| Notes Payable - Related Parties |
| 7. |
NOTES PAYABLE – RELATED PARTIES |
The Company has the following related
parties outstanding notes payable as of December 31, 2020 and 2019:
| Note |
|
Issuance Date |
|
Maturity Date |
|
Interest Rate |
|
|
Original
Borrowing |
|
|
Balance at
December 31,
2020 |
|
|
Balance at
December 31,
2019 |
|
| Note 1 (A) |
|
December 1, 2015 |
|
February 8, 2021 |
|
|
12.0 |
% |
|
$ |
1,249,000 |
|
|
$ |
725,000 |
|
|
$ |
825,000 |
|
| Note 2 (B) |
|
December 1, 2015 |
|
April 1, 2017 |
|
|
12.0 |
% |
|
|
112,000 |
|
|
|
112,000 |
|
|
|
112,000 |
|
| Note 3 (C) |
|
April 4, 2016 |
|
June 4, 2021 |
|
|
12.0 |
% |
|
|
343,000 |
|
|
|
240,000 |
|
|
|
240,000 |
|
| Note 4 (D) |
|
March 22, 2019 |
|
April 30, 2019 |
|
|
5.0 |
% |
|
|
58,000 |
|
|
|
- |
|
|
|
- |
|
| Total notes payable – related parties |
|
|
|
|
|
|
|
|
|
|
1,077,000 |
|
|
|
1,177,000 |
|
| Non-current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
(1,065,000 |
) |
| Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,077,000 |
|
|
$ |
112,000 |
|
| |
(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. As of
December 31, 2019, outstanding balance of the note amounted to $825,000.
During the year ended December 31, 2020, the
Company made payments of $100,000. As of December 31, 2020, the outstanding balance of the note amounted to $725,000. Subsequent
to December 31, 2020, the Company extended the note to February 8, 2023 with no changes to the other terms of the note agreement.
|
| |
(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 and 2018, the outstanding
principal balance of the note amounted to $112,000, respectively. As of December 31, 2020, the note was past due, and remains past
due. The Company is currently in negotiations with the noteholder to settle the past due note.
|
| |
|
|
| |
(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 will mature on June 4, 2021, as amended.
As of December 31, 2020, and December 31, 2019,
the outstanding balance of the note amounted to $240,000, respectively.
|
| |
(D) |
On March 22, 2019, the Company issued a note
payable to Mr. Jeffrey Clayborne, the Company’s Chief Financial Officer, in the amount of $58,000. The note was unsecured,
bore interest at a rate of 5% per annum, and matured on April 30, 2019.
On April 11, 2019, the Company paid off the
balance of $58,000 and there was no outstanding balance as of December 31, 2020 and 2019.
|
Total interest expense for notes payable to
related parties was $141,000 for the year ended December 31, 2020 and 2019, respectively. The Company paid $100,000 of principal
and 2020. In addition, the Company paid $120,000 and $101,000 in interest related to these notes for the year ended December 31,
2020 and 2019, respectively.
|