| Schedule of Convertible Notes Payable |
The
Company has the following convertible notes payable as of June 30, 2019 and December 31, 2018:
| Note |
|
Note Date |
|
Maturity Date |
|
Interest Rate |
|
|
Original Borrowing |
|
|
Balance at
June 30, 2019 |
|
|
Balance at
December 31, 2018 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Note payable (A) |
|
October 19, 2018 |
|
April 19, 2019 |
|
|
10 |
% |
|
$ |
1,500,000 |
|
|
$ |
- |
|
|
$ |
1,500,000 |
|
| Note payable (B) |
|
October 30, 2018 |
|
April 29, 2019 |
|
|
5 |
% |
|
$ |
400,000 |
|
|
|
- |
|
|
|
400,000 |
|
| Note payable (C) |
|
February 1, 2019 |
|
August 2, 2019 |
|
|
10 |
% |
|
$ |
500,000 |
|
|
|
- |
|
|
|
- |
|
| Total notes payable |
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
1,900,000 |
|
| Debt discount |
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
(1,082,000 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total notes payable, net of debt discount |
|
|
|
|
|
|
|
|
|
$ |
- |
|
|
$ |
818,000 |
|
| (A) |
On
October 19, 2018, the Company issued an unsecured convertible note to Bellridge Capital, LP (“Bellridge”), an
unaffiliated third-party, in the aggregate principal amount of $1,500,000 in exchange for net proceeds of $1,242,000, representing
an original issue discount of $150,000, and paid legal and financing expenses of $109,000. In addition, the Company issued
96,667 shares of its Common Stock with a fair value of $595,000. The note was unsecured and did not bear interest; however,
the implied interest was determined to be 10% since the note was issued at 10% less than its face value. The note matured
in April 2019. The note was also convertible into shares of the Company’s Common Stock only on or after the occurrence
of an uncured “Event of Default.” Primarily, the Company would be in default if it did not repay the principal
amount of the note, as required. The other events of default are standard for the type of transaction represented by the related
securities purchase agreement and the note. In the event of a default, the conversion price in effect on any date on which
some or all of the principal of the note is to be converted would be a price equal to 70% of the lowest VWAP during the ten
trading days immediately preceding the date on which Bellridge provided its notice of conversion. Upon an Event of Default,
the Company would owe Bellridge an amount equivalent to 110% of the then-outstanding principal amount of the note in addition
to of all other amounts, costs, expenses, and liquidated damages that might also be due in respect thereof. The Company agreed
that, on or after the occurrence of an Event of Default, it would reserve and keep available that number of shares of its
Common Stock that equaled 200% of the number of such shares that potentially would be issuable pursuant to the terms of the
securities purchase agreement and the note (assuming conversion in full of the note and on any date of determination). The
Company determined that, because the conversion price is unknown, the Company could not determine if it had enough authorized
shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, the Company determined that
the conversion feature of the note created a derivative with a fair value of $1,273,000 at the date of issuance. |
| |
As
a result of the issuance of the note, the Company incurred aggregate costs of $2,126,000 related to the note’s original
issue discount, legal and financing expenses, the fair value of the Common Stock issued and the recognition of the derivative
liability. The Company recorded these costs as a note discount up to the face value of the note of $1,500,000 and the
remaining $626,000 as financing costs in October 2018. The note discount was being amortized over the six-month term of
the note.
|
| |
In
April 2019, the Company paid off the balance of $1,500,000. Prior to the payoff the Company recognized a change in fair
market value in the derivative liability totaling $670,000. As part of the payoff the Company amortized the remaining
debt discount of $144,000 and recognized a gain on extinguishment of the derivative liability totaling $1,396,000.
