Quarterly report pursuant to Section 13 or 15(d)

CONVERTIBLE NOTES PAYABLE

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CONVERTIBLE NOTES PAYABLE
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
CONVERTIBLE NOTES PAYABLE

NOTE 10– CONVERTIBLE NOTES PAYABLE

 

On October 11, 2017, the Company completed the closing of a private placement financing transaction (the “Transaction”) with a third-party investor, pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) dated October 5, 2017. Pursuant to the Purchase Agreement, the investor purchased a 12% Convertible Promissory Note (the “Note”), dated October 5, 2017, in the principal amount of $48,000. On October 11, 2017, the Company received proceeds of $45,000 which excluded transaction costs, fees, and expenses of $3,000. Principal and interest is due and payable July 15, 2018, and the Note is convertible into shares of the Company’s common stock at any time after one hundred eighty (180) days, at the average of the two lowest closing bid prices during the ten (10) prior trading days from which a notice of conversion is received by the Company multiplied by sixty-five percent (65%), representing a thirty-five percent (35%) discount. The embedded conversion feature included in the note resulted in an initial debt discount of $40,300, and an initial derivative liability of $40,300. For the three months ended March 31, 2018, amortization of the debt discount of $12,994 was charged to interest expense. The Company also recorded a discount for debt issuance costs of $3,000 and has amortized $967 to interest expense for the three months ended March 31, 2018. As of March 31, 2018, and December 31, 2017, the note balance is $48,000, with a carrying value on March 31, 2018, of $32,157, net of unamortized discounts of $15,843.

 

On November 10, 2017, the Company issued a convertible promissory note (the “Note”), with a face value of $299,000, maturing on January 12, 2019, and stated interest of 10% to a third-party investor. The note is convertible at any time after ninety (90) days of the funding of the note into a variable number of the Company's common stock, based on a conversion ratio of 65% of the lowest trading price for the 20 days prior to conversion. The note was funded on November 10, 2017, when the Company received proceeds of $250,000, after disbursements for the lender’s transaction costs, fees and expenses. The Note also requires daily payments of $700 per day via ACH through January 12, 2019, when all unpaid principal and interest is due. The embedded conversion feature included in the note resulted in an initial debt discount of $250,000, an initial derivative expense of $213,549 and an initial derivative liability of $463,549. For the three months ended March 31, 2018, amortization of the debt discount of $66,668 was charged to interest expense. The Company also recorded an original issue discount and debt issue discount of $49,000 and amortized $13,067 to interest expense for the three months ended March 31, 2018. During the three months ended March 31, 2018, the Company made principal payments of $38,500 and as of March 31, 2018, and December 31, 2017, the note balance is $242,300 and $280,800, respectively, with a carrying value as of March 31, 2018, of $72,568, net of unamortized discounts of $169,732.

 

On December 12, 2017, the Company completed the closing of a private placement financing transaction (the “Transaction”) when a third-party investor purchased a convertible note (the “Convertible Note”). The Convertible Note carries a 10% annual interest rate and is in the principal amount of $50,000. Principal and interest is due and payable December 12, 2018, and the Note is convertible into shares of the Company’s common stock at any time after one hundred eighty (180) days, at a conversion price (the “Conversion Price”) equal to seventy-five percent (75%) of the average closing price of the Company’s common stock for the ten (10) days immediately preceding the conversion, representing a twenty-five percent (25%) discount. The embedded conversion feature included in the note resulted in an initial debt discount of $13,207, and an initial derivative liability of $13,207. For the three months ended March 31, 2018, amortization of the debt discount of $3,302 was charged to interest expense. As of March 31, 2018, and December 31, 2017, the note balance is $50,000, with a carrying value as of March 31, 2018, of $40,498, net of unamortized discounts of $9,502.

 

On February 1, 2018, the Company completed the closing of a private placement financing transaction (the “Transaction”) when a third-party investor purchased a convertible note (the “Convertible Note”). The Convertible Note carries a 10% annual interest rate and is in the principal amount of $35,000. Principal and interest is due and payable February 1, 2019, and the Note is convertible into shares of the Company’s common stock at any time after one hundred eighty (180) days, at a conversion price (the “Conversion Price”) equal to seventy-five percent (75%) of the average closing price of the Company’s common stock for the ten (10) days immediately preceding the conversion, representing a twenty-five percent (25%) discount. The embedded conversion feature included in the note resulted in an initial debt discount of $9,554, and an initial derivative liability of $9,554. For the three months ended March 31, 2018, amortization of the debt discount of $1,592 was charged to interest expense. As of March 31, 2018, the note balance is $35,000, with a carrying value of $27,038, net of unamortized discounts of $7,962.

