NOTE 7 — NOTES AND CAPITAL LEASE PAYABLE

Notes and capital lease payable were comprised of the following as of September 30, 2019 and December 31, 2018:

	September 30, 2019			December 31, 2018
Seaside Bank note payable.	$	980,000		$	980,000
Hunton & Williams note(s) payable		394,500			444,000
Weider promissory note payable		491,525			-
Power Up Lending Group notes payable		40,838			145,476
Lab and medical equipment capitalized leases		97,892			264,590
Total notes payable		2,004,785			1,834,076
Less unamortized debt discount		(36,032	)		(74,653	)
Total notes payable net of unamortized debt discount		1,968,753			1,759,423
Less current portion		(1,512,227	)		(462,330	)
Long term portion	$	456,496		$	1,297,093

Seaside Bank

On October 25, 2010, the Company entered into a Loan Agreement with Seaside National Bank and Trust for a $980,000 loan at 4.25% per annum interest that was used to refinance the Company’s loan with Bank of America. The obligation is guaranteed by certain shareholders of the Company. The Company renewed the loan with Seaside National Bank and Trust during the first quarter of 2019 to extend the maturity date to May 18, 2020.

Hunton & Williams Notes

At December 31, 2016, the Company had two outstanding notes payable with interest at 8% per annum due at maturity. The two notes, $61,150 and $323,822, are payable in one balloon payment upon the date the Noteholder provides written demand, however the Company is not obligated to make payments until the Northstar Biotech Group, LLC (or successor) Loan is paid off.

On August 31, 2017, the Company and the note holder entered into a Note Forbearance, Modification and Repayment Agreement (“Agreement”). The two notes, $61,150 and $323,822, were payable in one balloon payment upon the date of a written demand and upon certain triggering events occurring. The total of unpaid principal and accumulated interest for both notes as of August 31, 2017 was $747,680 and an account payable of $40,596, for an aggregate total of $788,276.

The note holder agreed to accept full payment of their obligation of over a four (4) year period in 48 monthly installments on an adjusted debt obligation in aggregate of $624,000 (reducing the outstanding balance), with such payments staggered in amounts such that the Company will pay $10,000 monthly the first year, $12,000 monthly the second year, $14,000 monthly the third year, and $16,000 monthly the final year. In addition, the note holder agreed to suspend accrual interest on the notes commencing September 1, 2017.

The Agreement remains in full force and effect provided the Company continues to make the monthly payments, there is no event of default as defined in the notes and an agreement to a subordination agreement by Northstar Biotech Group, LLC, which has been provided. During the nine-month ended September 30, 2019, the Company did not make all required payments. However, the noteholder agreed to waive their default rights under the agreement for a payment commitment of $5,000 in December 2019.

The Company imputed an interest rate of 5% and discounted the note accordingly. The imputed debt discount of $69,700 is amortized to interest expense using the effective interest method. The imputed debt discount of $69,700 is amortized to interest expense using the effective interest method. For three and nine months ended September 30, 2019, the Company amortized $24,205 and $34,945, and for three and nine months ended September 30, 2018, the Company amortized $6,343 and $22,426 of debt discounts to current period operations as interest expense. At September 30, 2019, the Company is in default and is negotiating payment structure. The remaining unamortized debt discount at September 30, 2019 was charged to current period operations.

Weider Promissory Note

The Company, as one of the parties entered into a Settlement Agreement and General Release (the “Agreement”) dated June 3, 2019 related to certain medical procedures. Without admitting any liability, and as part of that Agreement, the Company agreed to provide a five-year 5.25% unsecured promissory note, dated June 15, 2019, in the principal amount of $500,000, payable in monthly increments of $5,000 per month, with a final balloon payment due on June 15, 2024. The Company recorded the promissory note to current period operations. Remaining outstanding balance as of September 30, 2019 was $491,525.

