| Note 3 - Notes Payable | The
recorded value of our notes payable (net of debt discount) as of June 30, 2017 and December 31, 2016 were as follows:
June
30, 2017 December 31, 2016
Notes
payable, net of debt discount
R.
Phillip Zobrist Convertible Note 99,887 99,664
Pine
Valley Investments, LLC. Revolving Line of Credit Promissory Note 86,000 86,000
Legends
Capital Opportunity Fund, LLC Convertible Notes 25,000 25,000
Robert
Salna Convertible Promissory Note 196,182 192,427
December
2016 Notes Payable 105,000 105,000
Zika
Diagnostics, Inc. 445,000 445,000
Bridge
Notes Payable 1,683,500 1,603,804
Total 2,640,569 2,556,895
Less
Current Portion (2,640,569 ) (2,111,895 )
Total
Long-term $ -- $ 445,000
Notes
payable (related party), net of debt discount
Co
Diagnostics, Ltd. Revolving Line of Credit Promissory Note $ 609,940 $ 609,940
Legends
Capital Group, LLC Convertible Note 99,911 99,737
Clavo
Rico Promissory Note 10,000 10,000
Legends
Capital Group, LLC. Revolving Line of Credit Promissory Note 10,000 10,000
Hamilton
Mining Resources, Inc. Revolving Line of Credit Promissory Note 66,000 66,000
Machan
1988 Property Trust Revolving Line of Credit Promissory Note -- 41,500
Total
Related Party 795,851 837,177
Less
Current Portion Related Party (795,851 ) (837,177 )
Total
Long-term Related Party $ -- $ -- Beaufort
Capital Partners, LLC Convertible Note On
May 15, 2015, the Company entered into a $500,000 Convertible Promissory Note with Beaufort Capital Partners, LLC. The note bore
a 12% annual interest rate and is due monthly. The principal was due on April 30, 2016, and because it was not paid, the note
was in default. The holder filed a lawsuit in Third District Court in Salt Lake City, Utah and was awarded a judgment on June
6, 2016. The holder agreed to forbear any collection proceedings pursuant to a Forbearance Agreement dated August 8, 2016, through
October 31, 2016, in consideration of interest payments which have been made since the Forbearance Agreement was executed. The
note contained a conversion feature allowing the principal and any unpaid accrued interest to be converted into common shares
of the company at a rate of $8.25 or 20% less than the price of the anticipated Initial Public Offering, whichever is less, per
share at the discretion of the note holder. The conversion feature was not accounted for as a derivative because it was not deemed
to be beneficial. In addition, the equity and liability components of the convertible note were not separately accounted for since
the conversion price did not bear any relationship to the value of the privately held stock rendering the exercise of the conversion
feature improbable. In addition, the Note contained an adjustment provision effective in the event of stock dividends, splits
and combinations that adjusts the conversion price such that the holder would receive the same number of shares of stock upon
conversion that holder would have had after the stock adjustment event if the conversion had taken place prior to the stock adjustment
event. In December 2016, the holder agreed to convert the $500,000 principal of the note along with $83,500 of unpaid accrued
interest into the Companys Bridge Notes Payable detailed below. The
Company had received $490,000 on the origination date with $10,000 being withheld as points paid by the Company, additionally
the Company paid a $25,000 finders fee. The $35,000 represented by the points and finders fee has been recorded as a discount
to the principal of the note and is being accreted over the term of the note. For the three and six months ended June 30, 2016,
$2,991 and $12,066 was accreted for the note discount and included in interest expense. Interest of $22,500 and $44,750 related
to the note principal was included in interest expense for the three and six months June 30, 2016. R.
