Convertible Note Payable

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Convertible Note Payable

Note 7 – Convertible Note Payable

Convertible notes payable as of December 31, 2019 and 2018 is as follows: 

	Outstanding Principal as of													Warrants granted
	December 31, 2019			December 31, 2018			Interest Rate			Conversion Price			Maturity Date	Quantity		Exercise Price
The February 2018 Convertible Note Offering		75,000			75,000			15	%		4.00	(*)	January – February 2020		253,919		4.00
The March 2018 Convertible Note Offering		75,000			75,000			14	%		4.00	(*)	March – April 2020		240,342		4.00
The February 2019 Convertible Note Offering		2,311,703			-			10	%		5.00	(*)	February – March 2020		133,190		6.00
The November 2019 Convertible Note Offering		559,433			-			12	%		4.50		May – June 2020		-		-
		3,021,136			150,000
Less: Debt Discount		(124,096	)		(17,280	)
Less: Debt Issuance Costs		(614	)		(9,239	)
		2,896,425			123,481
Less: Current Debt		(2,896,425	)		-
Total Long-Term Debt	$	-		$	123,481

(*) As subject to adjustment as further outlined in the notes

The November 2016 Convertible Note Offering

 
During the months of November and December 2016, the Company issued convertible notes to third party lenders totaling $400,000 (the "November 2016 Convertible Note Offering"). These notes accrued interest at a rate of 10% per annum and matured with interest and principal both due between November 1, 2017 through December 29, 2017. The notes and accrued interest are convertible at a conversion price as defined therein. In addition, in connection with these notes the Company issued five-year warrants to purchase an aggregate of 20,000 shares of Company common stock at a purchase price of $6.00 per share. These investors converted $375,000 of principal and $30,719 of interest into the August 2017 Convertible Note Offering. 

During the year December 2018, the Company converted $25,000 of principal and $4,417 of unpaid interest into the August 2018 Equity Raise (as defined below).

The June 2017 Convertible Note Offering

During the month of June 2017 the Company issued convertible notes to third party lenders totaling $71,500. These notes accrued interest at 12% per annum and matured with interest and principal both due on September 1, 2017. These notes and accrued interest may be converted into a subsequent offering at a 15% discount to the offering price are convertible at a conversion price as defined therein. In addition, the Company issued warrants to purchase 3,378 shares of Company common stock. These warrants entitle the holders to purchase the Company's common stock at a purchase price of $4.00 per share for a period of five years from the issue date. As of December 31, 2017, the Company was currently in default on $71,500 in principal due on these notes. On February 8, 2018, the Company paid these notes and is no longer in default. 

The August 2017 Convertible Note Offering

From August through November of 2017, the Company conducted multiple closings of a private placement offering to accredited investors (the "August 2017 Convertible Note Offering") of units of the Company's securities by entering into subscription agreements with "accredited investors" (the "August 2017 Investors") for aggregate gross proceeds of $1,585,000. In addition, $1,217,177 of the Company's short-term debt along with accrued but unpaid interest of $40,146 was converted into the August 2017 Convertible Note Offering. These conversions resulted in the issuance of 339,571 warrants with a fair value of $583,681 and an original issue discount of $101,561. These were recorded as a loss on extinguishment of debt.  

The August 2017 Convertible Note Offering consisted of a maximum of $6,000,000 of units of the Company's securities (each, a "August 2017 Unit" and collectively, the "August 2017 Units"), with each August 2017 Unit consisting of (a) a 15% Convertible Secured Promissory Note (each a "August 2017 Offering Note", and together the "August 2017 Offering Notes"), convertible into shares of the Company's common stock ("August 2017 Offering Conversion Shares") at a conversion price of $4.00 per share (the "August 2017 Note Conversion Price"), and (b) a five-year warrant (each a "August 2017 Offering Warrant and together the "August 2017 Offering Warrants") to purchase common stock equal to one hundred percent (100%) of the shares into which the August 2017 Offering Notes can be converted into ("August 2017 Offering Warrant Shares") at an exercise price of $4.00 per share ("August 2017 Offering Warrant Exercise Price"). The August 2017 Offering Notes mature on the second (2nd) anniversary of their issuance dates.

