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9. Short-term notes

9 Months Ended

Feb. 28, 2019

9. Short-term notes:

On October 2017, the Company issued one-year promissory notes (the “2017 Notes”) totaling of $995,140 to various individual lenders. The interest rate for the 2017 Notes was 6% annum. Of the $995,140 noted above, $116,669 was rolled over from the 2016 Notes with renegotiated terms. The 2017 Notes were to be secured by the stocks of the following companies held by the Company:

Company name		Shares Secured for Loan
Nemaura Medical, Inc. (NMRD)		100,000
Recon Technology LTD (RCON)		49,999
Solbright Group Inc. (SBRT)		195,122
Nengfa Weiye Energy (NFEC)		218,779
SGOCO Group LTD (SGOC)		29,412

As of February 28, 2019, the Company transferred NMRD shares held to the Collateral Agent. It was determined that with the exception of 2017 Notes secured by NMRD shares, the remaining 2017 Notes were not properly secured. The Company offered the lenders of the unsecured 2017 Notes the option to either rescind the notes or allow the notes to remain in place as unsecured notes in April 2018. $360,000 out of the total $620,000 unsecured 2017 Notes were rescinded. The $995,140 in short term 2017 Notes were repaid, including all principal and interest pursuant to the note terms. As of February 28, 2019, the Company paid $995,140 loan principle and interest.

Pursuant to the 2017 Notes, the Company/Borrower, at its sole discretion, could at any time during the term of the 2017 Notes, sell the above referenced stocks, or in the case of the 2017 Notes properly secured by shares in NMRD, instruct the Collateral Agent to sell the above reference stocks, at which time the principal and accrued interest under the 2017 Notes would be accelerated and would become due and owing, and in addition, an incentive would be due and owing to the lenders collectively secured by NMRD in the total amount equal to 20% of the appreciation, if any, of the pledged collateral/stocks sold. None of the respective stocks/pledged collateral was sold during the term of the 2017 Notes, and as noted above, the 2017 Notes were paid full according to their terms and the 2017 Notes were effectively cancelled; therefore, no incentives are due and owing to any of these Lenders. As of February 28, 2019, the Company paid $995,140 of the total $995,140 short term 2017 Notes.

On August 2018, the board of directors of the Company approved the Company to offer unsecured one-year term notes (the “2018 Notes-10%”) to individual lenders for a maximum $3,000,000 with 10% annual interest rate. As of February 28, 2019, the Company has issued 2018 Notes-10% in the total amount of $3,030,000 from various individual lenders.

On October 2018, the board of directors of the Company approved the Company to offer unsecured one-year term notes (the “2018 Notes-8%”) to individual lenders for a maximum $3,000,000 with 8% annual interest rate. At the time the Notes were executed, the Company held 220,000 shares of NF Energy Savings Corporation (“NFEC”) (the “Securities”). As of February 28, 2019, the Company had issued 2018 Notes-8% in the total amount of $1,154,800 to various individual lenders. The 2018 Notes – 8% included an incentive based on the NFEC share value of $10.38 per share (the “Base Value”). As provided for in the 2018 Notes – 8%, the Company/ Borrower agreed that if Borrower, at its sole discretion, sold any of the Securities, all of the Lenders in the Class would be entitled to receive in the aggregate, twenty percent (20%) of the excess of the sales proceeds of such Securities over the Base Value(the “Incentive Payment”). The Lender’s share of the Incentive Payment would be determined by the fraction of the total loan to all loans in the class, not exceed $3,000,000. As of February 28, 2019, the Company sold all holdings in NEFC and accrued incentives totaling $51,314 incentive payable to the lenders .

On February 2019, the board of directors of the Company approved the Company offering unsecured one-year term notes (the “2019 Notes-10%”) to individual lenders for a maximum $5,000,000 with 10% annual interest rate. As of February 28, 2019, the Company has issued 2019 Notes-10% in the total amount of $75,000 from various individual lenders.

As of February 28, 2019 and May 31, 2018, the short-term notes are compromised as follows:

	February 28, 2019		May 31, 2018
Short-term 2017 notes
Secured short term notes, due on October 2018, 6% annual interest rate	$	–	$	635,140
Debt incentive to the secured short-term notes above		–		41,539
Short term notes, due on April and May 2018, 6% annual interest rate		–		360,000
Debt incentive related to the short-term notes above		–		21,405
Total short-term 2017 notes	$	–	$	1,058,084

Short-term 2018 notes-annual interest rate 10% due August to October 2019	$	3,030,000	$	–

Short-term 2018 notes-annual interest rate 8% due December 2019	$	1,154,800	$	–
Debt incentive related to the short-term notes above		51,314		–
Total short-term 2018 notes-annual interest rate 8%	$	1,206,114	$	–

Short-term 2019 notes-annual interest rate 10% due February 2020	$	75,000	$	–

Total Short-term notes	$	4,311,114	$	1,058,084