Phillip Zobrist Convertible Note On
December 1, 2015, the Company entered into a $100,000 Convertible Promissory Note with R. Phillip Zobrist. The note bears an 8.5%
annual interest rate and is due semi annually. The principal is due on September 30, 2017. The note contains a conversion feature
allowing the principal and any unpaid accrued interest to be converted into common shares of the company at a rate of $11.00 or
20% less than the price of the anticipated Initial Public Offering, whichever is less, per share at the discretion of the note
holder. The conversion feature was not accounted for as a derivative because it was not deemed to be beneficial. In addition,
the equity and liability components of the convertible note were not separately accounted for since the conversion price did not
bear any relationship to the value of the privately held stock rendering the exercise of the conversion feature improbable. In
addition, the Note contains an adjustment provision effective in the event of stock dividends, splits and combinations that adjusts
the conversion price such that the holder would receive the same number of shares of stock upon conversion that holder would have
had after the stock adjustment event if the conversion had taken place prior to the stock adjustment event. On July 12, 2017,
the note holder converted the $100,000 principal and $13,718 of accrued and unpaid interest in to 23,691 shares of our common
stock at a conversion price of $4.80 per share. The
note holder also received a warrant to purchase up to 4,545 shares of our common stock at a price of the lesser of $11.00 or the
offering price of an initial public offering of the Company common stock during the term of the warrant. The warrant expires on
November 12, 2020, the Company calculated a note discount for the value of the warrant received by the note holder of $824 using
a Black-Scholes pricing model with the following assumptions: (i) risk free interest rate 1.59%, (ii) expected life (in years)
of 5; (iii) expected volatility of 97.60%; (iv) expected dividend yield of 0.00%; and (v) stock trading price of $0.638. The $824
valuation of warrant is being accreted over the term of the note and for the three and six months ended June 30, 2017, $112 and
$223, respectively was included in interest expense. For the three and six months ended June 30, 2016, $112 and $224, respectively
was included in interest expense. Interest of $2,125 and $4,250 related to the note principal was included in interest expense
for both the three and six months ended June 30, 2017 and 2016, respectively. Pine
Valley Investments, LLC. Revolving Line of Credit Promissory Note On
December 30, 2015, the Company entered into a Revolving Line of Credit Promissory Note with Pine Valley Investments, LLC, a Utah
limited Liability Company, with a maximum limit on advances of $100,000. The note bore a 12% annual interest rate on advances
received. All accrued and unpaid interest along with the total sum of any outstanding advances were due on September 30, 2017.
The note holder agreed that in the event the Company was able to file a Registration Statement for an Initial Public Offering
to include the Note principal and accrued interest outstanding on the filing date with the Registration Statement to convert all
of the Note principal and accrued interest to common stock of the Company. On July 12, 2017, the note holder converted the $86,000
principal and $9,626 of accrued and unpaid interest in to 22,768 shares of our common stock at a conversion price of $4.20 per
share. At June 30, 2017 and 2016, the Company had net outstanding balances due on advances received of $86,000. Interest of $1,822
and $3,625 related to the note principal was included in interest expense for the three and six months ended June 30, 2017, respectively.
Interest of $1,656 and $2,141 related to the note principal was included in interest expense for the three and six months ended
June 30, 2016, respectively. Legends
Capital Opportunity Fund, LLC Convertible Notes In
August 2016, the Company entered into two convertible promissory notes with Legends Capital Opportunity Fund, LLC. At June 30,
2017 the aggregate principal due on these notes was $25,000. The notes bore interest at the rate of 10% per annum and were due
on December 31, 2017. The notes provide that the principal and interest on the notes would be convertible to shares of common
stock at a conversion rate of $8.25 per share or seventy percent (70%) of the anticipated initial public offering (IPO)
price per share. In addition, the Note contains an adjustment provision effective in the event of stock dividends, splits and
combinations that adjusts the conversion price such that the holder would receive the same number of shares of stock upon conversion
that holder would have had after the stock adjustment event if the conversion had taken place prior to the stock adjustment event.
On July 12, 2017, the note holder converted the $25,000 principal and $2,186 of accrued and unpaid interest in to 7,615 shares
of our common stock at a conversion price of $3.57 per share. Interest of $625 and $1,236 related to the notes principal was included
in interest expense for the three and six months ended June 30, 2017, respectively. Robert
Salna Convertible Promissory Note In
September 2016, the Company entered into a convertible promissory note in the principal amount of $200,000, with Robert Salna.
