Promissory Notes Payable

6 Months Ended

12 Months Ended

Mar. 31, 2015

Sep. 30, 2014

Promissory Notes Payable [Text Block]

Note 4 Promissory Notes Payable

		March 31,		September 30,
		2015		2014
Promissory note dated December 31, 2012 with a principal balance of CDN$100,000 bearing interest at 12% per annum, due on September 30, 2014	$	-	$	89,618
Promissory note dated January 9, 2013 with a principal balance of CDN$86,677, bearing interest at 12% per annum, secured by all the present and future assets of the Company; due on demand		68,553		77,679
Promissory note dated January 9, 2013 with a principal balance of CDN$27,639, bearing interest at 12% annum, secured by all the present and future assets of the Company; due on demand		21,859		24,768
	$	90,412	$	192,065

On December 31, 2012, the Company issued a promissory note having a principal balance of CDN$100,000, with terms that included interest at 12% per annum and matured on June 30, 2013, in exchange for an accounts payable owing with respect to unpaid consulting fees. This note was not repaid on June 30, 2013 and the maturity date was extended to September 30, 2014. The Company repaid this note during the six months ended March 31, 2015.

On January 9, 2013, the Company issued two (2) promissory notes (the “Secured Notes”);

a)	The Company issued a promissory note in the amount of CDN$86,677 to the former President, Secretary, Treasurer, CFO and director of the Company (the “President”) in exchange for unpaid consulting fees owing to the President. The note is bearing interest at 12% per annum and was due June 30, 2013.
b)	The Company issued a promissory note in the amount of CDN$27,639 to a former director of the Company (the “Director”) in exchange for unpaid consulting fees owing to the Director. The note is bearing interest at 12% per annum and was due June 30, 2013.

The Secured Notes are secured by a right to delay the transfer of any or all of the Company’s assets until the obligations of the Secured Notes are satisfied, including a restriction on the transfer of cash by the Company and a security interest over the intellectual property of the Company. The security interests of the Secured Notes is ranked senior to any and all security interests granted prior to the issuance of the notes and to all subsequent security interests granted, unless the holders agree in writing to other terms.

In addition, the Secured Notes contain a provision whereby if they are not repaid within 10 days of their maturity dates, they shall bear late fees in addition to interest accruing, at a rate of $100 per day per note. In an event of default by the Company, under the terms of the Secured Notes, the notes shall bear additional late fees of $500 per day per note.

Subsequent to the issuance of these Secured Notes, the former President resigned as President, Secretary, Treasurer, CFO and director of the Company and the former Director resigned as director of the Company.

The Company did not repay the notes on June 30, 2013. The Company has disputed the issuance and enforceability of the Secured Notes and should there be an attempt to enforce the Secured Notes or collection on them, the Company will consider a legal remedy. The Company has not accrued any late fees in connection with these Secured Notes as of March 31, 2015 or September 30, 2014, as the Company does not consider these amounts to be legally enforceable.

Note 4 Promissory Notes Payable

		2014			2013
Promissory note dated December 31, 2012 with a principal balance of $89,618 (CDN $100,000) bearing interest at 12% per annum, due on September 30, 2014		89,618			100,000
Promissory note dated January 9, 2013 with a principal balance of $77,679 (CDN $86,677), bearing interest at 12% per annum, secured by all the present and future assets of the Company; due on demand		77,679			84,060
Promissory note dated January 9, 2013 with a principal balance of $24,768 (CDN $27,639), bearing interest at 12% per annum, secured by all the present and future assets of the Company; due on demand		24,768			26,803
		192,065			210,863
Less: current portion		(192,065	)		(210,863	)
	$	–		$	–

On December 31, 2012, the Company issued a promissory note having a principal balance of $89,618 (CDN$100,000) with terms that included interest at 12% per annum and matured on June 30, 2013, in exchange for an accounts payable owing with respect to unpaid consulting fees. This note was not repaid on June 30, 2013 and the maturity date was extended to September 30, 2014. Subsequent to September 30, 2014, the Company repaid this note.