PowerUp Lending Group, Ltd

On November 8, 2018, the Company entered into a revenue based factoring agreement and received an aggregate of $137,200 (less origination fees of $2,800) in exchange for $187,600 of future receipts relating to monies collected from customers or other third party payors. Under the terms of the factoring agreement, the Company is required to make daily payments equal to $1,276 for 147 business days. The Company received net proceeds of $93,809 along with cancellation of the previous revenue based factoring agreement issued in May 2018. In connection with the cancellation of the January 2018 revenue based factoring agreement, the Company incurred a loss in settlement of debt of $37,604 in 2018. This agreement was subsequently terminated (see below) in exchange for a new revenue based factoring agreement.

On April 16, 2019, the Company entered into a revenue based factoring agreement and received an aggregate of $137,200 (less origination fees of $2,800) in exchange for $187,600 of future receipts relating to monies collected from customers or other third party payors. Under the terms of the factoring agreement, the Company is required to make daily payments equal to $1,276 for 147 business days. The Company received net proceeds of $84,876 along with cancellation of the previous revenue based factoring agreement issued in November 2018. In connection with the cancellation of the November 2018 revenue based factoring agreement, the Company incurred a loss in settlement of debt of $1,276 in 2019.

The remaining principle balance of the PowerUp Lending Group promissory note payable at September 30, 2019 and December 31, 2018 is $40,838 and $145,486, net of unamortized discount of $36,032 and $43,452, respectively.

Lab and Medical Equipment Capitalized Lease

On March 3, 2017, the Company entered into an asset sale and lease agreement (sale/leaseback transaction; “Asset Sale and Lease Agreement”) with GACP, whereby the Company sold certain lab, medical and other equipment relating to the cell banking business for $400,000 and leased back the sold equipment over a three year term. The Company recognized the arrangement as a capital lease. The Company initially recorded the equipment and the capitalized lease liability at the estimated present value of the minimum lease payments of $619,825.

The lease includes a base monthly rental payment of $20,000, due the first day of each calendar month plus contingent rent equal to 2.3%, 22.5%, and 31.6% of revenues collected on deposits arising from cell banking business for years 1, 2 and 3, respectively. The contingent rent is recognized as a period expense and as interest expense at the time of collection. At the expiration of the lease, the Company is required to return all leased equipment and along with any maintenance records, logs, etc. in the Company’s possession to the lessor with no right of repurchase.

The Company determined that the present value of the minimum lease payments exceeded 90% of the estimated fair value of the equipment and therefore classified the equipment sale/lease as a capitalized lease. The effective interest rate of the capitalized lease is estimated at 10.00% based on the Company estimated incremental borrowing rate.

The following summarizes the assets under capital leases:

	September 30, 2019			December 31, 2018
Classes of property
Lab, medical and other equipment	$	619,825		$	619,825
Office equipment		4,777			4,777
Less: accumulated depreciation		(538,515	)		(383,559	)
	$	86,087		$	241,043

The following summarizes the current and long-term portion of capital leases:

	September 30, 2019		December 31, 2018
Current leases payable	$	97,892	$	225,084
Long-term leases payable		-		39,506
Total	$	97,892	$	264,590

The following summarizes total future minimum lease payments at September 30, 2019:

Period ending,
Three months ended December 31, 2019		60,000
Year ended December 31, 2020		40,000
Total minimum lease payments		100,000
Amount representing interest		(2,108	)
Present value of minimum lease payments		97,892
Current portion of capital lease obligations		97,892
Capital lease obligation, less current portion	$	-

Promissory note

On June 1, 2015, the Company issued an amended and restated promissory note of $1,697,762 in settlement of the $1,500,000 outstanding subordinated debt, related accrued interest of $373,469 and accumulated and unpaid guarantor fees of $624,737.

The note is unsecured and non-interest bearing with four semi-annual payments of $75,000 beginning on December 31, 2015 with the remaining unpaid balance due June 1, 2020.

The Company imputed an interest rate of 5% and discounted the promissory note accordingly. The imputed debt discount of $368,615 is amortized to interest expense using the effective interest method. For the three and nine months ended September 30, 2019, the Company amortized $17,616 and $52,273; and $17,616 and $52,273 for the three and nine months ended September 30, 2018, of debt discounts to current period operations as interest expense, respectively. The unamortized debt discount at September 30, 2019 is $46,911.

As of September 30, 2019, the remaining principle due was $1,397,762.