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9. Notes Payable | 9 Months Ended
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Jun. 30, 2017
Notes |
9. Notes Payable | 9. Notes Payable The Company had the following notes payable outstanding as of:
|  | June 30, |  | September 30,
|  | 2017 |  | 2016
Unsecured notes payable with interest at 10% per annum, due November 2018. The notes may go into default in the event other notes payable go into default subsequent to the effective date of the note. Some of the notes are currently in technical default. However, as of the time of this report, the lenders have informally agreed to work with the Company until such time as the note can be repaid. In February 2016, the Company redeemed all 5,361 shares of its Series F Convertible Preferred Stock ("Series F preferred") plus accrued dividends of $673,948 for 20,005 shares of common stock with a fair value of $1,600,000 containing certain temporary restrictions, and $5,900,000 of notes payable. Payments on the notes are partially or fully convertible at the Company's option at the lesser of (i) 80% of the per share price of the common stock to be offered in the proposed offering that is described in the Form S-1 filed on July 19, 2016 (the "Offering"), (ii) $25 per share, (iii) 80% of the unit price in the Offering (if applicable), or (iv) the exercise price of any warrants issued in the Offering to a maximum of 39,334 shares of common stock. The conversion rate is adjustable to any lower rates granted through equity sales or other conversion rates provided by issuances of other debt, warrants, options or other instruments, with the exception of certain other raises. A note may only be converted if the holder owns less than 4.99% of the Company's common stock after conversion. The Company recorded a derivative liability of $2,461,899 related to the conversion feature of the notes. In connection with the redemption of the Series F preferred stock, the Company issued new warrants in exchange for warrants held by the Series F preferred stockholders for the purchase of 11,070 shares of common stock at an exercise price of the lesser of (i) 80% of the per share price of the common stock of the Offering, (ii) $25 per share, (iii) 80% of the unit price in the Offering (if applicable), or (iv) the exercise price of any warrants issued in the Offering, adjustable to any lower rates granted through equity sales or other conversion rates provided by issuances of other debt, warrants, options or other instruments, with the exception of certain other raises. The Company is also required to issue additional warrants for the purchase of up to 16,000 shares of common stock exercisable at $0.50 per share, also adjustable, that vest upon certain events of default. On December 11, 2017, the Company entered into Securities Purchase Agreements that adjusted the conversion rate to exercise price per share equal to the lesser of (i) 80% of the per share price of common stock in a contemplated private placement of securities of up to $5,000,000, contemplated to take place within six months of the effective date (the “Private Placement”) (ii) $3.00 per share, (iii) 80% of the offering price in the Private Placement (if applicable), or (iv) 80% of the exercise price of any warrants issued in the Private Placement, in each case subject to adjustment (see Note 18). The fair value of $1,344,608 related to the new warrants was recorded as a derivative (see Notes 12 and 15). The fair value of the stock, conversion feature, warrants and $25,000 of fees, in excess of the carrying value of the Series F preferred stock were recorded as a deemed dividend of $6,484,236. During the three months ended March 31, 2017, the Company entered into letter agreements related to the note to convert the outstanding principal and interest into shares of common stock contingent upon the Offering, which also removes the maximum share limitation conversion, which have expired (see Note 17). Subsequent to June 30, 2017, the Company received letters related to the notes wherein the lenders waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 (see Note 18). In December 2017, the Company entered into those certain forbearance and lock up letter agreements with four of the eight debtors, with principal balances in the aggregate amount of $1,134,658, whereby the debtors agreed that, without prior written consent of the Company, the debtors will not, directly or indirectly, (i) offer for sale, sell, pledge, or otherwise transfer or dispose of (or enter into any transaction that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of) any shares of Common Stock (including, without limitation, shares of common stock that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and shares of common stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for common stock, (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of common stock, whether any such transaction is to be settled by delivery of common stock or other securities, in cash or otherwise, (iii) except as provided for, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any other securities of the Company, or (iv) publicly disclose the intention to do any of the foregoing for a period of the earlier of (a) June 5, 2018 or (2) the consummation of a qualified offering, herein deemed as an offering by the Company of $3,000,000 or more. Additionally, the Debt Holders agreed that they will forbear from enforcing their rights and remedies against any