| SCHEDULE OF NOTES PAYABLE RELATED PARTIES |
The
Company has the following related parties outstanding notes payable as of December 31, 2021 and 2020:
SCHEDULE
OF NOTES PAYABLE RELATED PARTIES
| Note |
|
Issuance
Date
|
|
Maturity
Date
|
|
Interest
Rate
|
|
|
Original
Borrowing |
|
|
Balance
at
December 31,
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
was
not convertible. 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. |
| |
|
|
| |
|
In
February 2021, Mr. Cutaia and the 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. As the fair value of the warrants granted amounted to $287,000
or
approximately 40%
of the outstanding note payable, pursuant
to ASC 470, the Company accounted for the modification as an extinguishment of debt which required 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 payable into equity of the Company 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 December 31, 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 at a 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
was 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 payable into equity of the Company 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,
which was the closing price of the Company’s
common stock on the day of conversion. |
| |
|
|
| |
|
As
of December 31, 2021, and December 31, 2020, the outstanding balance of the note amounted to $40,000 and $240,000, respectively. |
|