Notes Payable | Note 5 – Notes Payable Notes payable at September 30, 2019 and December 31, 2018 consisted of the following: September 30, December 31, 2019 2018 Note payable to investor; accrue interest at 5% per annum; due December 31, 2019; unsecured $ 880,000 $ 790,000 Notes payable to individual investors; accrue interest at 8% per annum; principal payments equal to 1/12 of original balance plus interest due quarterly; due from dates ranging from August 9, 2020 to March 26, 2021; unsecured (A) 319,667 319,667 Note payable to investor; accrue interest at 6% per annum; due November 30, 2018; unsecured (B) 222,222 222,222 Note payable to investor; original issue discount of $117,828; due he earlier of November 30, 2019 or closing of a public offering; secured by assets of the Company (C) 1,296,018 1,296,018 Note payable to merchant bank; accrues interest at 15% per annum; daily payments of $813 - 37,308 Line of credit; $65,000 limit; accrues interest at 15% per annum; weekly payments of $3,038 - 24,966 Note payable to merchant bank; accrues interest at 79% per annum; 26 weekly payments of $1,401 31,177 - Note payable to merchant bank; accrues interest at 128% per annum; 130 daily payments of $1,558 3,181 - Note payable to merchant bank; accrues interest at 138% per annum; 125 daily payments of $1,644 62,388 - Note payable to merchant bank; accrues interest at 155% per annum; 120 daily payments of $1,738 135,962 - Note payable to merchant bank; accrues interest at 159% per annum; 115 daily payments of $2,978 223,214 - Note payable to investor; accrue interest at 5% per annum; due December 31, 2019; unsecured 500,000 - Total notes payable 3,673,829 2,690,181 Unamortized debt discount (42,351 ) (72,211 ) Notes payable, net discount 3,631,478 2,617,970 Less current portion (3,631,478 ) (2,617,970 ) Long-term portion $ - $ - (A) In connection with the issuance of these notes payable in 2018 and 2017, the Company also issued an aggregate of 24,050 shares of its common stock to these note holders as additional incentive to make the loans. The aggregate relative fair value of these shares of common stock was $119,875 and was recorded as a discount on the note payable and as additional paid in capital. The discount of $119,875 is being amortized over the term of the notes payable. During the nine months ended September 30, 2019 and 2018, $29,860 and $27,886, respectively, was charged to interest expense as amortization of the discounts, with an unamortized balance of $42,351 at September 30, 2019. (B) This note payable was issued with an original issuance discount of $22,222 which is being amortized over the term of the notes payable. During the nine months ended September 30, 2019 and 2018, $0 and $21,506, respectively, was charged to interest expense as amortization of the discount, with an unamortized balance of $0 at September 30, 2019. (C) On March 8, 2018, the Company issued a note payable for $6,000,000. The note accrues interest at LIBOR plus 100 basis points and is due five years from the date of issuance. The note payable is secured by the restricted cash balance. In addition, the Company issued to the note holder 150,000 shares of the Company’s common stock and 1,500,000 warrants to purchase shares of the Company’s common stock for $4.00 per shares. The warrants expire five years from the date of issuance. The Company also paid $178,228 of issuance costs associated with this note. The relative fair value of the 150,000 shares of common stock was $378,916 and the relative fair value of the 1,500,000 warrants was $3,726,506 and both were recorded as a discount on the note payable and as additional paid in capital. In addition, the issuance costs of $178,228 have also been recorded as a debt discount. The debt discount of $4,283,650 is being amortized over the term of the note payable. On September 12, 2018, the Company entered into a new note payable agreement with this investor whereby, the Company repaid $4,821,810 of the original $6,000,000 note payable and with the balance of $1,178,190 plus an original issue discount of $117,828 being rolled into the September 12, 2018 note payable for $1,296,018. The original issue discount of $117,828 is being amortized to interest expense over the term of the new note payable. As a result of the $6,000,000 note payable being repaid in September 2018, the Company amortized to interest expense the remaining debt discount associated with the note payable of $4,018,560. During the nine months ended September 30, 2019 and 2018, $0 and $4,316,808, respectively, was charged to interest expense as amortization of the debt discounts associated with the notes payable to this investor, with an unamortized balance of $0 at September 30, 2019. A rollforward of notes payable from December 31, 2018 to September 30, 2019 is below: Notes payable, December 31, 2018 $ 2,617,970 Issued for cash 1,951,300 Repayments (967,652 ) Amortization of debt discounts 29,860 Notes payable, September 30, 2019 $ 3,631,478 |