The August 2017 Note Conversion Price and the August 2017 Offering Warrant Exercise Price are subject to adjustment for issuances of the Company's common stock or any equity linked instruments or securities convertible into the Company's common stock at a purchase price of less than the prevailing August 2017 Note Conversion Price or August 2017 Offering Warrant Exercise Price. Such adjustment shall result in the August 2017 Note Conversion Price and August 2017 Offering Warrant Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein.

The Company recorded a $472,675 debt discount relating to 396,250 August 2017 Offering Warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. 

In connection with the August 2017 Convertible Note Offering, the Company paid a placement agent a cash fee of $90,508 to for services rendered in connection therewith on a "best-efforts" basis, which was recorded as issuance cost and is being accreted over the life of the note to accretion of debt discount and issuance cost. 

During the year ended December 31, 2018, the Company converted $2,830,764 of principal and $409,287 of unpaid interest into the August 2018 Equity Raise (as defined below). 

During the year ended December 31, 2018 the Company has repaid $114,000 of principal and $18,410 of unpaid interest.

The First December 2017 Note

On December 27, 2017, the Company issued a convertible note to a third-party lender totaling $100,000 (the "First December 2017 Note"). The First December 2017 Note accrues interest at 15% per annum and matures with interest and principal both due on December 27, 2019. In addition, the Company issued a warrant to purchase 25,000 shares of Company common stock. The warrant entitles the holder to purchase the Company's common stock at a purchase price of $4.00 per share for a period of five years from the issue date. The Company recorded a $35,525 debt discount relating to the warrants issued to the investor based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note The First December 2017 Note and accrued interest is convertible at a conversion price of $4.00 per share, subject to adjustment. The First December 2017 Note is secured by a second priority lien on the assets of the Company.

During the year ended December 31, 2018, the Company converted $100,000 of principal and $10,292 of unpaid interest into the August 2018 Equity Raise (as defined below).

The February 2018 Convertible Note Offering

During the three months ended March 31, 2018, the Company conducted multiple closings of a private placement offering to accredited investors (the "February 2018 Convertible Note Offering") of units of the Company's securities by entering into subscription agreements with "accredited investors" (the "February 2018 Investors") for aggregate gross proceeds of $725,000. In addition, $250,000 of the Company's short-term debt along with accrued but unpaid interest of $40,675 was exchanged for convertible debt in the February 2018 Offering. These conversions resulted in the issuance of 72,669 warrants with a fair value of $181,139. These were recorded as a loss on extinguishment of debt.

The February 2018 Convertible Note Offering consisted of a maximum of $750,000 of units of the Company's securities (each, a "February 2018 Unit" and collectively, the "February 2018 Units"), with each February 2018 Unit consisting of (a) a 15% Convertible Secured Promissory Note (each a "February 2018 Convertible Note" and together the "February 2018 Convertible Notes"), convertible into shares of the Company's common stock, par value $.001 per share ("February 2018 Conversion Shares") at a conversion price of $4.00 per share (the "February 2018 Note Conversion Price"), and (b) a five-year warrant (each a "February 2018 Offering Warrant and together the "February 2018 Offering Warrants") to purchase common stock equal to one hundred percent (100%) of the shares into which the February 2018 Convertible Notes can be converted into ("February 2018 Warrant Shares") at an exercise price of $4.00 per share ("February 2018 Warrant Exercise Price"). The February 2018 Offering Notes mature on the second (2nd) anniversary of their issuance dates. The February 2018 Offering Notes are secured by a second priority security interest in the Company's assets up to $1,000,000.

The February 2018 Note Conversion Price and the February 2018 Offering Warrant Exercise Price are subject to adjustment for issuances of the Company's common stock or any equity linked instruments or securities convertible into the Company's common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price and Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein.

The conversion feature of the February 2018 Convertible Note Offering provides for an effective conversion price that is below market value on the date of issuance. Such feature is normally characterized as a beneficial conversion feature ("BCF"). When the Company records a BCF the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The Company recorded a BCF and related debt discount of $37,350, the discount is being accreted over the life of the first Debenture to accretion of debt discount and issuance cost.

The Company recorded a $316,875 debt discount relating to 3,625,000 February 2018 Offering Warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of these notes to accretion of debt discount and issuance cost.

