| SCHEDULE OF NOTES PAYABLE TO RELATED PARTIES |
The
Company had the following related party notes payable as of September 30, 2021 and December 31, 2020:
SCHEDULE OF NOTES PAYABLE TO RELATED PARTIES
| Note |
|
Issuance
Date |
|
Maturity
Date |
|
Interest
Rate |
|
|
Original
Borrowing |
|
|
Balance
at
September 30,
2021 |
|
|
Balance
at
December 31,
2020 |
|
| Note
1 (A) |
|
December
1, 2015 |
|
February
8, 2023 |
|
|
12.0 |
% |
|
$ |
1,249,000 |
|
|
$ |
725,000 |
|
|
$ |
725,000 |
|
| Note
2 (B) |
|
December
1, 2015 |
|
April
1, 2017 |
|
|
12.0 |
% |
|
|
112,000 |
|
|
|
- |
|
|
|
112,000 |
|
| Note
3 (C) |
|
April
4, 2016 |
|
June
4, 2021 |
|
|
12.0 |
% |
|
|
343,000 |
|
|
|
40,000 |
|
|
|
240,000 |
|
| Total
notes payable – related parties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
765,000 |
|
|
|
1,077,000 |
|
| Non-current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(725,000 |
) |
|
|
- |
|
| Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
40,000 |
|
|
$ |
1,077,000 |
|
| |
(A) |
On
December 1, 2015, the Company issued a convertible note payable to Mr. Rory J. Cutaia, the Company’s majority stockholder and
Chief Executive Officer, to consolidate all loans and advances made by Mr. Cutaia to the Company as of that date. The note bears
interest at a rate of 12%
per annum, secured by
the Company’s assets, and matured on February
8, 2021, as amended. A
total of 30%
of the original note balance
or $375,000
was convertible to common
stock and was converted in 2018 while the remaining note balance of $825,000
is not convertible.
During the year ended December 31, 2020, the Company made payments of $100,000.
On February 25, 2021 the Company extended the note to February 8, 2023 with no changes to the other terms of the note agreement.
As of December 31, 2020, the outstanding balance of the note amounted to $725,000.
|
| |
|
|
| |
|
In February 2021, the Mr. Cutaia and Company amended the note payable and extended the maturity date from February 8, 2021 to February 8, 2023 or an extension of two years. In exchange for the extension, the Company issued Mr. Cutaia warrants to purchase 138,889 shares of common stock with a fair value of $287,000. The warrants are fully vested, exercisable at $2.61 per share and will expire in three years. There were no other changes to the original terms of the note payable. In accordance with ASC 450-70, modifications or exchanges are considered extinguishments with gains or losses recognized in current earnings if the terms of the new debt and original instrument are substantially different. The instruments are considered “substantially different” when the present value of the cash flows under the terms of the new debt instrument is at least 10% different from the present value of the remaining cash flows under the terms of the original instrument. As the fair value of the warrants granted amounted to $287,000 for which is approximately 40% of the outstanding note payable, pursuant to ASC 470, the Company accounted the modification as an extinguishment of debt which requires the measurement of the modified debt and additional consideration to be at fair value. As a result, the Company recognized a loss on debt extinguishment of $287,000 and a corresponding credit to contributed capital. On May 19, 2021 the Board approved the ability to convert the note into equity at the discretion of the holder. The conversion price is the fair market value of the Company’s common stock on the day of conversion. |
| |
|
|
| |
|
As
of September 30, 2021, the outstanding balance of the note amounted to $725,000. |
| |
|
|
| |
(B) |
On
December 1, 2015, the Company issued a note payable to a former member of the Company’s
board of directors, in the amount of $112,000,
representing unpaid consulting fees as of November 30, 2015. The note is unsecured, bears
interest rate of 12%
per
annum, and matured in April
2017. As
of December 31, 2020, the outstanding principal balance of the note amounted to $112,000.
On
September 24, 2021 the Company settled the entire note payable and all corresponding accrued interest and accounts
payable related to the former board member for $140,000,
which resulted in a gain of $82,000.
|
| |
|
|
| |
(C) |
On
April 4, 2016, the Company issued a convertible note to Mr. Cutaia, in the amount of $343,000, to consolidate all advances made by
Mr. Cutaia to the Company during the period December 2015 through March 2016. A total of 30% of the original note balance or $103,000
was convertible to common stock and was converted in 2018 while the remaining note balance of $240,000 is not convertible. The note
bears interest at a rate of 12% per annum, is secured by the Company’s assets, and matured on June 4, 2021, as amended. On
May 19, 2021 the Board approved the ability to convert the note into equity at the discretion of the holder. The conversion price
is the fair market value of the Company’s common stock on the day of conversion. On May 19, 2021 $200,000 was converted into
194,175 shares of common stock. The conversion price was $1.03 that was the closing price of the Company’s common stock on
the day of conversion. |
| |
|
|
| |
|
As
of September 30, 2021, and December 31, 2020, the outstanding balance of the note amounted to $40,000 and $240,000, respectively. |
|