defaults which may exist historically, currently or in the future through June 5, 2018 under the existing loan documents. The agreements automatically terminate upon the earlier of (i) inability to raise a minimum of $550,000 in capital on or before December 31, 2017; (ii) June 5, 2018; or (iii) the consummation of a qualified offering of at least $3,000,000 by the Company. In addition, two of the five debtor agreements waive their rights to default litigation only through December 31, 2017 and any new financing must receive their prior consent unless it is common equity (see Note 18). On January 12, 2018, the Company received letters from four of the debtors where the debtors forbear against any historical and future events of default and remedies through February 15, 2018. Further, the maturity date was extended through February 15, 2018. As part of the letters, the Company agreed not to initiate any new financing arrangements without the consent of the debtors. (see Note 18). On December 11, 2017, the Company borrowed an aggregate additional $300,000 from two of the lenders under new note payable agreements (see Note 18). | $ | 5,900,000 | $ | 5,900,000
Secured borrowings from a third party that purchased $3,257,600 of customer receivables for $2,100,000, with due dates ranging from January 2018 to October 2018, and payable in daily payments ranging from $5,000 to $13,000. The $1,157,600 difference between the customer receivables and cash received is being amortized to interest expense over the term of the respective notes. The secured borrowings are guaranteed by a former chief executive officer of the Company and are subordinated to other notes payable. On April 17, 2017, the Company entered into a factoring agreement which provides for an advance of $1,794,000, comprised of $1,000,000 in cash and the consolidation of $794,000 from four prior factoring agreements into the amounts owed under the factoring agreement (collectively, the "Funds"). In consideration for the Funds, the Company sold to the lender all future receipts until the total amount of $2,511,601 has been paid. The factoring agreement requires payment of the minimum daily amount of $12,999.99 for 193 days. The $2,511,601 can be reduced if repayment occurs more quickly. Repayment of the amounts owing is with recourse and secured by all accounts, chattel paper, documents, equipment, general intangibles, instruments, and inventory of the Company and subordinated to other notes payable. In June 2017, the lender verbally agreed to reduce the minimum daily amount to $5,000 and, in November 2017, verbally agreed to further reduce the minimum daily amount to $2,600 through January 7, 2018, after which the daily amount would return to $13,000. Subsequent to June 30, 2017, the Company entered into similar secured borrowings and related verbal or written reductions in the daily amounts. On January 5, 2018, the Company further modified each agreement to keep the amount of the daily payments at approximately the same level as the agreement on November 7, 2017 through mid-March 2018, except one where the lower payments are only through February 5, 2018 (see Note 18). |  | 1,974,602 |  | 689,318
Unsecured note payable with a vendor with interest at 0.65% per annum payable at the end of each calendar year, due January 2018, issued in March 2016 upon the conversion of $2,523,937 in accounts payable to the vendor. The note requires payments of $50,000 per month in April 2016 through December 2016, $100,000 per month in January 2017 through December 2017 and the remaining balance due in January 2018. In September 2017, the Company entered into agreements with the vendor which supersedes the unsecured note payable agreement and provides new terms (see Note 18). |  | 1,773,937 |  | 2,223,937
Unsecured note payable with a third party with no interest, was due the earlier of November 2016 or the third business day after the closing of a proposed Offering. The note is currently in technical default. However, as of the time of this report, the lender has provided bridge capital since going in default and has informally agreed to work with the Company until such time as the note can be repaid. Pursuant to the note, the Company may borrow up to $1,500,000 upon meeting certain milestones and may be converted into shares of common stock upon default. The note required a payment of common stock on the 5th trading day after the pricing of the proposed Offering, but no later than December 15, 2016. The number of common shares will equal $200,000 divided by the lowest of (i) the lowest daily closing price of the common stock during the ten days prior to delivery of the common shares or during the ten days prior to the date of the Purchase Agreement, (ii) 80% of the common stock Offering price of the Offering, (iii) 80% of the unit price Offering price of the Offering, or (iv) the exercise price of any warrants issued in the Offering. The estimated fair value of $240,000 of the stock is included in accrued liabilities and is being amortized to interest expense over the life of the note. In connection with the issuance of the note, the Company also issued 20,000 warrants to purchase shares of common stock at an exercise price per share equal to the lesser of (i) 80% of the per share price of the common stock in the Offering, (ii) $25 per share, (iii) 80% of the unit price in the Offering, or (iv) the exercise price of any warrants issued in the Offering and the number of shares will reset upon the closing of the