In connection with the February 2018 Convertible Note Offering, the Company retained a placement agent (the "Placement Agent"), to carry out the Offering on a "best-efforts" basis. For services in its capacity as Placement Agent, the Company has paid the Placement Agent a cash fee of $94,250 and issued to the Placement Agent shares of the Company's common stock equal to ten percent (10%) of the Conversion Shares underlying the February 2018 Convertible Notes or 362,500 shares that had a fair value of $74,881, which was recorded as issuance cost and is being accreted over the life of these notes to accretion of debt discount and issuance cost.

During the year ended December 31, 2018, the Company converted $940,675 of principal and $86,544 of unpaid interest into the August 2018 Equity Raise (as defined in Note 7 below).

During the year ended December 31, 2019 the company repaid $19,758 in interest.

The March 2018 Convertible Note Offering

During the three months ended March 31, 2018, the Company conducted multiple closings of a private placement offering to accredited investors (the "March 2018 Convertible Note Offering") of units of the Company's securities by entering into subscription agreements with "accredited investors" (the "March 2018 Investors") for aggregate gross proceeds of $770,000. In addition, $50,000 of the Company's short-term debt, $767 accrued but unpaid interest and $140,600 of the Company's vendor liabilities was exchanged for convertible debt within the March 2018 Convertible Note Offering. These conversions resulted in the issuance of 47,842 warrants with a fair value of $84,087. These were recorded as a loss on extinguishment of debt.

The March 2018 Convertible Note Offering consisted of a maximum of $900,000, with an over-allotment option of an additional $300,000 of units of the Company's securities (each, a "March 2018 Unit" and collectively, the "March 2018 Units"), with each March 2018 Unit consisting of (a) a 14% Convertible Secured Promissory Note (each a "March 2018 Note" and together the "March 2018 Notes"), convertible into shares of the Company's common stock, par value $.001 per share ("Conversion Shares") at a conversion price of $4.00 per share (the "Conversion Price"), and (b) a four-year warrant (each a "Warrant and together the "Warrants") to purchase common stock equal to one hundred percent (100%) of the shares into which the Notes can be converted into ("Warrant Shares") at an exercise price of $4.00 per share ("Exercise Price"). The March 2018 Notes mature on the second (2nd) anniversary of their issuance dates.

The Conversion Price of the March 2018 Note and the Exercise Price of the Warrants are subject to adjustment for issuances of the Company's common stock or any equity linked instruments or securities convertible into the Company's common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price and Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein.

The Company recorded a $254,788 debt discount relating to 240,342 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.

During the year ended December 31, 2018, the Company converted $886,367 of principal and $51,293 of unpaid interest pursuant to the August 2018 Equity Raise (as defined below).

The February 2019 Convertible Note Offering

During the nine months ended September 30, 2019, the Company conducted an offering to accredited investors (the "February 2019 Convertible Note Offering") of units of the Company's securities by entering into subscription agreements with "accredited investors" (the "February 2019 Investors") for aggregate gross proceeds of $1,993,025.

The February 2019 Convertible Note Offering consisted of (a) a 10% Convertible Promissory Note (each a "February 2019 Note" and together, the "February 2019 Notes"), convertible into shares of the Company's common stock, par value $.001 per share ("Conversion Shares") at the lesser of (i) a fixed conversion price equal to $5.00 per share or (ii) the price provided to investors in connection with (a) any private placement offerings or one or more registered public offerings by the Company under the Securities Act, pursuant to which the Company receives monies in the amount greater than $1,500,000 in exchange for securities of the Company between February 21, 2019 and the date on which the Company's consummates a listing onto a national securities exchange, or (b) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a "Qualified Offering"), and (b) a four-year stock purchase warrant (each a "Warrant and together the "Warrants") to purchase a quantity of shares of the Company's common stock up to thirty-three percent (33%) of the number of shares of common stock into which the underlying Notes may be converted, at an exercise price of $6.00 per share ("Exercise Price"). During the nine months ended September 30, 2019 a total of 133,190 Warrants were issued in conjunction with The February 2019 Convertible Note Offering.

The February 2019 Notes mature on the first (1^st) anniversary of their issuance dates. In the event that the Offering's Purchasers do not choose to convert the Notes into the Common Stock on or prior to the Maturity Dates, the principal and interest evidenced by the Note shall be mandatorily converted upon the earlier of (i) the listing of the Common Stock onto a national securities exchange, or (ii) upon a Qualified Offering.

