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Short-Term Promissory Notes and Unsecured Loan
9 Months Ended
Sep. 30, 2017
Short-Term Promissory Notes and Unsecured Loan\Convertible Promissory Notes and Warrant Agreements [Abstract]  
Short-Term Promissory Notes and Unsecured Loan

NOTE 7 – Short-Term Promissory Notes and Unsecured Loan

 

Short-Term Promissory Notes

In August 2017, the Company’s Board of Directors authorized and the Company issued short-term unsecured promissory notes (the “Short-Term Notes”) for aggregate gross proceeds of $253,000 prior to issuance costs of $3,030 which were discounted from the Short-Term Notes and are being amortized ratably to interest expense over the term of the Short-Term Notes. For the three and nine month period ended September 30, 2017, discount amortization charged to interest expense related to the issuance costs was $733. The Short-Term Notes do not bear interest on principal and require the Company to repay the principal upon maturity on February 18, 2018.

 

In addition, upon maturity, under the provisions of the Short-Term Notes, the holders will receive 126,500 common stock purchase warrants upon maturity with a term of 5 years at an exercise price of $1.80 which will be immediately exercisable upon issue. A portion of the proceeds from the Short-Term Notes was allocated to the warrants based on their relative fair value to the underlying Short-Term Notes. The proceeds allocated to the warrants were recorded as additional paid in capital in the accompanying condensed consolidated balance sheets and were discounted from the Short-Term Notes in the amount of $61,496. The relative fair value of the warrants was based on the Black-Scholes method with the following assumptions: risk-free interest rate 1.77 percent; expected volatility 48 percent; expected life 5.5 years; and expected dividend yield 0 percent. The underlying stock price used in the analysis is on a non-marketable basis and is according to a separate 409A valuation analysis. The discount related to the warrants is being amortized to interest expense ratably over the term of the Short-Term Notes which amounted to $14,868 during the three and nine month period ended September 30, 2017.

 

Unsecured Loan

NeuroOne received a $50,000 short-term unsecured loan in November 2016 from the placement agent for its convertible promissory note financing (see Note 8 – Convertible Promissory Notes and Warrant Agreements). NeuroOne incurred no fees or interest costs for this temporary loan and it was repaid in full in February 2017.