Offering. The warrants may only be exercised to the extent the holder would own a maximum of 9.99% of the Company's common stock after exercise. The fair value of $493,590 related to the replacement warrants was recorded as a derivative (see Notes 12 and 15). Of this fair value amount, $220,000 was recorded as a debt discount and is being amortized over the life of the note and the remaining $273,590 was recorded as a loss on derivative liability. In the event of borrowing in excess of an initial $500,000, the Company will be required to issue additional warrants with an aggregate exercise amount equal to 100% of the additional amount borrowed with similar terms to the initial warrants issued. In November 2016, the Company borrowed an addition $250,000 on the note and issued an additional warrant for the purchase of 10,000 shares of common stock with similar terms to the original warrants. The fair value of $286,171 related to the November 2016 warrants was recorded as a derivative (see Notes 12 and 15). The fair value was recorded as a debt discount and is being amortized over the remaining life of the note. In November 2016, the Company amended the note to extend the maturity date to the earlier of January 31, 2017 or the third business day after the closing of the Offering. In addition, the amendment adjusted the origination shares to equal 20% of the note divided by the lowest of (i) the lowest daily closing price of the common stock during the ten days prior to delivery of the shares or during the ten days prior to the date of the agreement, (ii) 80% of the common stock Offering price of the Offering, (iii) 80% of the unit price Offering price (if applicable), or (iv) 80% of the exercise price of any warrants issued in the Offering. In December 2016, the Company borrowed an addition $250,000 on the note and issued an additional warrant for the purchase of 10,000 shares of common stock with similar terms to the original warrants. The fair value of $349,819 related to the December 2016 warrants was recorded as a derivative (see Notes 12 and 15). The fair value was recorded as a debt discount and is being amortized over the remaining life of the note. On January 3, 2017, the Company borrowed an additional $200,000 on the note and issued an additional warrant for the purchase of 8,000 shares of common stock with similar terms to the original warrants. The fair value of $567,753 related to the January 3, 2017 warrants was recorded as a derivative (see Notes 12 and 15). The fair value was recorded as a debt discount and is being amortized over the remaining life of the note. On January 30, 2017, the Company amended the note to extend the maturity date to the earlier of March 15, 2017 or the third business day after the closing of the Offering. Also on January 30, 2017. the Company borrowed the remaining $300,000 on the note and issued an additional warrant for the purchase of 12,000 shares of common stock with similar terms to the original warrants. The fair value of $899,598 related to the January 30, 2017 warrants was recorded as a derivative (see Notes 12 and 15). The fair value was recorded as a debt discount and is being amortized over the remaining life of the note. On March 3, 2017, the Company amended the note to increase the maximum sum from $1,500,000 to $2,000,000. Also on March 3, 2017, the Company borrowed an additional $200,000 on the note and issued an additional warrant for the purchase of 8,000 shares of common stock with similar terms to the original warrants. The fair value of $407,947 related to the March 3, 2017 warrants was recorded as a derivative (see Notes 12 and 15). The Company recorded a loss on extinguishment of debt of $501,969 related to the March 3, 2017 amendment and additional borrowing. Effective March 27, 2017, the Company amended the note to extend the maturity date to the earlier of April 15, 2017 or the third business day after the closing of the Offering. Additionally, the lender agreed to enter into a lock up prohibiting the sale or other transfer of all securities of the Company owned by them for a period of 6 months. In consideration for entering into the lock-up agreement the Company has agreed to pay a $340,000 fee, payable in shares of common stock at a rate of the lowest of (i) 80% of the common stock Offering price of the Offering, (ii) 80% of the unit price Offering price of the Offering (if applicable), or (iii) 80% of the exercise price of any warrants issued in the Offering. The lock-up agreement was signed during April 2017, which has expired. Effective April 19, 2017, the Company amended the note to extend the maturity date to the earlier of May 20, 2017 or the third business day after the closing of the Offering. On December 11, 2017, the Company borrowed an additional $250,000 from the lender under a new note payable agreement (see Note 18). |  | 1,700,000 |  | 500,000
