Convertible notes payable

12 Months Ended

Jun. 30, 2019

Convertible Notes Payable [Abstract]

Convertible notes payable

9. Convertible notes payable

Financing and security agreement

On September 23, 2014, the Company entered into a Financing and Security Agreement (the "Financing Agreement") whereby the Company may be able to borrow up to $1.5 million through the issuance of convertible secured debt. The principal terms of the Financing Agreement are as follows:

· The Company may borrow up to $1.5 million in tranches of up to $150,000 each.

· The first tranche of $150,000 was issued at the closing of the transaction and was used to acquire and put into service Company-owned micro markets. An additional amount of $100,000 was issued during the quarter ended December 31, 2014.

· All subsequent tranches shall be in the amount of up to $150,000, shall be due and funded by the lender within seven days of notice, and shall be contingent upon the Company placing an additional 20 micro markets into service.

· The notes payable issued under the terms of the Financing Agreement are due in full 24 months from the funding of each tranche. The Company may, at its discretion, extend the due date for each tranche for an additional 12 months.

· Interest on the borrowings accrues at a rate of 10% per annum and is payable quarterly. In the event the Company elects to extend the maturity date of a tranche, the interest rate will increase to 12% per annum on that tranche.

· The lender may at its discretion convert any outstanding principal under any of the tranches into shares of the Company's common stock. The conversion price is 85% of the average closing prices for the 15 trading days prior to the notice of conversion, but in no event at a conversion price lower than $1.28 per share.

· On the due date, or the extended due date, the Company may at its discretion convert up to one-half of the outstanding principal into shares of common stock. The conversion price is 85% of the average closing prices for the 15 trading days prior to the due date or extended due date, whichever may be applicable.

· Borrowings are secured by the Company-owned micro markets.

At June 30, 2018, there was $250,000 outstanding under the Financing Agreement, of which $150,000 originally matured on September 23, 2016 and $100,000 originally matured on December 15, 2016. On January 20, 2017, the Company extended both tranches until December 31, 2018. As part of the extension, the holder was granted conversion rights at $.16 per share. The conversion right granted was fixed at the closing trading price of the stock. As a result, the Company determined that the conversion right was not a derivative in accordance with ASC 815, Derivatives and Hedges, the host instrument was conventional convertible, and that no beneficial conversion feature was present. The modification of the debt terms was not deemed substantive and therefore, was not accounted for as an extinguishment of debt with the recognition of a gain or loss. No penalties or higher rates are effective upon default.

The lender of the Financing Agreement has informed the Company that he does not intend to lend additional amounts under the Financing Agreement.

As of June 30, 2019, and 2018, the outstanding balance was approximately $125,000 and $250,000, respectively.

As of June 30, 2019, and 2018, accrued interest was approximately $53,000 and $81,000, respectively.

For the years ended June 30, 2019 and 2018, interest expense was approximately $22,000 and $25,000, respectively.

For the year ended June 30, 2019, approximately $125,000 of principal and $50,000 of accrued interest was converted into approximately 1,095,000 shares of common stock.

Convertible unsecured promissory note

On April 8, 2019, the Company issued a $500,000 convertible unsecured promissory note (the “Note”) in exchange for cash proceeds of $500,000. The Note matures on April 8, 2020 and bears interest at a rate of 15% annum, payable every six months. The Note principal has conversion rights at $0.50 per share. Interest accrued on the Note is not convertible. A 2% penalty applies to missed interest payments.

As of June 30, 2019, and 2018, the outstanding balance was approximately $500,000 and $0 respectively. During 2019, principal payments were approximately $0.

As of June 30, 2019, and 2018, accrued interest was approximately $17,000 and $0, respectively. For the year ended June 30, 2019, interest payments were approximately $0.

For the years ended June 30, 2019 and 2018, interest expense was approximately $17,000 and $0, respectively.

Convertible unsecured promissory notes

Between April and June 2019 the Company issued approximately nineteen promissory notes (the “Notes”) totaling $1,385,000 in exchange for cash proceeds of $1,385,000. The Notes mature twenty-four months from their effective date and have maturity dates between April and June 2021 and have conversion rights at $0.50 per share. The Notes bear interest at a rate of 15% annum, payable every six months.

As of June 30, 2019, and 2018, the outstanding balance was approximately $1,385,000 and $0 respectively. During 2019, principal payments were approximately $0.

As of June 30, 2019, and 2018, accrued interest was approximately $34,000 and $0, respectively. For the year ended June 30, 2019, interest payments were approximately $0.

