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Note 10 - Convertible Notes Payable | 6 Months Ended
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Jun. 30, 2019
Notes to Financial Statements |
Debt Disclosure [Text Block] |
10. | Convertible NOTES PAYABLE
On April 4, 2019, the Company issued a $550,000 secured convertible debenture which matures November 15, 2019 and is convertible into common stock at a conversion price of $1.50 per share. The note may be redeemed at any time by payment of a premium to the principal balance starting at 5% and increasing to 25%. The note was issued at approximately 7% ( $40,000 ) original issue discount. Subject to the mutual agreement of the Company and the investor, the Company may purchase two additional $550,000 principal amount note on the same terms after 45 day intervals from the prior issuance, for an additional potential net proceeds of $1,020,000. The convertible note contains anti-dilution protections if the Company issues shares of common stock for less than the conversion price. The convertible note was secured substantially by all the assets of the Company. At the closing, the Company issued 80,000 shares of common stock in payment of a $120,000 commitment fee and is obligated to issue 10,000 shares of common stock monthly in payment of a monthly commitment fee of $15,000 until the earlier of November 1, 2019 or the repayment or conversion of the note. On June 14, 2019, the Company issued a $157,000 secured 10% convertible redeemable note which matures November 14, 2019 and is convertible into common stock at a conversion price of $1.50 per share. The convertible redeemable note contains anti-dilution protections if the Company offers a conversion discount or other more favorable conversion terms while the note is in effect. The note may be redeemed within the first five months by payment of a premium to the principal balance starting at 10% and increasing to 30% of principal plus interest. At the closing, the Company issued 200,000 shares of common stock in lieu of payment of a $30,000 commitment fee. If the note is repaid prior to the maturity date, 180,000 of the shares shall be returned to the Company. Both notes were repaid on July 10, 2019. For the two notes issued during the second quarter of 2019, the Company issued a total of 300,000 shares of common stock, amounting to $450,000 in commitment fees. Of these amounts, $180,000 was recorded as an offset to notes payable – debt issuance costs and is amortized over the life of the loan. The return of commitment fee in amount of $270,000 ( 180,000 shares) was recorded as a reduction in additional paid in capital and shares were returned to the Company on July 10, 2019. The Company also incurred $17,000 of legal fees withheld from proceeds which was also recorded as an offset to notes payable – debt issuance costs and amortized over the life of the loan. Amortization of the debt issuance costs and debt discount are included in interest expense on the statement of operations. Convertible notes payable, net of unamortized debt discount and debt issuance costs at June 30, 2019 consist of:
Principal amount |  | $ | 707,000 |
Less unamortized debt discount |  |  | (24,533 | )
Less unamortized debt issuance costs |  |  | (140,800 | )
Notes payable, net of unamortized debt discount and debt issuance costs |  | $ | 541,667 |

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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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