Secured note payable to a third party with interest at 12.75% per annum, due February 2019, in default. The note is secured by the assets of the Company and may go into default in the event other notes payable go into default subsequent to the effective date of the note. The Company entered into the note payable agreement in conjunction with a line of credit. The Company initially borrowed $1,500,000 and may borrow additional amounts under the note payable agreement up to a total balance of $3,000,000 as the Company meets certain milestones. The interest rate may also reduce to 11.25% per annum as the Company meets certain milestones. In conjunction with the note and related line of credit, the Company issued warrants to the lender to purchase 24,032 shares of common stock at $32.50 per share with a fair market value of $3,732,100 (see Notes 12 and 15), which resulted in a loss on derivative of $2,309,461. The Company has recorded discounts of $1,500,000, which are being amortized to interest expense over the term of the note. In April 2016, the Company borrowed an additional $500,000 on the note and incurred additional fees of $25,000, which are being amortized to interest expense over the remaining term of the note. In September 2016, the Company entered into a forbearance agreement where the lender will forbear from exercising remedies with regard to certain breaches through October 31, 2016 and consented to the Company entering into a purchase agreement with another party and issue the note and the warrant thereunder. Effective November 1, 2016, the Company and a lender entered into a forbearance and consent under a loan and security agreement (the "November Forbearance Agreement"). Pursuant to the terms of the November Forbearance Agreement, the lender will forbear from exercising remedies (the "November Forbearance") with regard to certain breaches of agreements between the Company and the lender, including the existing agreements as well as the previous forbearance agreement. Additionally, pursuant to the November Forbearance Agreement, the lender has provided the Company with the consent required under the existing agreements and previous forbearance agreement to make certain payments from the proceeds of the Offering. These payments include, but are not limited to (i) payments to holders of the Company's Series E Preferred, (ii) third party note and receivable payments and (iii) repayment of an unsecured note payable issued in September 2016. The lender also consented to the issuance of the Company's Series G Preferred Stock to certain affiliates of the Company. In consideration for the November Forbearance, the Company has agreed to issue the lender warrants to purchase 130,000 shares of common stock at an exercise price equal to the per share price of the common stock in the Offering, which shall be subject to a 12-month lock-up agreement. The Company has included the $1,932,577 estimated fair value of the warrants in accrued expenses as of June 30, 2017. The Forbearance set forth in the November Forbearance Agreement was in effect through December 31, 2016. The Company recorded a loss on extinguishment of debt of $2,043,715 on the note and its related line of credit in relation to the forbearance agreement. Effective December 31, 2016, the Company and the lender entered into a forbearance and consent under loan and security agreement (the "December Forbearance"). Pursuant to the terms of the December Forbearance, the lender will forbear from exercising remedies with regard to certain breaches of agreements between the Company and the lender, including the existing agreements as well as the previous two forbearances. Additionally, pursuant to the December Forbearance, the lender has provided the Company with the consent required under the Existing Agreements and prior two forbearances to make certain payments from the proceeds of the Offering. In consideration for the December Forbearance, the Company has agreed to issue the lender warrants to purchase 10,000 shares of common stock at an exercise price equal to the per share price of the common stock in the Offering and $50,000 of common stock at 80% of the at the same issue price in of the Offering, which shall be subject to a lock-up agreement. The $148,677 estimated fair value of the warrants and $60,000 fair value of the stock has been included in accrued expenses as of June 30, 2017. $104,824 of the fair value of the warrants and common stock associated with the note is recorded as a discount and is being amortized to interest expense over the remaining life of the note. The forbearance set forth in the December Forbearance was in effect through February 15, 2017. On February 15, 2017, the lender extended the December Forbearance period through March 31, 2017. On March 28, 2017, the lender extended the December Forbearance period through April 10, 2017. In March 2017, the Company modified the line of credit to include an additional secured borrowing of a maximum of $300,000. The Company recorded a loss on extinguishment of debt of $56,741 related to the modification. The Company has accrued default interest of $15,470 on the note payable. |  | 1,152,778 |  | 1,652,778
Secured line of credit with a third party with interest at 12.25% per annum, due February 2018, in default. The note is secured by the assets of the Company and may go into default in the event other notes payable go into default subsequent to the effective date of the note. The Company entered into the line of credit agreement in conjunction with a note payable. The Company may draw up to the lesser of 80% of certain accounts receivable or $1,500,000 and increase the maximum it may borrow under the agreement up to a total balance of $3,000,000 at $500,000 per increase as the Company meets certain milestones. The interest rate may also reduce to 10.75% per annum as the Company meets certain milestones. In conjunction with the line of credit and related note, the Company issued warrants to purchase 24,032 shares of common stock at $32.50 per share with a fair market value of $3,732,100 (see Notes 12 and 15), which resulted in a loss on