is a $30,000 collateralized secured promissory note and a $33,333 back end note (with the same terms as the convertible debenture mentioned above). As of January 31, 2020, and at the date of filing, no proceeds have been received on the collateralized secured promissory note or the back-end note.
(f)On October 4, 2017, the Company issued a convertible debenture, to a non-related party, in the amount of $36,000, which was the first tranche of a convertible debenture totaling $102,000 (the “October 4, 2017 Agreement”). Pursuant to the October 4, 2017 Agreement, the note was issued with an original issue discount and as such the purchase price was $25,000. Under the terms of the debenture, the amount is unsecured, bears
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHNOLOGIES HOLDINGS CORP.)
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
5.Convertible Debentures (continued)
interest at 10% per annum, and was due on July 9, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past ten trading days prior to notice of conversion or the issuance of the note. In the event of default, the conversion price decreases to 40% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the year ended April 30, 2019, the Company incurred $21,910 in penalties that were added to the principal balance of the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $36,000, of which $11,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note was accreted over the term of the convertible note up to the face value of $36,000. As at January 31, 2020, the loan was in default, the carrying value of the note was $57,910 (April 30, 2019 - $57,910), and the unamortized total discount was $nil (April 30, 2019 - $nil).
(g)On September 28, 2017, the Company issued a convertible debenture, to a non-related party, in the amount of $33,333. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $25,500. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum, and was due on September 28, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past twenty-five trading days prior to notice of conversion or the issuance of the note. In the event of default there is a penalty of 10% of the principal balance of the outstanding note and the interest rate increases to 24%.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,333, of which $7,833 of the discount resulted from debt issuance costs. The carrying value of the convertible note was accreted over the term of the convertible note up to the face value of $33,333. During the year ended April 30, 2019, the Company recorded a $3,333 principal penalty. As at January 31, 2020, the loan was in default, the carrying value of the note was $36,666 (April 30, 2019 - $36,666), and the unamortized total discount was $nil (April 30, 2019 - $nil).
Included in the convertible debenture agreement is a back end note for up to $33,333 (with the same amount of proceeds, original issue discount, maturity date, interest rate and conversion terms as the convertible debenture mentioned above). As of January 31, 2020, and at the date of filing, no proceeds have been received on the back-end note.
(h)On November 8, 2017, the Company issued a convertible debenture, to a non-related party, in the amount of $33,000, which was the second tranche of the October 4, 2017 agreement. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $30,000. Under the terms
29
of the debenture, the amount is unsecured, bears interest at 10% per annum, and was due on August 8, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past ten trading days prior to notice of conversion or the issuance of the note. In the event of default, the conversion price decreases to 40% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the year ended April 30, 2019, the Company incurred $20,084 in penalties that were added to the principal balance of the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,000, of which $3,000 of the discount resulted from debt issuance costs. The carrying value of the
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHNOLOGIES HOLDINGS CORP.)
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
5.Convertible Debentures (continued)
convertible note was accreted over the term of the convertible note up to the face value of $33,000. As at January 31, 2020, the loan was in default, the carrying value of the note was $53,084 (April 30, 2019 - $53,084), and the unamortized total discount was $nil (April 30, 2019 - $nil).
(i)On December 26, 2017, the Company issued a convertible debenture, to a non-related party, in the amount of $33,000, which was the final tranche of the October 4, 2017 agreement. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and was due on September 26, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past ten trading days prior to notice of conversion or the issuance of the note. In the event of default, the conversion price decreases to 40% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the year ended April 30, 2019, the Company incurred $20,084 in penalties that were added to the principal balance of the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,000, of which $3,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note was accreted over the term of the convertible note up to the face value of $33,000. As at January 31, 2020, the loan was in default, the carrying value of the note was $53,084 (April 30, 2019 - $53,084), and the unamortized total discount was $nil (April 30, 2019 - $nil). (j)
(j)On March 15, 2019, the Company issued a convertible debenture, to a non-related party, in the amount of $36,000. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on December 15, 2019. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 65% of the lowest trading price of the Company’s common stock of the past twenty trading days prior to notice of conversion or the issuance of the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $36,000, of which $6,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $36,000. As at January 31, 2020 the loan was in default, the carrying value of the note was $36,000 (April 30, 2019 - $nil), and the unamortized total discount was $nil (April 30, 2019 - $36,000).