The note bore interest at the rate of 10% per annum and was due on December 31, 2017. The note provides that the principal and
interest on the note would be convertible to shares of common stock at a conversion rate of $8.25 per share or a discount of 15%
to the conversion price of a bridge financing anticipated closing prior to filing a Registration Statement, which bridge financing,
was completed on December 12, 2016. In addition, the Note contains an adjustment provision effective in the event of stock dividends,
splits and combinations that adjusts the conversion price such that the holder would receive the same number of shares of stock
upon conversion that holder would have had after the stock adjustment event if the conversion had taken place prior to the stock
adjustment event. The Company paid a $10,000 finders fee which has been recorded as a discount to the principal of the
note and is being accreted over the term of the note. On July 12, 2017, the note holder converted the $200,000 principal and $16,833
of accrued and unpaid interest in to 60,738 shares of our common stock at a conversion price of $3.57 per share. For the three
and six months ended June 30, 2017, $1,888 and $3,755, respectively, was accreted for the note discount and included in interest
expense. Interest of $5,000 and $9,889 related to the note principal was included in interest expense for the three and six months
ended June 30, 2017, respectively.
December
2016 Notes Payable In
December 2016, the Company entered into convertible promissory notes with two individuals and one company in the aggregate of
$105,000. The notes bore interest at the rate of 10% per annum and were due on December 31, 2017. The notes provide that the principal
and interest on the notes would be convertible to shares of common stock at a conversion rate of $8.25 per share or seventy percent
(70%) of the anticipated initial public offering (IPO) price per share. In addition, the Note contains an adjustment
provision effective in the event of stock dividends, splits and combinations that adjusts the conversion price such that the holder
would receive the same number of shares of stock upon conversion that holder would have had after the stock adjustment event if
the conversion had taken place prior to the stock adjustment event. On July 12, 2017, the note holders converted the $105,000
principal and $6,333 of accrued and unpaid interest into 26,508 shares of our common stock at a conversion price of $4.20 per
share. Interest of $2,625 and $5,250 related to the notes principal was included in interest expense for the three and six months
ended June 30, 2017, respectively. Zika
Diagnostics, Inc. Note Payable On
October 11, 2016, the Company entered into an exclusive license agreement with Watermark Group, Inc., a Nevada corporation, (Watermark)
which granted the exclusive license to sell the Companys proprietary molecular diagnostic tests for the Zika virus and
other mosquito borne illnesses in exchange for an initial royalty of $500,000 and a royalty of 10% of net sales. The license was
cancelled as described hereafter. Also as part of the transaction the Company entered into a stock purchase agreement with the
major shareholder of Watermark for the purchase of 3,600,000 shares of common stock in Watermark for $55,000, which constituted
a controlling interest in Watermark. Watermark subsequently changed its name to Zika Diagnostics, Inc. contemporaneously, with
the execution of those two agreements, Watermark secured an investment of $1.05 million from an individual for the purchase of
shares of Watermark, $0.5 million of which was paid to the Company pursuant to the exclusive license agreement as an initial royalty
payment. As an integral part of the license agreement and the stock purchase agreement, the Company required that Watermark be
debt free for the transaction to close. It was represented that a related party loan (Related Note) on the books
of Watermark as of July 31, 2016 in the approximate amount of $172,000 plus accrued interest was satisfied. The Company was furnished
written documentation from what was purported to be the then holder of the Related Note (Tide Pool Ventures) and
a written confirmation from the original holder of the Related Note (P&G Holdings) that the debt was satisfied.
