CONVERTIBLE DEBENTURE

9 Months Ended

Feb. 28, 2017

On September 26, 2016, the Company issued a convertible debenture for $18,000. Pursuant to the terms of the agreement, the note is unsecured, bears interest at 10% per annum, and is due six months from the date of issuance. At any time up to and including the maturity date, the unpaid amount of principal and interest can be converted at the holder’s option at a conversion price equal to a 20% discount of the average share closing price for the thirty days preceding the date of conversion, not to be below $0.05 per share. The 20% discount provides for rate of conversion that is below market value, thus is characterized as a beneficial conversion feature. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $18,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value will be accreted over the term of the convertible debenture up to its face value of $18,000. The embedded conversion option does not qualify for derivative accounting and bifurcation under ASC 815 “Derivatives and Hedging”. At February 28, 2017, the Company had amortized $10,973 of the debt discount to this convertible debenture and had accrued interest of $775 related to this convertible debenture.

Convertible Debentures consist of the following as of February 28, 2017:

Noteholder (issue date)	February 28, 2017

September 26, 2016 debenture	$	18,000

		18,000
Less: debt discount		(7,027	)

Total	$	10,973

Science to Consumers, Inc. 10-Q