30
(k)On September 12, 2019, the Company issued a convertible debenture, to a non-related party, in the amount of $33,000. Pursuant to the agreement, the note was issued with an original issue discount of $3,000 and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on June 12, 2020. The debenture is convertible into common shares of the Company at a conversion price $0.078. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $30,462 as additional paid-in capital and reduced the carrying value of the convertible note to $2,538. The carrying value will be accreted over the term of the convertible notes up to their face value of $33,000.
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHNOLOGIES HOLDINGS CORP.)
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
5.Convertible Debentures (continued)
As at January 31, 2020, the carrying value of the convertible notes was $9,442 (April 30, 2019 - $nil) and had an unamortized discount of $23,558 (April 30, 2019 - $nil). During the nine months ended January 31, 2020, the Company recorded accretion expense of $6,904 (2019 - $nil).
(l)On November 13, 2019, the Company issued a convertible debenture, to a non-related party, in the amount of $28,193. Pursuant to the agreement, the note was issued with an original issue discount of $2,563 and as such the purchase price was $25,630. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on August 13, 2020. The debenture is convertible into common shares of the Company at a conversion price $0.048. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $18,795 as additional paid-in capital and reduced the carrying value of the convertible note to $9,398. The carrying value will be accreted over the term of the convertible notes up to their face value of $28,193.
As at January 31, 2020, the carrying value of the convertible notes was $13,176 (April 30, 2019 - $nil) and had an unamortized discount of $15,017 (April 30, 2019 - $nil). During the nine months ended January 31, 2020, the Company recorded accretion expense of $3,778 (2019 - $nil).
(m)On January 14, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $35,000. Pursuant to the agreement, the note was issued with an original issue discount of $5,000 and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on October 14, 2020. The debenture is convertible into common shares of the Company at a conversion price $0.06. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature.
The Company recognized the intrinsic value of the embedded beneficial conversion feature of $23,333 as additional paid-in capital and reduced the carrying value of the convertible note to $11,667. The carrying value will be accreted over the term of the convertible notes up to their face value of $35,000.
As at January 31, 2020, the carrying value of the convertible notes was $12,606 (April 30, 2019 - $nil) and had an unamortized discount of $22,394 (April 30, 2019 - $nil). During the nine months ended January 31, 2020, the Company recorded accretion expense of $939 (2019 - $nil).
(n)On January 23, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $68,000. Pursuant to the agreement, the note was issued with an original issue discount of $8,000 and as
31
such the purchase price was $60,000. During the nine months ended January 31, 2020, the Company received the first tranche totaling $30,000 and recognized an original issue discount of $4,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on October 23, 2020. The debenture is convertible into common shares of the Company at a conversion price $0.048. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $22,667 as additional paid-in capital and reduced the carrying value of the convertible note to $11,767. The carrying value will be accreted over the term of the convertible notes up to their face value of $34,000.
As at January 31, 2020, the carrying value of the convertible notes was $11,768 (April 30, 2019 - $nil) and had an unamortized discount of $22,232 (April 30, 2019 - $nil). During the nine months ended January 31, 2020, the Company recorded accretion expense of $434 (2019 - $nil).
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHNOLOGIES HOLDINGS CORP.)
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
6.Derivative Liability
The Company records the fair value of the of the conversion price of the convertible debentures disclosed in Note 5 in accordance with ASC 815, Derivatives and Hedging. The fair value of the derivative was calculated using a Binomial model. The fair value of the derivative liability is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statement of operations. During the nine months ended January 31, 2020, the Company recorded a loss on the change in fair value of derivative liability of $460,346 (January 31, 2019 – gain of $330,888). As at January 31, 2020, the Company recorded a derivative liability of $1,287,942 (April 30, 2019 - $1,080,589).