For the years ended June 30, 2019 and 2018, interest expense was approximately $34,000 and $0, respectively.

Convertible unsecured redeemable note

On June 4, 2019, the Company issued a $750,000 convertible redeemable promissory note (the “Note”) in exchange for cash proceeds of $735,000 as $15,000 was deducted by the Note holder for legal fees. The Note matures on June 4, 2020 and bears interest at a rate of 6% annum, payable paid annually. The note has conversion rights at $0.70 per share if converted within the first 180 days of issuance, after which the holder has the right to convert the Note at 65% of the lowest closing bid price of the common stock for fifteen prior trading days including the day upon which the notice of conversion is received by the Company. The Company determined that the conversion right is a derivative in accordance with ASC 815, Derivatives and Hedges, and at the time of issuance a debt discount of $695,989 was recorded and will be amortized on a straight-line basis over the life of the note to accretion of discount on notes payable in the accompanying statement of operations.

As additional consideration for the purchase of the Note, the company issued to the buyer 62,500 shares of restricted common stock.

During the first six months the Note is in effect, the Company may redeem this Note by paying to the holder an amount as follows:

Date	Amont
0-30 days	105%*(P+I)
31-60 days	110%*(P+I)
61-90 days	115%*(P+I)
91-120 days	120%*(P+I)
121-150 days	125%*(P+I)
151-180 days	130%*(P+I)

The Note may not be redeemed after 180 days in effect.

As of June 30, 2019, and 2018, the outstanding balance was approximately $750,000 and $0 respectively. For the year ended June 30, 2019, principal payments were approximately $0.

As of June 30, 2019, and 2018, accrued interest was approximately $3,000 and $0, respectively. For the year ended June 30, 2019, interest payments were approximately $0.

As of June 30, 2019, and 2018, the debt discount associated with the derivative liability was approximately $638,000 and $0, respectively. For the year ended June 30, 2019, approximately $58,000 was accreted to accretion of discount on notes payable.

For the years ended June 30, 2019 and 2018, interest expense was approximately $3,000 and $0, respectively.

Convertible unsecured promissory note  

On June 6, 2019, the Company issued a $250,000 convertible unsecured promissory note (the “Note”) in exchange for cash proceeds of $250,000. The Note matures on June 6, 2022 and bears interest at a rate of 10% annum, payable every six months. The note has conversion rights at $0.50 per share.  

As of June 30, 2019, and 2018, the outstanding balance was approximately $250,000 and $0 respectively. For the year ended June 30, 2019, principal payments were approximately $0.  

As of June 30, 2019, and 2018, accrued interest was approximately $2,000 and $0, respectively. For the year ended June 30, 2019, interest payments were approximately $0.  

For the years ended June 30, 2019 and 2018, interest expense was approximately $2,000 and $0, respectively.  

As of June 30, 2019, convertible notes payable consisted of the following:

	June 30, 2019			June 30, 2018
Convertible secured debt, bearing interest at 10% per annum, payable quarterly. The convertible secured debt matures on December 31, 2018 and has conversion rights at $.16 per share.		125,000			250,000
Convertible Unsecured Promissory Note, bearing interest at 15% annum, payable every six months. The note matures on April 8, 2020 and has conversion rights at $.50 per share.		500,000			-
Convertible Unsecured Promissory Notes issued between April and June 2019, bearing interest at 15% annum, payable every six months. These 24 month notes mature between April and June 2021 and have conversion rights at $.50 per share.		1,385,000			-
Convertible Unsecured Redeemable Note, interest bearing and payable at 6% annum. The note matures on June 4, 2020 and has conversion rights at $.70 per share if converted within the first 180 days of issuance (June 4, 2019), after which the holder has the right to convert each share at 65% of the lowest closing bid price on date of conversion. Net of derivative liability discount of $637,990 and $0 respectively		750,000			-
Convertible Unsecured Promissory Note, bearing interest at 10% annum, payable every six months. The note matures on June 6, 2022 and has conversion rights at $.50 per share.		250,000			-
Total convertible notes payable		3,010,000			250,000
Less discounts		(637,990	)		-
Total convertible notes payable net of discounts		2,372,010			250,000
Less current maturities		(1,375,000	)		(250,000	)
Convertible notes payable, current portion	$	997,010		$	-

Maturities of the convertible notes payable, are as follows:

2020	$	1,375,000
2021	$	1,635,000
	$	3,010,000