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Convertible Notes (Related and Unrelated Party) | 12 Months Ended
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Dec. 31, 2019
Debt Disclosure [Abstract] |
Convertible Notes (Related and Unrelated Party) | Note 6. Convertible Notes (Related and Unrelated Party) In March 2018, we closed an offering of $2,527,500 in convertible notes, Series CN Note 1 of 2, of which, management, directors and significant shareholders have invested $840,000. The convertible notes bear 10% interest per annum and are due and payable on March 14, 2020. The notes are convertible at any time prior to the due date into our common stock at conversion price of $0.88 per share or 85% of the average closing price of the common stock over the twenty consecutive trading days immediately preceding the date of note holders’ election; but in no event lower than $0.60 per share. In addition, the interest is convertible at any time prior to the due dates into our common stock at conversion price of 85% of the average closing price of the common stock over the twenty consecutive trading days immediately preceding the date of note holders’ election; but in no event lower than $0.60 per share. There were 1,331,583 warrants issued, in conjunction with the convertible note offering. The fair value of the warrants, $0.17 per share ($220,548 in the aggregate), was calculated using the Black-Scholes option pricing model using the following assumptions:
Expected life (in years) |  |  | 3 |
Volatility (based on a comparable company) |  |  | 54.82 | %
Risk Free interest rate |  |  | 2.41 | %
Dividend yield (on common stock) |  |  | - |
The value of $220,548 was recorded as a debt discount related to the issuance of the warrants. In April 2018, we offered investors in our March 2018 Convertible Note (“Series CN Notes”) the opportunity to accelerate the issuance of certain warrants associated with the CN Notes. Pursuant to the acceleration offer, Series CN Notes investors who invested an additional 10% to 20% of the Series CN Note amount, immediately received an additional 25% warrant coverage on their initial CN Note investment, which would otherwise have been issued after one year. During April 2018, we closed the CN Note acceleration offer in the amount of $177,300 in convertible notes, of which, management, directors and significant shareholders have invested $30,000. The CN Note acceleration offer convertible notes bear 10% interest per annum and are due and payable on March 14, 2020. The notes are convertible at any time prior to the due date into our common stock at conversion price of $0.88 per share or 85% of the average closing price of the common stock over the twenty consecutive trading days immediately preceding the date of note holders’ election; but in no event lower than $0.60 per share. In addition, the interest is convertible at any time prior to the due dates into our common stock at conversion price of 85% of the average closing price of the common stock over the twenty consecutive trading days immediately preceding the date of note holders’ election; but in no event lower than $0.60 per share. There were 937,373 warrants issued in conjunction with the Series CN Note acceleration offer convertible note offering. The fair value of the warrants, $0.25 per share ($235,519 in the aggregate), was calculated using the Black-Scholes option pricing model using the following assumptions:
Expected life (in years) |  |  | 3 |
Volatility (based on a comparable company) |  |  | 55.49 | %
Risk Free interest rate |  |  | 2.45 | %
Dividend yield (on common stock) |  |  | - |
The value of $105,199 was recorded as a debt discount related to the issuance of the warrants as using the fair value would cause the debt discount to exceed the gross proceeds received. In November and December 2018, three investors elected to convert their convertible note issued on March 14, 2018 into stock. The total debt converted was $453,000 and $30,459 accrued interest into 804,396 shares of stock. In March 2019, an investor elected to exercise I-Warrants by using part of the investor’s convertible note. The total debt settled was $350,634 of principal and $33,929 of accrued interest. The convertible notes consist of the following components as of the year-end:
|  | 31-Dec-19 |  |  | 31-Dec-18 |
Convertible notes |  | $ | 2,704,800 |  |  | $ | 2,704,800 |
Less: Debt discount (warrant value) |  |  | (325,747 | ) |  |  | (325,747 | )
Less: Debt discount (derivative value)(Note 7) |  |  | (638,988 | ) |  |  | (638,988 | )