A summary of the activity of the derivative liability is shown below:
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
Balance, April 30, 2019
|
|
|
|
|
1,080,589
|
|
Adjustment for conversion
|
|
|
|
|
(252,993)
|
|
Mark to market adjustment at January 31, 2020
|
|
|
|
|
460,346
|
|
|
|
|
|
|
|
|
Balance, January 31, 2020
|
|
|
|
|
1,287,942
|
7.Convertible Preferred Series B Stock Liability
On June 13, 2019, the Company designated 1,000,000 shares of preferred stock as Series B. The holders of Series B preferred shares are not entitled to receive dividends except as may be declared by the Board at its sole and absolute discretion. Each Series B preferred share is convertible into common shares according to the following formula: the Stated Value of $1.10 per share of Series B preferred stock divided by the closing price of the Common Stock on the day prior to the conversion. Holders of Series B preferred stock shall not have voting rights.
On June 17, 2019, the Company issued 530,000 shares of Series B preferred stock, at a value of $583,000 based on the stated value of $1.10 per share, in exchange for the settlement of accounts payable of $266,523, notes payable of $990, accrued interest of $535, management fees of $33,000. The transaction resulted in a loss on settlement of debt of $281,952. Because the Series B shares represent an unconditional obligation that the Company must or may settle in a variable number of its equity shares and the monetary value of the obligation is
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predominantly based on a fixed monetary amount ($1.10 worth of common stock), the 530,000 shares with a balance of $583,000 is recorded as a liability on the balance sheet.
8.Common Shares
During the nine months ended January 31, 2020, the Company issued an aggregate of 673,423 common shares with a fair value of $291,647 upon the conversion of $6,496 of convertible debentures, $252,993 of derivative liabilities, $20,490 of accrued interest, and $3,000 in conversion fees resulting in a loss on settlement of debt of $8,668. The remaining loss settlement of debt relates to the issuance of the Series B preferred stock. See Note 7.
On November 17, 2017, the Company effected a reverse stock split on a basis of 1 new common share for every 100 old common shares. Additionally, on February 14, 2020, the Company effected a reverse stock split on a basis of 1 new common share for every 100 old common shares. The impact of these reverse stock splits has been applied on a retroactive basis.
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHNOLOGIES HOLDINGS CORP.)
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
9.Preferred Shares
Authorized: 10,000,000 preferred shares with a par value of $0.001 per share
Convertible Preferred Series A stock
On April 18, 2017, the Company designated 500,000 shares of preferred stock as Series A. The holders of Series A preferred shares are entitled to receive dividends equal to the amount of the dividend or distribution per share of common stock payable multiplied by the number of shares of common stock the shares of Series A preferred shares held by such holder are convertible into. Each Series A preferred shares is convertible at a factor of 10,000 Series A shares for one common share. Each holder of Series A preferred shares is entitled to cast 10,000 votes for every one Series A preferred share held.
Convertible Preferred Series B stock – see Note 7.
10.Commitments and Contingencies
On February 19, 2019, the former Chief Executive Officer and Director of the Company entered into a Stock Purchase Agreement to sell his Series A Preferred Stock, the closing of which is pending certain closing conditions, including, but not limited to the Company getting current with its SEC filings and restricting some of its outstanding debt. This transaction was completed on November 22, 2019.
11.Subsequent Events
On February 1, 2020, the Company signed a consulting services agreement with an unrelated party to be paid in 500,000 shares of common stock and $5,000 per month for the duration of the contract. This agreement has been terminated, however, the Company anticipates issuing the 500,000 shares in the future.
On February 5, 2020, the Company signed a joint venture agreement for a 25% share in the Hemp seed and genetics industry. The Company has committed to contribute $300,000 to the joint venture on a to be mutually agreed upon schedule. Additionally, the Company will issue 1,500,000 common shares to the other members of the joint venture as compensation for their initial contributions. On May 11, 2020, the agreement was terminated with no shares issued or contributions made.
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On March 25, 2020, the Company issued a convertible promissory note to an unrelated party for $13,000. Pursuant to the agreement, the note was issued with a 10% original issue discount and with $2,000 being withheld by the Holder to offset transaction costs. As such the purchase price was $9,700. The note is convertible into common stock of the Company at $0.018, which equals 60% multiplied by the lowest Trading Price for the Common Stock on the Trading Day preceding the execution of the note. The promissory note shall bear interest at 10% per annum and is due on December 25, 2020.
On May 1, 2020, the Company signed a consulting services agreement with an unrelated party to be paid in 2,000,000 shares of common stock upon the execution of the agreement and $5,000 per month for the duration of the contract beginning July 31, 2021. These shares have not yet been issued.