derivative of $2,309,461. The Company has recorded prepaid expenses of $44,665, which are being amortized to interest expense over the term of the line of credit. In September 2016, the Company entered into a forbearance agreement where the lender will forbear from exercising remedies with regard to certain breaches through October 31, 2016 and consented to the Company entering into a purchase agreement with another party and issuance of the note and the warrant thereunder. Effective November 1, 2016, the Company and a lender entered into a forbearance and consent under a loan and security agreement (the "November Forbearance Agreement"). Pursuant to the terms of the November Forbearance Agreement, the lender will forbear from exercising remedies (the "November Forbearance") with regard to certain breaches of agreements between the Company and the lender, including the existing agreements as well as the previous forbearance agreement. Additionally, pursuant to the November Forbearance Agreement, the lender has provided the Company with the consent required under the existing agreements and previous forbearance agreement to make certain payments from the proceeds of the Offering. These payments include, but are not limited to (i) payments to holders of the Company's Series E Preferred, (ii) third party note and receivable payments and (iii) repayment of an unsecured note payable issued in September 2016. The lender also consented to the issuance of the Company's Series G Preferred Stock to certain affiliates of the Company. In consideration for the November Forbearance, the Company has agreed to issue the lender warrants to purchase 130,000 shares of common stock at an exercise price equal to the per share price of the common stock in the Offering, which shall be subject to a 12-month lock-up agreement. The Company has included the $1,932,577 estimated fair value of the warrants in accrued expenses as of June 30, 2017. The Forbearance set forth in the November Forbearance Agreement was in effect through December 31, 2016. The Company recorded a loss on extinguishment of debt of $2,043,715 on the note and its related line of credit in relation to the forbearance agreement. Effective December 31, 2016, the Company and the lender entered into a forbearance and consent under loan and security agreement (the "December Forbearance"). Pursuant to the terms of the December Forbearance, the lender will forbear from exercising remedies with regard to certain breaches of agreements between the Company and the lender, including the existing agreements as well as the previous two forbearances. Additionally, pursuant to the December Forbearance, the lender has provided the Company with the consent required under the Existing Agreements and prior two forbearances to make certain payments from the proceeds of the Offering. In consideration for the December Forbearance, the Company has agreed to issue the lender warrants to purchase 10,000 shares of common stock at an exercise price equal to the per share price of the common stock in the Offering and $50,000 of common stock at 80% of the at the same issue price in of the Offering, which shall be subject to a lock-up agreement. The $148,677 estimated fair value of the warrants and $60,000 fair value of the stock has been included in accrued expenses as of June 30, 2017. $104,824 of the fair value of the warrants and common stock associated with the note is recorded as a discount and is being amortized to interest expense over the remaining life of the note. The forbearance set forth in the December Forbearance was in effect through February 15, 2017. On February 15, 2017, the lender extended the December Forbearance period through March 31, 2017. On March 28, 2017, the lender extended the December Forbearance period through April 10, 2017. In March 2017, the Company modified the line of credit to include an additional secured borrowing of a maximum of $300,000. The Company recorded a loss on extinguishment of debt of $56,741 related to the modification. The Company has accrued default interest of $16,997 on the note payable. |  | 1,259,007 |  | 929,518
Unsecured note payable with interest at 18% per annum, with no maturity date. The note payable is from a verbal agreement with the lender which converted $617,500 of advances into $1,100,000 of principal on the note payable. The additional $482,500 of principal plus agreed upon fees of $95,226 have been included in accrued liabilities and were booked to interest expense immediately. During November 2017, the Company amended the note to be callable at any time, due May 30, 2018, and to become convertible into shares of the Company’s common stock at the most favorable rate available as of the date of the agreement. The conversion rate may adjusted for any more favorable conversion terms provided to any other note holder at a future date (see Note 18). |  | 1,100,000 |  | -
Unsecured note payable with interest at 2.8% of total revenue per annum, with no maturity date. The note payable is from a verbal agreement with the lender which converted a $350,000 advance into the note payable. Agreed upon fees of $143,987 and a future payoff fee of 20%, or $70,000, have been included in accrued liabilities and were booked to interest expense immediately. During November 2017, the Company amended the note to where the Company is required to pay any outstanding interest at the end of the first month following a quarter end, the lender may call all amounts due under the note payable as due and payable after February 28, 2018, given 15 calendar days notice, and to become convertible into shares of the Company’s common stock at the most favorable rate available as of the date of the agreement. The conversion rate may adjusted for any more favorable conversion terms provided to any other note holder at a future date (see Note 18). |  | 350,000 |  | -
