Note 11. Promissory Notes and Unsecured Convertible Promissory Notes

Promissory Notes

The Promissory Notes of $993 at December 31, 2019 are comprised of six bank notes secured through by Artilium with varying original maturity dates ranging between 6 and 24 months with an average interest rate of 2%. The notes are not convertible and are not included in any of the tables in the remainder of this note. The promissory notes were $681 at December 31, 2018.

9% Unsecured Convertible Promissory Note

On December 18, 2015, the Company consummated a closing and on March 14, 2016, the Company consummated the last of twelve closings of its private placement offering of units (“Units”) to “accredited investors” (as defined in Rule 501(a) of the Securities Act as part of a “best efforts” private placement offering of up to $4,200 consisting of up to 140 Units, each Unit consisting of: (i) one 9% unsecured subordinated Note in the principal amount of $30, which is convertible into the Note Shares of common stock of the Company at the option of the holder at a conversion price of $7.50 per share, subject to certain exceptions; and (ii) a five-year Warrant to purchase one hundred thousand (4,000) shares of common stock (the “Warrant Shares”) at an exercise price of $11.25 per share, subject to certain exceptions. During 2016 and 2015, the Company sold an aggregate of $3,548 principal amount of Notes and delivered Warrants to purchase an aggregate of 473,067 shares of common stock. In December 2016, the Company and the holders agreed upon modification of the Warrants to remove certain anti-dilution protections in the note and offered an exercise price adjustment to $3.75 and 10% bonus warrants (47,306 warrants) in return.

In connection with the offering, the Company retained a registered FINRA broker dealer (the “Placement Agent”) to act as the placement agent. For acting as the placement agent, 33,115 warrants were issued with an exercise price of $11.25 and 33,115 warrants were issued with an exercise price of $7.50 along with a cash fee.

The value of the Warrants and the conversion feature to the investors and the Placement Agent cash fees and warrants were capitalized and off set against the liability for the Notes at the time of issuance and were amortized over the term of the Notes using the effective interest method.

During 2019, the conversion feature was exercised at a price of $1.75 per share and 60,000 shares were issued for the outstanding principal amount, 6,000 shares issued for the 10% early repayment and 18,220 shares issued for accrued interest on the promissory notes (see table below).


					Conversions
					(during 2019)
			Regular		including		Outstanding
Breakdown of the 9% Unsecured Subordinated Convertible	December		Amortizations		accelerated		December
Promissory Note (Matured December 2018 through June 2019)	31, 2019		(during 2019)		amortization		31, 2018
Convertible Note Principal Amount
Principal Amount	$	—	$	—	$	105	$	(105)
10% Early Repayment		—		—		11		(11)

Debt Discounts & Financing Costs
Investor Warrants		—		(2)		—		2
Conversion Feature value		—		(1)		—		1
7% Agent Warrants		—		(1)		—		1
Financing Costs		—		(5)		—		5
	$	—	$	(9)	$	116	$	(107)

At December 31, 2019 there were 38,111,211 warrants outstanding from the accredited investors 4,818,269 warrants were exercised in 2019 and 1,488,973 outstanding from the Placement Agent.


		Agreement
Breakdown of the conversion rights for outstanding convertible notes:	Outstanding	Amendments	Exercises /	Outstanding
Number of underlying shares for Conversion of	December 31,	/ Interest	Conversions	December 31,
outstanding unsecured convertible notes	2019	effects	/ Expirations	2018
9% Convertible Note – Investors	—	44,720	(84,220)	39,500
Outstanding Conversion Features	—	44,720	(84,220)	39,500

In the above table the exercise price at December 31, 2018 for the conversion of the promissory notes, including accrued interest, into common shares was at $3.75 (39 shares) and converted in 2019 at an exercise price of $1.75 (84 shares) resulting in a difference of 45 shares.