Convertible Notes Payable and Note Payable and Related Party Notes Payable

6 Months Ended

Feb. 28, 2018

Convertible Notes Payable and Note Payable and Related Party Notes Payable

NOTE 3 – CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE AND RELATED PARTY NOTES PAYABLE

The Company has notes payable as of February 28, 2018 are as follows:

	February 28, 2018									August 31, 2017
Convertible notes			Debt									Debt
payable	Principal		Discount			OID		Principal		Principal		Discount			OID			Principal

Shelton Davis	$	25,000	$	-		$	-	$	25,000	$	25,000	$	-		$	-		$	25,000
Steven Sass		25,000		-			-		25,000		25,000		-			-			25,000
Luke Hoppel		50,150		(20,707	)		-		29,443		75,000		(59,697	)		(18,331	)		(3,028	)
PowerUp		53,000		(14,270	)		-		38,730		53,000		(42,654	)		-			10,346
Auctus		135,000		(99,269	)		-		35,731		-		-			-			-
EMA		135,000		(75,976	)		-		59,024		-		-			-			-
	$	423,150	$	(210,222	)	$	-	$	212,928	$	178,000	$	(102,351	)	$	(18,331	)	$	57,318

On July 27, 2016, the Company executed a convertible promissory note with Shelton Avery Davis, as part of a private offering, for $25,000. The note has a maturity date of July 27, 2017 and bears interest of 10% which accrues. The note converts into common stock at $0.25 per share. As of February 28, 2018, $3,740 of interest has been accrued. On July 27, 2017, the note was extended to July 27, 2018.

On December 8, 2016, the Company executed a convertible promissory note with Steven Sass, as part of a private offering, for $25,000. The note has a maturity date of December 8, 2017 and bears interest of 10% which accrues. The note converts into common stock $0.25 per share. As of February 28, 2018, $3,069 of interest has been accrued.

On July 18, 2017, the Company executed a convertible promissory note with Luke Hoppel (“Hoppel”) for $75,000. The note has a maturity date of July 18, 2018 and bears interest of 8% which accrues. As of February 28, 2018, $3,715 of interest has been accrued. The note is convertible at 60% of the average of the three lowest daily traded prices during the 25 consecutive trading days immediately preceding the applicable conversion date. The shares were valued at $0.047 per share, or $20,752. On February 7, 2018, Hoppel converted $10,500 of principal into 2,000,000 shares of common stock valued at $0.019 per share, or $38,000. On February 23, 2018, Hoppel converted $14,350 of principal into 3,500,000 shares of common stock valued at $0.014 per share, or $49,000.

On August 28, 2017, the Company executed a convertible promissory note with PowerUp for $53,000. The note has a maturity date of May 30, 2018 and bears interest of 12% which accrues. As of February 28, 2018, $3,224 of interest has been accrued. The note is convertible at 58% of the average of the three lowest daily traded prices during the 10 consecutive trading days immediately preceding the applicable conversion date.

On November 6, 2017, the Company entered into a convertible promissory note for $135,000 with Auctus Fund, LLC (“Auctus”). The note matures on August 6, 2018 and bears interest of 12%. The conversion feature provides for a discount of 40% resulting in a debt discount of $135,000. The Company was required to issue 123,875 shares of common stock to Auctus which were an inducement for the financing. As of February 28, 2018, the 123,875 shares of common stock have not been issued and are valued at approximately $12,000. As of February 28, 2018, $5,104 of interest has been accrued.

On January 5, 2018, the Company entered into a convertible promissory note for $135,000 with EMA Financial, LLC (“EMA”). The note matures on January 5, 2019 and bears interest of 12%. The conversion feature provides for a discount of 40% resulting in a debt discount of $89,168. The Company issued 123,250 shares of common stock to EMA which were an inducement for the financing. The shares were valued at $6,150. As of February 28, 2018, $2,485 of interest has been accrued.

