The Company has the following advances on future receipts as of September 30, 2020:

Note 1 and 2

On December 24, 2019, the Company received two secured advances from an unaffiliated third party totaling $728,000 for the purchase of future receipts/revenues of $1,012,000. Pursuant to the terms of the agreement the unaffiliated third-party auto withdrew an aggregate of $6,000 from the Company’s operating account each banking day. The term of the agreement extended until the advances are paid in full. The notes did not bear any interest, however, the interest was imputed at a rate of 28% based on the face value of the note. These advances were secured by the Company’s tangible and intangible assets.

The Company accounted these advances on future receipts as a liability pursuant to current accounting guidelines. As a result, the Company recorded a liability of $1,012,000 to account for the future receipts sold and a debt discount of $285,000 to account for the difference between the future receipts sold and the cash received. The debt discount was being amortized over the term of the agreement. As of December 31, 2019, outstanding balance of the advances amounted to $1,006,000 and the unamortized debt discount of $274,000.

 During the period ended September 30, 2020, the Company paid the entire amount due of $1,006,000 and amortized the corresponding debt discount for $274,000.

Note 3 and 4

On June 30, 2020, the Company received two secured advances from the same unaffiliated third party totaling $728,000 for the purchase of future receipts/revenues of $1,012,000. Pursuant to the terms of the agreement the unaffiliated third-party will auto withdraw an aggregate of $6,000 from the Company’s operating account each banking day. The term of the agreement extends until the advances are paid in full. The Company may pay off either note for $446,000 if paid within 30 days of funding; for $465,000 if paid between 31 and 60 days of funding; or for $484,000 if paid within 61 to 90 days of funding. These advances are secured by the Company’s tangible and intangible assets. As a result, the Company recorded a liability of $1,012,000 to account for the future receipts sold and a debt discount of $284,000 to account for the difference between the future receipts sold and the cash received. The debt discount is being amortized over the term of the agreement.

During the period ended September 30, 2020, the Company paid $418,000 the balance outstanding and amortized $108,000 of the debt discount. As of September 30, 2020 outstanding balance of the notes amounted to $594,000 and the unamortized balance of the debt discount was $176,000.