 

On February 8, 2018, the Company completed the closing of a private placement financing transaction (the “Transaction”) with a third-party investor, pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) dated February 8, 2018. Pursuant to the Purchase Agreement, the investor purchased a 12% Convertible Promissory Note (the “Note”), dated February 8, 2018, in the principal amount of $58,300. On February 8, 2018, the Company received proceeds of $50,000 which excluded transaction costs, fees, and expenses of $8,300. Principal and interest is due and payable November 8, 2018, and the Note is convertible into shares of the Company’s common stock at any time after one hundred eighty (180) days, at the average of the two lowest closing bid prices during the ten (10) prior trading days from which a notice of conversion is received by the Company multiplied by seventy-five percent (75%), representing a twenty-five percent (25%) discount. The embedded conversion feature included in the note resulted in an initial debt discount of $50,000, an initial derivative liability of $65,525 and an initial derivative expense of $15,525. For the three months ended March 31, 2018, amortization of the debt discount of $8,912 was charged to interest expense. The Company also recorded a debt issue discount of $8,300 and has amortized $1,480 to interest expense for the three months ended March 31, 2018. As of March 31, 2018, the note balance is $58,300, with a carrying value of $10,392, net of unamortized discounts of $47,908.

 

On March 2, 2018, the Company completed the closing of a private placement financing transaction (the “Transaction”) when a third-party investor purchased a convertible note (the “Convertible Note”). The Convertible Note carries a 10% annual interest rate and is in the principal amount of $50,000. Principal and interest is due and payable March 2, 2019, and the Note is convertible into shares of the Company’s common stock at any time after one hundred eighty (180) days, at a conversion price (the “Conversion Price”) equal to seventy-five percent (75%) of the average closing price of the Company’s common stock for the ten (10) days immediately preceding the conversion, representing a twenty-five percent (25%) discount. The embedded conversion feature included in the note resulted in an initial debt discount of $13,399, and an initial derivative liability of $3,399. For the three months ended March 31, 2018, amortization of the debt discount of $1,117 was charged to interest expense. As of March 31, 2018, the note balance is $50,000, with a carrying value of $37,718, net of unamortized discounts of $12,282.

 

On March 26, 2018, the Company completed the closing of a private placement financing transaction (the “Transaction”) when a third-party investor purchased a convertible note (the “Convertible Note”). The Convertible Note carries a 10% annual interest rate and is in the principal amount of $50,000. Principal and interest is due and payable March 26, 2019, and the Note is convertible into shares of the Company’s common stock at any time after one hundred eighty (180) days, at a conversion price (the “Conversion Price”) equal to seventy-five percent (75%) of the average closing price of the Company’s common stock for the ten (10) days immediately preceding the conversion, representing a twenty-five percent (25%) discount. The embedded conversion feature included in the note resulted in an initial debt discount of $13,420, and an initial derivative liability of $13,420. For the three months ended March 31, 2018, amortization of the debt discount of $112 was charged to interest expense. As of March 31, 2018, the note balance is $50,000, with a carrying value of $36,692, net of unamortized discounts of $13,308.

 

On March 27, 2018, the Company completed the closing of a private placement financing transaction (the “Transaction”) when a third-party investor purchased a convertible note (the “Convertible Note”). The Convertible Note carries a 10% annual interest rate and is in the principal amount of $25,000. Principal and interest is due and payable March 27, 2019, and the Note is convertible into shares of the Company’s common stock at any time after one hundred eighty (180) days, at a conversion price (the “Conversion Price”) equal to seventy-five percent (75%) of the average closing price of the Company’s common stock for the ten (10) days immediately preceding the conversion, representing a twenty-five percent (25%) discount. The embedded conversion feature included in the note resulted in an initial debt discount of $6,736, and an initial derivative liability of $6,736. For the three months ended March 31, 2018, amortization of the debt discount of $56 was charged to interest expense. As of March 31, 2018, the note balance is $25,000, with a carrying value of $18,320, net of unamortized discounts of $6,680.

 

The following is a roll-forward of the Company’s convertible notes and related discounts for the three months ended March 31, 2018:

 

     
Convertible notes   $ 558,600  
Unamortized note discounts     (283,216 )
Balance at March 31, 2018   $ 275,834  

 

The following is a summary of the Company’s convertible notes and related discounts as of March 31, 2018:

 

   

Principal

Balance

 

Debt

Discounts

  Total
Balance at January 1, 2018   $ 378,800     $ (292,073 )   $ 86,727  
New issuances     218,300       (101,409 )     116,891  
Cash payments     (38,500 )     —         (38,500 )
Amortization     —         110,266       110,266  
Balance at March 31, 2018   $ 558,600     $ (283,216 )   $ 275,384