Less: Debt discount (issuance costs paid) |  |  | (27,000 | ) |  |  | (27,000 | )
Less: Note conversion |  |  | (803,634 | ) |  |  | (453,000 | )
Add: Debt discount amortization |  |  | 898,940 |  |  |  | 481,042 |
|  | $ | 1,808,371 |  |  | $ | 1,741,107 |
The total of $1,808,371 shown in the table above at December 31, 2019, plus the total of $932,190 from the table below equals the total presented in the balance sheet of Long Term Liabilities: Convertible Note – related party net of discount, of $1,181,942, Convertible Note – net of Discount of $1,407,877, and Current Liabilities: Convertible Note – net of Discount 150,742. The total of $1,741,107 in the table above at December 31, 2018, plus the total of $468,216 from the table below ($2,209,323) agrees to the total presented in the balance sheet of Long Term Liabilities: Convertible note – related party, net of discount of $841,836, and Convertible Note, net of discount, of $1,367,487. In December 2018, we closed an offering of $1,363,200 in convertible notes, Series CN 2 of 2, of which, management, directors and significant shareholders have invested $560,000. The convertible notes bear 10% interest per annum and are due and payable on November 30, 2020. The notes are convertible at any time prior to the due date into our common stock at conversion price of $0.88 per share or 85% of the average closing price of the common stock over the twenty consecutive trading days immediately preceding the date of note holders’ election; but in no event lower than $0.60 per share. In addition, the interest is convertible at any time prior to the due dates into our common stock at conversion price of 85% of the average closing price of the common stock over the twenty consecutive trading days immediately preceding the date of note holders’ election; but in no event lower than $0.60 per share. There were 678,864 warrants issued, in conjunction with the convertible note offering. The fair value of the warrants, $0.31 per share ($212,763 in the aggregate), was calculated using the Black-Scholes option pricing model using the following assumptions:
Expected life (in years) |  |  | 3 |
Volatility (based on a comparable company) |  |  | 59.00 | %
Risk Free interest rate |  |  | 2.83 | %
Dividend yield (on common stock) |  |  | - |
The value of $212,763 was recorded as a debt discount related to the issuance of the warrants. The convertible notes consist of the following components as of the year-end:
|  | 31-Dec-19 |  |  | 31-Dec-18 |
Convertible notes |  | $ | 1,363,200 |  |  | $ | 1,363,200 |
Less: Debt discount (warrant value) |  |  | (212,763 | ) |  |  | (212,763 | )
Less: Debt discount (derivative value)(Note 7) |  |  | (697,186 | ) |  |  | (697,186 | )
Less: Debt discount (issuance costs paid) |  |  | (23,700 | ) |  |  | (23,700 | )
Add: Debt discount amortization |  |  | 502,639 |  |  |  | 38,665 |
|  | $ | 932,190 |  |  | $ | 468,216 |
The total shown in the above table of $932,190 at December 31, 2019, plus the total from table above $1,808,371 agrees to the total presented in the balance sheet of Long Term Liabilities: Convertible Note – related party net of discount, of $1,181,942, Convertible Note – net of Discount of $1,407,877, and Current Liabilities: Convertible Note – net of discount of 150,742. The total in the first table above of $1,741,107 at December 31, 2018, plus the total from the second table above of $468,216 ($2,209,323) agrees to the total presented in the balance sheet of Long Term Liabilities: Convertible note – related party, net of discount of $841,836, and Convertible Note, net of discount, of $1,367,487. As of December 31, 2019, the outstanding balances due of the Series CN Notes, net of all related debt discount, total $2,740,561. The Long Term Liabilities of related party convertible notes (net) and unrelated party convertible notes (net) represent $1,181,942 and $1,407,877, respectively as of December 31, 2019. The Current Liabilities of Convertible Notes, (net) represent 150,742 as of December 31, 2019. Per Note 14, Subsequent Events, the Company restructured its Milestone I and II Convertible Notes through both conversion and extension. The remaining principal balance outstanding as of March 23, 2020 is $1,407,000. Future maturity of convertible notes at face value before effect of all discount, are as follow:
|  | Total Convertible Notes |
Years ending December 31, |  |  |  |
2020 |  | $ | 177,366 |
2021 |  |  | 168,000 |
2022 |  |  | 1,071,000 |
2023 |  |  | - |
2024 |  |  | - |
|  | $ | 1,416,366 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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