Note payable

On May 15, 2017, the Company entered into a settlement agreement with Arthur G. Mikaelian, et al (see Note 6 for all parties, the “Settlement Agreement”). Mikaelian had a financial obligation to Alkmini Anastasiadou (“Anastasiadou”), which was unrelated to the Company. As part of the Settlement Agreement, the Company would assume the debt of Mikaelian to Anastasiadou, as settlement between them, of $322,000, in a promissory note (the “Anastasiadou Note”). The terms of the Anastasiadou Note are 3% interest, with installment payments of $5,000 monthly beginning June 1, 2017 with payment in full by December 31, 2017. As of February 28, 2018, the balance of the note was $278,000 and the accrued interest was $7,296. In connection with the settlement, the Company issued $322,000 in notes payable, reversed accounts payable of $110,400 and recorded a loss of $211,600. On December 27, 2017, the Company and Anastasiadou executed a replacement promissory note (the “Anastasiadou Replacement Note”) which modified the monthly payments to $7,000 beginning on January 1, 2018 with a balloon payment on July 1, 2018.

The Company has notes payable to related parties, net of discounts, as of February 28, 2018 and August 31, 2017, as follows:

Notes payable to	February 28, 2018									August 31, 2017
related party, net of discounts	Principal		Debt Discount			OID		Principal		Principal		Debt Discount		OID		Principal

Ralph Salvagno (1)	$	-	$	-		$	-	$	-	$	153,011	$	-	$	-	$	153,011
Ralph Salvagno (1)		-		-			-		-		59,852		-		-		59,852
Ralph Salvagno (1)		-		-			-		-		24,830		-		-		24,830
Ralph Salvagno (1)		-		-			-		-		98,665		-		-		98,665
Ralph Salvagno		3,500		-			-		3,500		-		-		-		-
Ralph Salvagno		361,487		(65,761	)		-		295,726		-		-		-		-
	$	364,987	$	(65,761	)	$	-	$	299,226	$	336,358	$	-	$	-	$	336,358

(1)	The Company combined these notes into one note payable for $361,487.

On August 31, 2017, the Company executed a promissory note with Ralph Salvagno (“Salvagno”), the Company’s CEO and Director, for $153,011. The note is due on demand and bears interest at 2% per annum which accrues. See Note 4.

On January 14, 2017, the Company executed a promissory note with Salvagno for $59,852. The note converted various payables to Salvagno. The note is due on demand and bears interest at 4% per annum which accrues. See Note 4.

On March 18, 2017, the Company executed a promissory note with Salvagno for $24,830. The note converted various payables to Salvagno. The note is due on demand and bears interest at 4% per annum which accrues. See Note 4.

On May 31, 2017, the Company executed a promissory note with Salvagno for $98,664. The note converted various payables to Salvagno. The note is due on demand and bears interest at 4% per annum which accrues. See Note 4.

On January 26, 2018, the Company executed a promissory note with Salvagno for $3,500 of accrued expenses related to expenses paid by Salvagno. The note is due on demand and bears interest at 4% per annum which accrues. As of February 28, 2018, $13 of interest has been accrued.

On January 26, 2018, the Company executed a secured convertible promissory note with Salvagno for $361,487 which converted all of the promissory notes with Salvagno from August 31, 2016 through May 31, 2017, totaling $336,357, and accrued expenses related to expenses paid by Salvagno in the amount of $25,130. The note is convertible after six months from the date of the note or after ninety days following the removal of Salvagno as the CEO of the Company, which was done on March 22, 2018. The conversion terms are at the rate of $0.008 per share, based on a 20% discount on the date of this note. The Company recorded a discount for the beneficial conversion of $72,297 and recorded discount amortization of $6,536 for the period ended February 28, 2018. The note is secured by the assets of the Company. The note is due on January 26, 2019 and bears interest at 12% per annum which accrues. As of February 28, 2018, $4,041 of interest has been accrued. See Note 4.

PetLife Pharmaceuticals, Inc. 10-Q