Note payable previously secured by CareServices customer contracts. In January 2015, the note was amended to reduce the outstanding principal to $375,000, interest at 9% per annum, and payable in 15 monthly installments beginning in February 2015. The amendment released the collateralized customer contracts and the note payable is guaranteed by both a former Executive Chairman of the Board of Directors and a member of the Board of Directors. A gain on the extinguishment of the old note of $769,449 was recorded in other income. In December 2015, the note was amended to extend maturity to January 2018 payable in monthly installments beginning in July 2016, convert $31,252 from accrued interest into principal, interest at 10% per annum, and provide that the note is convertible into common stock at its fair value per share. The Company recorded a derivative in connection with the convertible feature of the note (see Note 12) and is amortizing the initial $302,690 fair value of the derivative liability over the life of the note. In February 2016, the note was amended to subordinate to other notes payable also issued during February 2016. In July 2016, the note was amended to extend the maturity date to the earlier of an equity raise in excess of $10,000,000 or November 2016 and included additional default penalties and payment terms. In October 2016, the note was amended to extend the maturity date to the earlier of an equity raise in excess of $10,000,000 or December 31, 2016 and included additional default penalties and payment terms. In December 2016, February 2017 and March 2017, the note was further amended to extend the maturity date to the earlier of an equity raise in excess of $10,000,000 or February 15, 2017, March 31, 2017, and April 30, 2017, respectively. Subsequent to June 30, 2017, the Company received a letter related to the note wherein the lender waived any historical and future events of default through August 24, 2017 and extended the maturity date through August 24, 2017 and later sent an additional letter where the lender waived any historical and future events of default through February 28, 2018 and extended the maturity date through February 28, 2018 (see Note 18). |  | 334,464 |  | 334,464
Unsecured note payable with interest at 12% per annum, due February 2016, convertible into common stock at $150 per share. In connection with the issuance of the note, the Company repriced previously issued warrants to purchase shares of common stock. The $22,397 increase in relative fair value of the warrants was included as a loss on the extinguishment of the old note in other expense in fiscal 2015. The note also required a payment of 6,000 shares of common stock. The fair value of $780,000 was included as a loss on the extinguishment of the old note in other expense in fiscal 2015. The maturity date was subsequently extended on two occasions for a total of 500 shares of common stock and the note was due May 2016. The $31,250 fair value of these shares was being amortized over the extension period. In February 2016, the note was amended to subordinate to other notes payable also issued during February 2016, and the conversion price was reduced to $30 per share, which was below the fair value of the Company's common stock on the date of the amendment. The note may only be converted if the holder owns less than 9.99% of the Company's common stock after conversion. The Company recorded the value of the beneficial conversion feature of $381,299 to loss on termination of debt as a result of the modification. In May 2016, the note was amended to extend the maturity date to the earlier of an equity raise of $10,000,000 or October 2016 which required a payment of 600 shares of common stock. The $28,500 fair value of these shares has been included in accrued liabilities and was amortized over the extension period. In October 2016, the Company extended the maturity date of the note month-by-month through no later than April 30, 2017 for a fee of $5,000 per month extended. During September 2017, the Board of Directors granted 200 shares of Series H Preferred Stock for extension fees. In October 2017, the Company entered into a settlement agreement related to the note where the Company borrowed an additional $200,000 and modified the terms of the note payable to become secured by inventory owned by the Company, requires issuance of 3,000 shares of Series H Preferred Stock, which were authorized for grant by the Board of Directors on September 5, 2017 and are required to be able to convert the lender’s shares into 300,000 shares of the Company’s common stock, and requires payments of $8,600 for 72 consecutive weeks. If any payment is late, the Company is required to issue the lender an additional 86 shares of Series H Preferred Stock per late payment and an additional 172 shares of Series H Preferred stock if late payments are not cured within 30 days and for each subsequent 30-day period the note is in default. The amended note also requires payment of a key man life insurance policy on a former Executive Chairman of the Board of Directors naming the lender as the benefactor. The fair value of the shares will be amortized over the life of the amended note. The note terms are adjustable for any terms subsequently provided to other investors (see Note 18). |  | 300,000 |  | 300,000