The seller of the Watermark stock purchased by the Company also represented that the Related Note was satisfied as a condition
to the stock purchase agreement. On or about January 10, 2017, the Company and Watermark were notified by P&G Holdings that
the Related Note was not only still outstanding, but that it was in default and payment was demanded. On January 31, 2017, P&G
Holdings filed a lawsuit in Federal District Court in New York demanding payment of the Related Note, all accrued interest thereon
and attorneys fees and that stock be issued such that P&G Holdings would own 80% of the issued and outstanding shares
of stock of Watermark. During
the investigation undertaken by the Company to determine why the Note was still outstanding it was discovered that the written
confirmation originally furnished to the Company by P&G Holdings appeared to have been forged. The Related Note had never
been transferred to Tide Pool Ventures, and there were documents requesting issuances of stock from the Watermark transfer agent
that appeared to have forged signatures of the then president of Watermark. In
light of these irregularities, the Company determined that it would unwind the transaction by terminating the license agreement
effective as of October 11, 2016 and rescinding the stock purchase, which it did on March 22, 2017. Under the terms of the rescission
and cancellation of the license agreement, the Company returned the shares of stock of Watermark that it held to the seller of
the stock and agreed to repay a portion of the initial license fee it received. In that connection the Company reversed the amortization
of the deferred revenue originally recognized and removed the deferred revenue accounts related to the license agreement to reflect
the license termination and in addition removed the investment in Watermark which reflected the cost of the stock purchased ($55,000)
and set up a note payable to Watermark of $445,000. The note principal was due December 31, 2020 and was non-interest bearing.
On March 20, 2017, a new note was entered into, replacing the previous note for the $445,000 principal balance due, for which
the maturity date was September 30, 2017 and established an annual interest rate of 12%.
On
July 12, 2017, the note holder converted the $445,000 principal and $17,800 of accrued and unpaid interest into 77,133 shares
of our common stock at a conversion price of $6.00 per share. For the three and six months ended June 30, 2017, $13,498 and $15,130,
respectively was included in interest expense. Bridge
Notes Payable In
December 2016, the Company entered into convertible promissory notes with six individuals and five companies, in the aggregate
principal amount of $1,683,500 which consisted of (a) $1,100,000 of new investor funding and (b) $583,500 representing the satisfaction
of the $500,000 note principal plus $83,500 of accrued interest on the Beaufort Capital Partners, LLC Convertible Note. The notes
bore interest at the rate of 15% per annum and were due in June 2017. The notes provide that the principal and interest on the
notes would be convertible to shares of common stock at a conversion rate of $8.25 per share or seventy percent (70%) of the initial
public offering (IPO) price per share or, if the IPO has not occurred by the Maturity Date, 70% of the Companys
initial public offering (IPO) price per share or, if the IPO has not occurred by June 12, 2017, 85% of the offering
price of the Companys next bona fide sale of its preferred stock or common stock in excess of $1,000,000. The notes are
secured by all of the assets of the Company. The Company (i) received $1,041,000 in cash (net of $59,000 in commissions withheld)
and, (ii) converted $583,500 of principal and interest from the Beaufort Capital Partners, LLC Convertible Note mentioned above.
The Company agreed to register the shares underlying the bridge notes and the warrants underlying the bridge notes. The transaction
documents contain negative covenants that include restrictions on the repayment of debt and issuance of dividends, restrictions
on new debt (including restrictions on variable rate loans) and new security interests on the Companys assets and other
customary restrictions. In addition, the Note contained an adjustment provision effective in the event of stock dividends, splits
and combinations that adjusts the conversion price such that the holder would receive the same number of shares of stock upon
conversion that holder would have had after the stock adjustment event if the conversion had taken place prior to the stock adjustment
event. On July 12, 2017, the note holders converted the $1,683,500 principal and $73,651 of accrued and unpaid interest into 418,370
shares of our common stock at a conversion price of $4.20 per share. Additionally we paid two note holders an aggregate of $23,055
for accrued and unpaid interest. The
note holders also received warrants to purchase up to an aggregate of 102,039 shares of our common stock at a price of eighty-five
percent (85%) of the Companys IPO price per share or, if the IPO has not occurred by June 12, 2017, 85% of the offering
price of the Companys next bona fide sale of its preferred stock or common stock in excess of $1,000,000. The warrants
expire in December 2021. The Company calculated a note discount for the value of the warrants received by the note holders of
$11,914 using a Black-Scholes pricing model with the following assumptions: (i) risk free interest rate 1.96%, (ii) expected life
(in years) of 5; (iii) expected volatility of 80.49%; (iv) expected dividend yield of 0.00%; and (v) stock trading price of $0.638.