The Conversion Price of the February 2019 Note and the Exercise Price of the Warrants are subject to adjustment for issuances of the Company's common stock or any equity linked instruments or securities convertible into the Company's common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price and Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein.

The Company recorded a $222,632 debt discount relating to 133,190 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.

As of the date of this filing, certain notes in this offering with maturity dates prior to March 20, 2020 have not been repaid, but the Company is in negotiations with the holders about an extension agreement.

The July 2019 Tal Loan Agreement

On July 26, 2019, the Company entered into a loan agreement (the "July 2019 Tal Loan Agreement") with Robert Tal, whereby the Company issued Tal a promissory note in the principal amount of $12,000 (the "July 2019 Tal Note"). Pursuant to the July 2019 Tal Loan Agreement, the July 2019 Tal Note bears interest at a rate of $600 per month. As additional consideration for entering in the July 2019 Tal Loan Agreement, the Company issued Tal a five-year warrant to purchase 180 shares of the Company's common stock at a purchase price of $6.00 per share.

During the year ended December 31, 2019 the Company repaid $12,000 in principal and $600 in interest and the loan is no longer outstanding. 

The August 2019 Tal Loan Agreement

On August 6, 2019, the Company entered into a loan agreement (the "August 2019 Tal Loan Agreement"), whereby the Company issued Tal a promissory note in the principal amount of $12,000 (the "August 2019 Tal Note"). Pursuant to the August 2019 Tal Loan Agreement, the August 2019 Tal Note bears interest at a rate of $600 per month. As additional consideration for entering in the August 2019 Tal Loan Agreement, the Company issued Tal a five-year warrant to purchase 180 shares of the Company's common stock at a purchase price of $6.00 per share.

During the year ended December 31, 2019 the Company repaid $12,000 in principal and $600 in interest and the loan is no longer outstanding. 

The First September 2019 Tal Loan Agreement

On September 4, 2019, the Company entered into a loan agreement (the "First September 2019 Tal Loan Agreement"), whereby the Company issued Tal a promissory note in the principal amount of $15,000 (the "First September 2019 Tal Note"). Pursuant to the First September 2019 Tal Loan Agreement, the First September 2019 Tal Note bears interest at a rate of $750 per month. As additional consideration for entering in the First September 2019 Tal Loan Agreement, the Company issued Tal a five-year warrant to purchase 225 shares of the Company's common stock at a purchase price of $6.00 per share.

During the year ended December 31, 2019 the Company repaid $15,000 in principal and $750 in interest and the loan is no longer outstanding. 

The Second September 2019 Tal Loan Agreement

On September 26, 2019, the Company entered into a loan agreement (the "Second September 2019 Tal Loan Agreement"), whereby the Company issued Tal a promissory note in the principal amount of $12,500 (the "Second September 2019 Tal Note"). Pursuant to the Second September 2019 Tal Loan Agreement, the Second September 2019 Tal Note bears interest at a rate of $625 per month. As additional consideration for entering in the First September 2019 Tal Loan Agreement, the Company issued Tal a five-year warrant to purchase 188 shares of the Company's common stock at a purchase price of $6.00 per share.

During the year ended December 31, 2019 the Company repaid $12,500 in principal and $1,250 in interest and the loan is no longer outstanding. 

The November 2019 Convertible Note Offering

During the year ended December 31, 2019, the Company conducted an offering to accredited investors (the "November 2019 Convertible Note Offering") of units of the Company's securities by entering into subscription agreements with "accredited investors" (the "November 2019 Investors") for aggregate gross proceeds of $479,500. In addition, the Company converted $318,678 in Accounts Payable into this offering.

The November 2019 Convertible Note Offering consisted of (a) a 10% Convertible Promissory Note (each a "November 2019 Note" and together, the "November 2019 Notes"), convertible into shares of the Company's common stock, par value $.001 per share ("Conversion Shares") at a fixed conversion price equal to $4.50 per share.

The November 2019 Notes mature six months after the anniversary of their issuance dates. At any time on or after the Maturity Date, at the election of the Offering's Purchaser, this Note may convert into Common Stock equal to the quotient obtained by dividing the outstanding principal and unpaid accrued interest of this Note on the date of such conversion by $4.50.

The Company recorded a $84,377 debt discount relating to an original issue discount equal to $79,933 and a beneficial conversion feature of $4,444. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.