Secured note payable with interest at 12.25% per annum, due May 2017, in default. The note is secured by the assets of the Company and may go into default in the event other notes payable go into default subsequent to the effective date of the note. The Company entered into the agreement in conjunction with a modification to another note payable and line of credit. The note requires payment of a $3,000 modification fee and requires payment of a fee of $50,000 for each thirty days that the loan is outstanding. The Company recorded a loss on extinguishment of debt of $56,741 related to the modification. The Company has accrued default interest of $4,050 on the note payable. |  | 300,000 |  | -
Unsecured note payable with interest at 12.75% per annum, due June 2017, in default, subordinated to other notes payable. The note requires payment of a $3,000 closing fee and requires payment of a fee of $50,000 for each thirty days that the loan is outstanding. The $3,000 closing fee is being amortized to interest expense over the remaining term of the note and the $50,000 fees are being accrued as incurred. On January 12, 2018, the lender forbore against any historical and future events of default through February 28, 2018 and extended the maturity date through February 28, 2018 in exchange for 12,000 shares of common stock (see Note 18). |  | 300,000 |  | -
Unsecured note payable with interest at 12% per annum, due September 2016, in default, subordinated to other notes payable. In connection with the issuance of the note, the Company issued 2,000 shares of common stock. The $100,000 fair value of the stock was amortized to interest expense over the term of the note. During the three months ended March 31, 2017, the Company entered into a letter agreement related to the remainder of the note to convert the outstanding principal and interest into shares of common stock contingent upon the completion of the Offering, which has expired (see Note 17). On January 12, 2018, the lender forbore against9/ any historical and future events of default through February 28, 2018 and extended the maturity date through February 28, 2018 in exchange for 12,000 shares of common stock (see Note 18). |  | 250,000 |  | 250,000
Unsecured cash advance with fees at $1,000 per day for the first 15 days and $1,500 per day thereafter, with no maturity date. The terms of the advance are verbal. During November 2017, the Company amended the advance to be callable at any time, due May 30, 2018, and to become convertible into shares of the Company’s common stock at the most favorable rate available as of the date of the agreement. The conversion rate may adjusted for any more favorable conversion terms provided to any other note holder at a future date (see Note 18). |  | 100,000 |  | -
Unsecured notes with interest at 18% per annum, due April 2013, in default. The Company issued 20,000 shares of Series D preferred stock as loan origination fees. The $195,000 fair value of the preferred stock was amortized over the original term of the note. Principal of $50,000 and accrued interest of $13,333 were converted to common stock in December 2013. During the three months ended March 31, 2017, the Company entered into a letter agreement related to the remainder of the note to convert the outstanding principal and interest into shares of common stock contingent upon the completion of the Offering, which has expired (see Note 17). |  | 64,261 |  | 64,261
Secured note payable to a third party with interest at 18% per annum, due June 2017. The note was secured by shares of the Company's common stock held by, and other assets of an entity controlled by, a former Executive Chairman of the Board of Directors. The note was guaranteed by a former Executive Chairman of the Board of Directors and his related entity and may go into default in the event other notes payable go into default subsequent to the effective date of the note. Payments on the note were convertible at the holder's option into common stock at 75% of its fair value if not paid by its respective due date, which is subject to a 20 trading day true-up and is adjustable to any lower rates granted through equity sales or other conversion rates provided by issuances of other debt, warrants, options or other instruments, with the exception of other certain raises. The Company recognized a derivative liability related to the conversion feature with a fair value of $181,670, which was recognized as a loss on termination of debt. In June 2016, $13,713 of principal and $11,287 of accrued interest converted into 953 shares of common stock, pursuant to the terms of the note. In August 2016, $64,654 of principal and $10,346 of accrued interest converted into 9,203 shares of common stock, pursuant to the terms of the note. This note was terminated by paying the remaining principal and accrued interest in cash with no additional consideration. |  | - |  | 162,539
Total notes payable before discount |  | 16,859,049 |  | 13,006,815
Less discount |  | (1,468,335) |  | (1,930,060)
Total notes payable |  | 15,390,714 |  | 11,076,755
Less current portion |  | (9,501,544) |  | (3,722,899)
Notes payable, net of current portion | $ | 5,889,170 | $ | 7,353,856

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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