Quarterly report pursuant to Section 13 or 15(d)

Convertible Notes

v3.19.3
Convertible Notes
9 Months Ended
Sep. 30, 2019
Debt Disclosure [Abstract]  
Convertible Notes

NOTE 3 – CONVERTIBLE NOTES

 

On April 20, 2018, (modified May 22, 2018) the Company issued a $165,000 (originally $158,000) convertible note with original issue discount (OID) of $15,000 and bearing interest at 8% per annum. The amended maturity date of the note was June 1, 2019 and was convertible on or after October 17, 2018 into the Company’s restricted common stock at $0.20 per share at the holder’s request. The OID is recorded as a discount to the debt agreement. The Company determined the note to contain a beneficial conversion feature valued as $104,000 based on the intrinsic per share value of the conversion feature. This beneficial conversion feature is recorded as a discount to the debt agreement. The noteholder was also granted detachable 3-year warrants to purchase 200,000 shares of the company’s restricted common stock at an exercise price of $0.375 per share, 200,000 shares of the company’s restricted common stock at an exercise price of $0.50 per share, and 100,000 shares of the company’s restricted common stock at an exercise price of $0.625 per share. The warrants were valued at $126,000 using the Black-Scholes pricing model and were recorded as a discount to the debt agreement. The noteholder was also issued 116,000 shares of the company’s restricted common stock valued at $34,000 based upon the closing price of the Company stock on the date of the modified agreement and recorded as a discount to the debt agreement. During the year ended December 31, 2018 the Company accrued interest for this note in the amount of $9,000. On May 10, 2019, the Company amended the note to extend the due date to June 1, 2019, provide for a partial conversion of $25,000 of the outstanding principal balance into common shares of the Company at a conversion price of $0.10 per share for a total of 250,000 shares, and waive any prior alleged or actual defaults under the note. As of September 30, 2019, the note is in default for late payment. During the nine months ended September 30, 2019 the Company has accrued interest for this note in the amount of $96,000, which includes $78,000 in liquidated damages and default interest. At September 30, 2019, the principal balance together with total accrued interest is recorded on the Company’s consolidated balance sheet net of discounts at $245,000.

 

On May 22, 2018, the Company issued a $275,000 convertible note with original issue discount (OID) of $25,000 and bearing a one-time interest charge at 8%. The amended maturity date of the note is December 31, 2019 and is convertible into the Company’s restricted common stock at $0.25 per share at the holder’s request. The OID is recorded as a discount to the debt agreement. The Company has determined the note to contain a beneficial conversion feature valued as $40,000 based on the intrinsic per share value of the conversion feature. This beneficial conversion feature is recorded as a discount to the debt agreement. The noteholder was also granted detachable 5-year warrants to purchase 500,000 shares of the company’s restricted common stock at an exercise price of $2.00 per share. The warrants were valued at $45,000 using the Black-Scholes pricing model and were recorded as a discount to the debt agreement. The noteholder was also issued 200,000 shares of the company’s restricted common stock valued at $58,000 based upon the closing price of the Company stock on the date of the agreement and recorded as a discount to the debt agreement. During the year ended December 31, 2018 the Company accrued interest for this note in the amount of $20,000 and liquidated damages of $25,000. On May 10, 2019, the Company amended the note to extend the due date to September 1, 2019, provide for a partial conversion of $25,000 of the outstanding principal balance into common shares of the Company at a conversion price of $0.10 per share for a total of 250,000 shares, and waive any prior alleged or actual defaults under the note. On October 11, 2019, the Company amended the note to extend the due date to December 31, 2019, provide for a partial conversion of $50,000 of the outstanding principal balance into common shares of the Company at a conversion price of $0.10 per share for a total of 500,000 shares, and waive any prior alleged or actual defaults under the note. During the nine months ended September 30, 2019 the Company has accrued interest for this note in the amount of $2,000. At September 30, 2019, the principal balance together with total accrued interest and liquidated damages is recorded on the Company’s consolidated balance sheet net of discounts at $297,000.

 

The following table summarized the Company's convertible notes payable as of September 30, 2019 and December 31, 2018:

    September 30, 2019   December 31, 2018
Beginning Balance   $ 432,000     $ —    
Proceeds from the issuance of convertible notes, net of issuance discounts     —         137,000  
Repayments     —         —    
Conversion of notes payable into common stock     (50,000 )     —    
Amortization of discounts     62,000       241,000  
Liquidated damages     78,000       25,000  
Accrued Interest     20,000       29,000  
Ending Balance   $ 542,000     $ 432,000  
                 
Convertible notes, short term   $ 390,000     $ 440,000  
Accrued interest and damages   $ 152,000     $ 54,000  
Debt discounts   $ —       $ 62,000