Convertible Notes Payable |
6 Months Ended |
|---|---|
Dec. 31, 2022 | |
| Debt Disclosure [Abstract] | |
| Convertible Notes Payable | Note 7 – Convertible Notes Payable
Convertible note purchase agreement
On January 18, 2022, the Company entered into a note purchase agreement with Quick Capital pursuant to which the Company issued Quick Capital a twelve-month convertible promissory note, due January 18, 2023, in the principal amount of $170,454 (the “Note”). The Company received net proceeds of $146,750 from the note, after Quick Capital’s legal fees of $3,250, and an original issuance discount of 12% ($23,704). In connection with the Note issuance, Quick Capital was also issued restricted shares of the Company’s common stock and a warrant (the “Warrant”) to purchase up to an aggregate of 347,512 restricted shares of the Company’s common stock at an exercise price of $0.075 per share). These issuances were valued and then using the relative fair value method of the cash received on the Note began with an unamortized discount totaling $27,383. At December 31, 2022 and June 30, 2022, the balance due on the Note is $167,652 (net of unamortized discount of $2,082) and $142,180 (net of unamortized discount of $28,274), respectively.
NEXIEN BIOPHARMA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 7 – Convertible Notes Payable (continued)
Quick Capital is entitled to a cash payment of $20,000 as liquidated damages for any failure to include all shares issuable upon the conversion of the Note (the “Conversion Shares”) and the Warrant Shares on any registration statement filed with the Securities and Exchange Commission. For twelve months following the issuance of the Quick Note, Quick Capital will have the right of first refusal to participate in future financings proposed to the Company by bonafide third parties on the same terms as such third parties and participation rights to purchase up to $1,000,000 of securities in other offerings, subject to certain exceptions.
The Note is convertible into shares of common stock at a conversion price of $0.035 per share. The Note may be prepaid at any time within the first six months at 130% of face value. Thereafter, the Note can only be prepaid at Quick Capital’s discretion.
If an event of default (as described in the Note) occurs, the Note will become immediately due and payable in an amount equal to 150% of the then outstanding principal amount of the Note plus any interest or amounts owing to Quick Capital.
The Note may not be converted and the Warrant may not be exercised if after giving effect to such conversion or exercise, as the case may be, Quick Capital and its affiliates would beneficially own more than % of the outstanding common stock of the Company. On or after May 7, 2022 and upon the mutual agreement of the Company and Quick Capital, Quick Capital may purchase additional note(s) in an aggregate amount not to exceed $350,000 on similar terms.
The Company has recorded the original issue discount, legal fees, financing shares and warrants of the Note, aggregating $51,087 as a discount to the Note. The fair value for the expense portion of the Note is being amortized over the term of the Note. This fair value has been determined based on the current trading prices of the Company’s common stock. Management has determined that this treatment is appropriate given the uncertain nature of the value of the Company and its stock, and there will be no revaluations until the Note is paid or redeemed for stock. During the six months ended December 31, 2022, $25,472 was charged to operations for amortization of the recorded discount. The Company is currently in negotiations with Quick Capital for extension of the Note.
Convertible notes payable - related
On November 24, 2020, the Company entered into financing agreements with two individuals, its CEO and a shareholder. Under the agreements, the Company issued unsecured convertible promissory notes due in () with accrued interest at the rate of % per annum, compounded annually. The notes and accrued interest are convertible at the option of the holders at any time into restricted shares of the Company’s common stock at a price of $, being the volume-weighted average price of the common stock over the trading days immediately preceding the date the notes were funded. The CEO was issued a note in the principal amount of $40,000, which included a $15,000 advance made in October 2020 and an additional loan of $25,000. A stockholder of the Company loaned $25,000 on these terms. Both lenders were also issued three types of warrants, exercisable for a period, at prices of $, $, and $, to purchase a total of shares.
The Company has recorded the conversion feature as a Beneficial Conversion Feature. The fair value of $ for the expense portion of the notes is being amortized over the term of the notes. As the warrants exceeded the value of the notes themselves, the discount is the entire amount of the notes. This fair value has been determined based on the current trading prices of the Company’s common stock. Management has determined that this treatment is appropriate given the uncertain nature of the value of the Company and its stock, and there will be no revaluations until the note is paid or redeemed for stock. The note holders have agreed not to convert the loans unless sufficient shares of common stock are available for conversion.
NEXIEN BIOPHARMA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 7 – Convertible Notes Payable (continued)
At December 31, 2022 and June 30, 2022, $45,352 (net of discount of $19,648) and $34,548 (net of discount of $30,452), respectively, was due under the financing agreements. During the six months ended December 31, 2022 and 2021, $ and $, respectively, was charged to operations for amortization of the Beneficial Conversion Feature.
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