In addition, the warrants contain an adjustment provision effective in the event of stock dividends, splits and combinations that
adjusts the exercise price and number of shares such that the holder would receive the same number of shares of stock upon exercise
at an equivalent purchase price that holder would have had after the stock adjustment event if the exercise had taken place prior
to the stock adjustment event. Upon
any default of the notes for non-payment, any bankruptcy event or breach of the note or other transaction documents, the Company
may be liable to pay a default redemption amount equal to 130% of the amount due under the note and deliver an additional warrant
to purchase 50% of the common stock issuable upon conversion of the notes. The Company may have to issue additional warrants due
to stock dividends, stock splits, reclassification or other actions such as a merger or reorganization of the Company. If, at
any time when the notes or warrants issued to the bridge note holders, the Company issues any common stock or common stock equivalents
at a lower conversion or exercise price, the conversion or exercise price of the notes and/or warrants shall be reduced to such
lower conversion or exercise price. Additionally,
the Company paid $15,000 in loan preparation fees. The $59,000 withheld as finders fees, the $11,914 warrant valuation and the
$15,000 for loan preparation have all been recorded as a discount to the principal of the note and is being accreted over the
term of the note. For the three and six months ended June 30, 2017, $39,848 and $79,696, respectively, was accreted for the note
discount and included in interest expense. Interest of $62,958 and $125,081 related to the note principal was included in interest
expense for the three and six months ended June 30, 2017, respectively. Co
Diagnostics, Ltd. Revolving Line of Credit Promissory Note On
August 1, 2015, the Company entered into a Revolving Line of Credit Promissory Note with Co Diagnostics, Ltd a Turks and Caicos
limited company, with a maximum limit on advances of $750,000. Co Diagnostics, Ltd. is a greater than 20% shareholder of the Company.
The note bore a 12% annual interest rate on advances received. All accrued and unpaid interest along with the total sum of any
outstanding advances were due on September 30, 2017. The note holder agreed that in the event the Company was able to file a Registration
Statement for an Initial Public Offering on or before December 31, 2016, the note holder agreed to include the Note principal
and accrued interest outstanding on the filing date with the Registration Statement to convert all of the Note principal and accrued
interest to common stock of the Company. On July 12, 2017 the note holder converted the $609,940 principal and $112,633 of accrued
and unpaid interest into 172,041 shares of our common stock at a conversion price of $4.20 per share. As of June 30, 2017 and
2016, the Company had an outstanding balance due on advances received of $609,940 and $509,985, respectively. Interest of $18,248
and $36,296 related to the note principal was included in interest expense for the three and six months ended June 30, 2017, respectively.
Interest of $15,070 and $27,491 related to the note principal was included in interest expense for the three and six months ended
June 30, 2016, respectively. Legends
Capital Group, LLC Convertible Note On
November 12, 2015, the Company entered into a $100,000 Convertible Promissory Note with Legends Capital Group, LLC, a Utah limited
liability company . The
note holder also received a warrant to purchase up to 4,545 shares of our common stock at a price of the lesser of $16.50 or the
offering price of an initial public offering of the Company common stock during the term of the warrant. The warrant expires on
November 12, 2020, the Company calculated a note discount for the value of the warrant received by the note holder of $665 using
a Black-Scholes pricing model with the following assumptions: (i) risk free interest rate 1.67%, (ii) expected life (in years)
of 5; (iii) expected volatility of 97.71%; (iv) expected dividend yield of 0.00%; and (v) stock trading price of $0.638. The $665
valuation of warrant is being accreted over the term of the note and for the three and six months June 30, 2017and 2016, $88 and
$175, respectively was included in interest expense. Interest of $2,125 and $4,250 related to the note principal was included
in interest expense for both the three and six months ended June 30, 2017 and 2016, respectively. In addition, the warrants contain
an adjustment provision effective in the event of stock dividends, splits and combinations that adjusts the exercise price and
number of shares such that the holder would receive the same number of shares of stock upon exercise at an equivalent purchase
price that holder would have had after the stock adjustment event if the exercise had taken place prior to the stock adjustment
event. Clavo
Rico Promissory Note In
February 2016, the Company entered into a promissory note in the principal amount of $10,000 with Clavo Rico Inc. a Utah corporation.
