NOTE 5 – CONVERTIBLE DEBENTURES

As of July 31, 2018, all convertible notes had been converted. As of December 31, 2017, the Company issued $785,000 in convertible notes of which were held by four non-related parties. The convertible notes were due and payable two years after their issue date. The convertible notes bear interest at 5% per annum payable. Interest payments are deferred until maturity. The convertible noteholders hold an option to convert principal, plus accrued and unpaid interest, into common stock of the Company at a price equal to eighty percent (80%) of the average of the common stock issued for the Company’s next round of financing that may occur through the issuance of equity (the “Next Equity Financing”) and subsequent to the maturity date.

At the time of conversion, there was $1,015,000 in convertible notes. These notes were converted in sequence with the merger. Total shares issuable for all convertible notes was approximately 3,771,000 shares.

The following table summarizes convertible notes payable as of July 31, 2018 and December 31, 2017:

			Bioanomaly, Inc.
			as of
	July 31, 2018		December 31, 2017
Convertible note payable - 1 holder, principal and interest due and payable 24 months from investment, monthly payments of interest - 5.0% per annum. Convertible into common stock, 20% discount to price target along with valuation cap set at $11 million (total market capitalization)	$	-	$	40,000
Convertible note payable - 1 holder, principal and interest due and payable 24 months from investment, monthly payments of interest - 5.0% per annum. Convertible into common stock, 20% discount to price target along with valuation cap set at $8 million (total market capitalization)		-		350,000
Convertible note payable - 1 holder, principal and interest due and payable 24 months from investment, monthly payments of interest - 5.0% per annum. Convertible into common stock, 20% discount to price target along with valuation cap set at $3 million (total market capitalization)		-		45,000
Convertible note payable - 1 holder, principal and interest due and payable 24 months from investment, monthly payments of interest - 5.0% per annum. Convertible into common stock, 20% discount to price target along with valuation cap set at $6 million (total market capitalization)		-		350,000
Total convertible notes payable		-		785,000
Less current maturities		-		(785,000	)
Long term portion of convertible notes payable	$	-	$	-

Subsequent to December 31, 2017 entered into several other convertible notes. The terms were similar to the convertible notes entered into during 2017. Valuation caps ranged from $3 million to $11 million. Total additional convertible notes in the amount of $230,000 were received by the Company.

The Company analyzed its conversion option for derivative accounting under ASC 815-15 Derivatives and Hedging and determined the beneficial conversion feature afforded the convertible notes should be recorded as a discount to debt. The convertible notes conversion feature was not effective immediately and would have been only afforded to the holder upon maturity. With no expressed limit to the number of shares to be ultimately delivered upon settlement this may necessitate the Company recognizing a discount equal to the entire debt instrument if it were not for the fact the Company conducted a Next Equity Financing transaction after period end whereby new shares of the Company were issued and the holders of the convertible notes received shares at a 20% discount to the Next Equity Financing pricing.

The convertible notes and its conversion features was measured against fair value at the end of each reporting period with the Company recording the change in fair value to earnings through its Statement of Operations.

The Company accounts for fair value of its conversion features in accordance with ASC 815-15, Derivatives and Hedging; Embedded Derivatives. The Company is required to carry the embedded derivative on its balance sheet at fair value and account for any unrealized change in fair value as a component of its results of operations. The Company valued the embedded derivatives using the Black-Scholes pricing model. Fair value of the conversion feature was $485,385 for the period ended June 6^th, 2018. As of June 6^th, the notes were converted and recorded into paid in capital.

Expected volatility was based on the historical volatility of several publicly traded companies common stock. Historical volatility was computed using daily pricing observations for comparable periods of time. The Company believed this method produced an estimate that was representative of the Company’s expectations of future volatility over the expected term. The Company had no reason to believe future volatility over the expected remaining life of these common stock equivalents was likely to differ materially from historical volatility. Expected life was based on one year due to the expiry of maturity. The risk-free rate was based on the U.S. Treasury rate corresponded to the expected term of the common stock equivalents.