|
| |
As
of June 30, 2019, the outstanding balance of the note was $0 and unamortized debt discount was $0. |
| (B) |
On
October 30, 2018, the Company issued two unsecured convertible notes to one current investor and one otherwise unaffiliated
third-party in the aggregate principal amount of $400,000. The notes bore interest at a rate of 5% per annum and matured on
April 29, 2019. Upon the Company’s consummation of its underwritten public offering of the Company’s units, all,
and not less than all, of (i) the outstanding principal amount and (ii) the accrued interest thereunder were to be
converted into shares of the Company’s Common Stock. The per-share conversion price equaled seventy-five percent (75%)
of the effective offering price of the Common Stock in the Company’s recent underwritten public offering. The Company
determined that, because the conversion price was unknown, that the Company could not determine if it had enough authorized
shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, the Company determined that
the conversion feature of the notes created a derivative with a fair value of $302,000 at the date of issuance and was accounted
as a debt discount and was being amortized over the term of the notes payable. |
On
April 5, 2019, the Company converted the outstanding principal amount and accrued interest of $410,000 into
182,333 shares of Common Stock. Prior to the conversion, the Company recognized a change in fair market value in the derivative
liability totaling $21,000. In addition, the Company amortized the remaining debt discount of $48,000 and recognized a gain on
extinguishment of the derivative liability totaling $187,000.
As
of June 30, 2019, the outstanding balance of the note was $0 and unamortized debt discount was $0.
| (C) |
On
February 1, 2019, the Company issued an unsecured convertible note to Bellridge, an unaffiliated
third-party, in the aggregate principal amount of $500,000 in exchange for net proceeds
of $432,000, representing an original issue discount of $25,000, and paid legal and financing
expenses of $43,000. In addition, the Company issued 16,667 shares of its Common Stock
with a fair value of $128,000. The note was unsecured and did not bear
interest; however, the implied interest was determined to be 10% since the note was issued
at 10% less than its face value. The note matured in August 2019. The note was
also convertible into shares of the Company’s Common Stock only on or after
the occurrence of an uncured “Event of Default.” Primarily, the Company
would have been in default if it did not repay the principal amount of the
note, as required. The other events of default were standard for the type of transaction
represented by the related securities purchase agreement and the note. The conversion
price in effect on any date on which some or all of the principal of the note would
have been converted would be a price equal to 70% of the lowest VWAP during
the ten trading days immediately preceding the date on which Bellridge provides its notice
of conversion. Upon an Event of Default, the Company would have owed Bellridge
an amount equivalent to 110% of the then-outstanding principal amount of the note in
addition to of all other amounts, costs, expenses, and liquidated damages that would
have been due in respect thereof. The Company agreed that, on or after the occurrence
of an Event of Default, it would reserve and keep available that number of shares
of its Common Stock that is at least equal to 200% of the number of such shares that
potentially would be issuable pursuant to the terms of the securities purchase agreement
and the note (assuming conversion in full of the note and on any date of determination).
The Company determined that, because the conversion price was unknown, the Company
could not determine if it had enough authorized shares to fulfill the conversion obligation.
As such, pursuant to current accounting guidelines, the Company determined that the conversion
feature of the note created a derivative with a fair value of $388,000 at the date of
issuance.
As
a result of the issuance of the note, the Company incurred aggregate costs of $584,000 related to the note’s original
issue discount, legal and financing expenses, the fair value of the Common Stock issued and the recognition of the derivative
liability. The Company recorded these costs as a note discount up to the face value of the note of $500,000 and the remaining
$84,000 as financing costs. The note discount was being amortized over the six-month term of the note.
On
April 2, 2019, the Company increased the outstanding principal amount of the note by $25,000 to an aggregate
of $525,000 and issued 8,606 shares of Common Stock with a fair value of $55,000. The Company accounted for
the increase in principal and the fair value of the shares of Common Stock in the aggregate of $80,000 as part
its financing costs.
In
April 2019, the Company paid off the outstanding principal balance of $525,000. Prior to the payoff, the
Company recognized a change in fair market value in the derivative liability totaling $260,000. In addition, the Company
amortized the remaining debt discount of $366,000 and recognized a gain on extinguishment of the derivative liability
totaling $644,000.
As
of June 30, 2019, the outstanding balance of the note was $0 and unamortized debt discount was $0.
|
|