The president of Clavo Rico is a member of the Companys Board of Directors. The note bore interest at the rate of 12% per
annum with an amended maturity date of September 30, 2017. On September 14, 2016 we amended the note to provide that the principal
and interest on the note would be convertible to shares of common stock at a conversion rate of $8.25 per share or a discount
of 30% to the price of an IPO if the Company were to file a Registration Statement. On July 12, 2017, the note holder converted
the $10,000 principal and $1,660 of accrued and unpaid interest in to 2,776 shares of our common stock at a conversion price of
$4.20 per share. Interest of $299 and $595 related to the note principal was included in interest expense for the three and six
months ended June 30, 2017, respectively. Interest of $299 and $424 related to the note principal was included in interest expense
for the three and six months ended June 30, 2016, respectively. Legends
Capital Group, LLC. Revolving Line of Credit Promissory Note In
March 2016, the Company entered into a revolving line of credit promissory note Legends Capital Group, LLC in the principal amount
of $100,000. The investor is a principal shareholder of ours and owns approximately 12% of the issued and outstanding shares of
the Company. The note bore interest at the rate of 12% per annum with an amended maturity date of September 30, 2017. At June
30, 2017 and 2016, the company had net outstanding advances due of $10,000 and $45,000, respectively under the line of credit.
On September 14, 2016, the Company amended the note to provide that the principal and interest on the note would be convertible
to shares of common stock at a conversion rate of $8.25 per share or a discount of 30% to the price of an IPO if we were to file
a Registration Statement. On July 12, 2017, the note holder converted the $10,000 principal and $6,112 of accrued and unpaid interest
in to 3,836 shares of our common stock at a conversion price of $4.20 per share. Interest of $299 and $595 related to the note
principal was included in interest expense for the three and six months ended June 30, 2017, respectively. Interest of $1,123
and $1,262 related to the note principal was included in interest expense for the three and six months ended June 30, 2016, respectively. Hamilton
Mining Resources, Inc. Revolving Line of Credit Promissory Note In
May 2016, the Company entered into a revolving line of credit promissory note with Hamilton Mining Resources Inc. in the principal
amount of $75,000. The president of Hamilton is a member of the Companys Board of Directors. The note bore interest at
the rate of 12% per annum and an amended maturity date of September 30, 2017. At both June 30, 2017 and 2016, the Company had
net outstanding advances due of $66,000 under the line of credit. On September 14, 2016, the Company amended the note to provide
that the principal and interest on the note would be convertible to shares of common stock at a conversion rate of $8.25 per share
or a discount of 30% to the price of an IPO if we were to file a Registration Statement. On July 12, 2017, the note holder converted
the $66,000 principal and $8,726 of accrued and unpaid interest in to 17,792 shares of our common stock at a conversion price
of $4.20 per share. Interest of $1,980 and $3,960 related to the note principal was included in interest expense for the three
and six months ended June 30, 2017, respectively. Interest of $720 related to the note principal was included in interest expense
for both the three and six months ended June 30, 2016. Machan
1988 Property Trust Revolving Line of Credit Promissory Note In
May 2016, the Company entered into a revolving line of credit promissory note with Machan 1988 Property Trust in the principal
amount of $50,000. The Trustee of the Trust is a member of the Companys Board of Directors. The note bore interest at the
rate of 12% per annum. At December 31, 2016, the Company had net outstanding advances due of $41,500 under the line of credit.
On September 14, 2016, the Company amended the note to provide that the principal and interest on the note would be convertible
to shares of common stock at a conversion rate of $8.25 per share or a discount of 30% to the price of an IPO if we were to file
a Registration Statement before December 31, 2016. The Company did not file the aforementioned Registration Statement until after
December 31, 2016. We subsequently retired the $41,500 principal of the note on March 6, 2017. Interest of $913 related to the
note principal was included in interest expense for the six months ended June 30, 2017. Interest of $353 related to the note principal
was included in interest expense for both the three and six months ended June 30, 2016. |
