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Notes Payable
3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Notes Payable

NOTE 4 – NOTES PAYABLE

 

On May 29, 2018, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Alpha Capital Anstalt (“Alpha”) and Brio Capital Master Fund Ltd. (“Brio”). Pursuant to the terms of the Purchase Agreement, the Company issued and sold to the Investors senior secured convertible notes in the aggregate original principal amount of $550,000, and warrants to purchase up to 2,391,305 shares of the Company’s common stock. The Notes will matured in May 2019. The Company shall pay, interest on the outstanding principal amount of the Notes compounded annually at the annual rate of twelve percent (12%), subject to adjustments. The Notes may be converted into the Company’s common stock, at the option of the holder, at any time following issuance, unless the conversion or share issuance under the conversion would cause the holder to beneficially own in excess of 4.99% of the Company’s common stock. The conversion price for the principal and interest, if any, in connection with voluntary conversion by the Holder shall be $0.23 per share of Common Stock, subject to adjustment as defined in the note. The borrowers have converted $344,642 of these notes including $9,922 of interest as of December 31, 2019 and 2018. While this note matured in May of 2019, the Company had yet to pay $187,308 to one investor as of December 31, 2019. As of March 31, 2020, the Company signed an agreement to cure the default and pay the outstanding amount of the note.

 

On August 15, 2019, the Company entered into securities purchase agreements with three accredited investors. Pursuant to the terms of the Purchase Agreements, the Company issued and sold to the investors convertible promissory notes for the aggregate original principal amount of $1,291,500, and warrants to purchase up to 4,679,348 shares of the Company’s common stock. These notes mature on August 15, 2020 and accrue interest at a rate of twelve percent (12%) per annum, subject to adjustments as discussed in the notes. These notes may be converted into shares of the Company’s common stock, at the discretion of the holder, at any time following issuance, unless the conversion or share issuance under the conversion would cause the holder to beneficially own shares in excess of 4.99% of the Company’s common stock. The conversion price for the principal and interest, if any, in connection with voluntary conversion by the investors shall be $0.23 per share of common stock, subject to adjustment as defined in the notes. In conjunction with the convertible notes, the Company issued warrants to purchase up to 4,612,500 shares of common stock with an exercise price of $0.28 per share. The fair value of these warrants was determined to be $569,147 based on using the Black-Scholes pricing model. These warrants were evaluated by management and deemed to be equity-linked awards subject to ASC 810, Derivatives and Hedging. These notes contained an original issue discount of 20% or $215,250 which is the difference between the note face amount of $1,291,500 and the cash proceeds received from the investors. As part of this financing, the Company paid debt issuance costs $284,070 which are placed as a contra-debt account and amortized over the life of the loan.

 

On February 25, 2020, the Company entered into a Note Repayment and Warrant Amendment Agreement with Alpha and Brio, whereby the Company agreed to repay the outstanding balance of the Convertible Promissory Note issued in favor of Alpha and Brio on August 15, 2019 in the amount of $1,291,000, including principal and interest. As a result of this transaction, the Company accelerated debt discounts for warrants, issuance costs and original issue discount of $500,145, which was recognized through interest expense on the accompanying consolidated statement of operations. As of March 31, 2020 and December 31, 2019, the gross balance payable for these notes was $0 and $1,291,000, respectively. As of March 31, 2020 and December 31, 2019, the Company has cumulatively amortized $568,322 and $404,393 of the debt discounts costs including debt issuance costs, original issue discount, and discount for warrants issued in connection with the debt transaction, all of which is included in interest expense on the accompanying consolidated statement of operations. As of March 31, 2020 and December 31, 2019, the net balance payable for these notes was $0 and $627,426, respectively.

 

On February 18, 2020, the Company entered into two agreements for the purchase and sale of future revenue with C6 Capital, LLC (“C6”). Pursuant to the terms of the Purchase Agreement, the Company issued and sold to C6 two loan agreements in the aggregate original principal amount of $1,020,000. These loans contain an original purchase discount of 18%, or $270,000, in total, or $135,000 per agreement. C6 paid $375,000 per loan agreement for a total of $750,000. The Company paid debt issuance costs to C6 of $7,500 per agreement, or $15,000 in total, which was placed as a contra-debt account and will be amortized over the life of the loan. The loan agreements require the Company to pay all future receipts of the Company without recourse until such time as the purchased amount has been repaid. The loan agreements require the company to make a daily average payment of $8,094 during the term of the agreement. As of March 31, 2020, the Company has made $161,904 in principal payments under these loan agreements. As of March 31, 2020, the gross balance payable for these loan agreements was $858,000, and the balance of the loan net of discounts was $600,424. For the three months ended March, 31, 2020, the Company has amortized $27,329 of debt discount through interest expense on the accompanying statement of operations.

 

Total interest expense on notes payable, inclusive of amortization of debt discounts, amounted to $793,039 and $170,194 for the three months ended March 31, 2020 and 2019, respectively.