On January 9, 2013, the Company issued two (2) promissory notes (the “Secured Notes”);

a)	The Company issued a promissory note in the amount of $77,679 (CDN$86,677) to the former President, Secretary, Treasurer, CFO and director of the Company (the “President”) in exchange for unpaid consulting fees owing to the President. The note is bearing interest at 12% per annum and was due June 30, 2013.
b)	The Company issued a promissory note in the amount of $24,768 (CDN$27,639) to a former director of the Company (the “Director”) in exchange for unpaid consulting fees owing to the Director. The note is bearing interest at 12% per annum and was due June 30, 2013.

The Secured Notes are secured by a right to delay the transfer of any or all of the Company’s assets until the obligations of the Secured Notes are satisfied, including a restriction on the transfer of cash by the Company and a security interest over the intellectual property of the Company. The security interests of the Secured Notes is ranked senior to any and all security interests granted prior to the issuance of the notes and to all subsequent security interests granted, unless the holders agree in writing to other terms.

In addition, the Secured Notes contain a provision whereby if they are not repaid within 10 days of their maturity dates, they shall bear late fees in addition to interest accruing, at a rate of $100 per day per note. In an event of default by the Company, under the terms of the Secured Notes, the notes shall bear additional late fees of $500 per day per note.

Subsequent to the issuance of these Secured Notes, the former President resigned as President, Secretary, Treasurer, CFO and director of the Company and the former Director resigned as director of the Company.

The Company did not repay the notes on June 30, 2013. The Company has disputed the issuance and enforceability of the Secured Notes and should there be an attempt to enforce the Secured Notes or collection on them, the Company will consider a legal remedy. The Company has not accrued any late fees in connection with these Secured Notes as of September 30, 2014 or 2013, as the Company does not consider these amounts to be legally enforceable.

Extinguishment of promissory notes payable and accounts payable

During the year ended September 30, 2013, the Company issued equity units in settlement of certain of its promissory notes and trade accounts payable. Each unit consisted of one common share and common share purchase warrant entitling the holder to purchase an additional common share at $0.75 until July 5, 2018.

The promissory note and accounts payable settlements are summarized as follows:

Amount Settled					Units issued
				Accrued					Loss on
Date of Note		Principal		Interest	Number		FairValue		Settlement
Promissory notes payable
June 6, 2012		49,000		3,200	130,501		98,205		46,005
June 26, 2012		250,000		15,233	663,082		498,972		233,739
October 17, 2012		150,000		5,425	388,562		292,394		136,969
November 14, 2012		50,000		1,501	128,753		96,887		45,386
February 8, 2013		50,000		699	126,747		95,377		44,678
		549,000		26,058	1,437,645		1,081,835		506,777
Accounts payable		1,108,506		–	2,771,265		2,085,386		976,880
	$	1,657,506	$	26,058	4,208,910	$	3,167,221	$	1,483,657

The fair value of each unit issued was determined to be $0.753 determined by aggregating (i) the fair value of $0.61 for the Company’s common shares based on their quoted market price on the date of settlement and (ii) the fair value of $0.143 for each warrant included in the Company’s units. The fair value of the Company’s warrants was determined using the Black Scholes option pricing model with the following assumptions:

Stock price	$0.61
Exercise price	$0.75
Expected volatility	81.57%
Risk–free discountrate	0.28%
Expected term	1.49years
Expected dividend yield	0.00%

The loss on settlement of debt was recorded on the statement of operations for the year ended September 30, 2013 and was reduced by an amount of $11,449 relating to the interest that accrued on the promissory notes that was forgiven upon settlement of the notes payable in exchange for shares.

As discussed in Note 5, the warrants issued were required to be accounted for as derivative liabilities pursuant to the guidance of ASC 815. Consequently, the Company allocated the proceeds from the issuance of the units first to the warrants, at their fair value of $600,000 with the remainder of $2,567,220 being allotted to equity. The fair value of the warrants of $600,000 was determined based on the binomial option pricing model using the following assumptions: risk-free interest rate 0.28%, expected life 1.49 years, expected volatility 81.57%, dividend yield 0.00% .