NOTES PAYABLE (Tables)

9 Months Ended

Sep. 30, 2018

Notes Payable

Schedule of notes payable

Notes Payable at September 30, 2018 and December 31, 2017, are comprised of the following.

	September 30,	December 31,
	2018	2017
12% short-term promissory note (b)	$           1,000	$                 —
Other short-term notes payable (c)	1,143	—
Notes payable to Wells Fargo (d)	295	300
Note payable to Dept. of Economic and Community Development (e)	265	292
Power-Plus Credit Facilities (f)	—	171
Note payable to Power-Plus Member (g)	34	130
Note payable to People's United Bank (h)	18	19
8% short-term promissory note (i)	1,212
12% September '18 short-term promissory note (j)	789
10% short-term promissory notes (k)	—	15
Short term bank credit (l)	1,800	—
Total notes payable	6,556	927
Less:
Unamortized debt discounts	(482)	—
Unamortized financing cost	(41)	—
Total notes payable, net of financing cost	$           6,033	$               927
Less: current portion	(5,539)	(402)
Notes payable – long-term portion	$              494	$               525

(a) On February 20, 2018, the Company issued promissory note in the principal face amount of $900 to an accredited investor. This promissory note included an original issue discount (“OID”) of $150 resulting in net proceeds of $750. The principal and OID on this note was due and payable on March 22, 2018. On March 23, 2018, the Company entered into a new promissory note in the principal amount of $2,100 for a term of two months, subject to the Company’ ability to prepay within one month. The new promissory note included an OID of $350 if paid within one month and $700 if paid within two months, resulting in net proceeds of $1,750. The Company also issued to the lender a warrant to purchase 1,250,000 shares of the Company’s common stock at an exercise price of $1.15 per share. The principal amount of the new promissory note consisted of cash of $1,000 and the cancellation of principal of $750 from the February 20, 2018 promissory note. The interest on the February 20, 2018 note in the amount of $150 was paid to the lender prior to entering into the new promissory note. The warrants are exercisable commencing on issuance date for a term of three years. The exercise price of these warrants is subject to adjustment for customary stock splits, stock dividends, combinations and other standard anti-dilution events. The warrants may be exercised for cash or on a cashless basis. The Company recorded debt discount in the amount of $604 based on the estimated fair value of these warrants. The Company computed the fair value of these warrants using the Black-Scholes option pricing model. The debt discount was amortized as non-cash interest expense over the term of the debt. During the three and nine months September 30, 2018, non-cash interest expense of nil and $604, respectively, was recorded from the amortization of debt discount and interest expense of nil and $350 was recorded from the amortization of the OID on the new promissory note. On April 23, 2018, the Company paid the entire outstanding principal on the new promissory note of $2,100. The new promissory note had been guaranteed by our Chief Executive Officer and had also been guaranteed by Philou.

(b) On March 23, 2018, the Company entered into a securities purchase agreement to sell and issue a 12% promissory note and a warrant to purchase 300,000 shares of common stock to an accredited investor if the promissory note is paid in full on or before May 23, 2018, or up to 450,000 shares of common stock, if the promissory note is paid by June 22, 2018. The promissory note was issued with a 10% OID. The promissory note is in the principal amount of $1,000 and was sold for $900, bears interest at 12% simple interest, and was due on June 22, 2018. The Company is in negotiations with the investor to amend the payment terms on this 12% promissory note, however, since payment was not made on the specified maturity date this unsecured 12% promissory note is currently in default. Interest only payments are due, in arrears, on a monthly basis commencing on April 23, 2018. The exercise price of the warrant is $1.15 per share. The Company recorded debt discount in the amount of $271 based on the estimated fair value of these warrants. The Company computed the fair value of these warrants using the Black-Scholes option pricing model. The debt discount was amortized as non-cash interest expense over the term of the debt. During the three and nine months ended September 30, 2018, non-cash interest expense of nil and $271, respectively, was recorded from the amortization of debt discount and interest expense of nil and $100, respectively, was recorded from the amortization of the OID on the 12% promissory note. The 12% promissory note is unsecured by any of the Company’s assets but is guaranteed by our Chief Executive Officer.

(c) During the nine months ended September 30, 2018, the Company entered into the following short-term promissory notes:

(i) On February 7, 2018, the Company issued demand promissory notes in the aggregate principal face amount of $440 to accredited investors. These promissory notes included an aggregate OID of $40 resulting in net proceeds to the Company of $400. The principal and OID on these notes were due and payable on demand after April 24, 2018. These loans were paid on April 27, 2018. During the three and nine months ended September 30, 2018, the Company recognized nil and $40, respectively, from the amortization of OID on these demand promissory notes.

(ii) On February 26, 2018, the Company issued a 10% promissory note in the principal amount of $330 to an accredited investor. This promissory note included an OID of $30 resulting in net proceeds to the Company of $300. The principal and accrued interest on this note was due and payable on April 12, 2018, subject to a 30-day extension available to the Company. This 10% promissory note was paid on April 27, 2018. During the three and nine months ended September 30, 2018, the Company recognized nil and $36 from interest and the amortization of OID on this 10% promissory note.

(iii) On March 27, 2018, the Company issued a 10% promissory note in the principal amount of $200 to an accredited investor. The principal and accrued interest on this note was due and payable on March 29, 2018. On March 29, 2018 and April 24, 2018, the Company paid $50 and $150, respectively, on this 10% promissory note of $200.

(iv) On May 23, 2018, the Company issued a promissory note in the aggregate principal face amount of $81 to an accredited investor. The promissory note included an aggregate OID of $6 resulting in net proceeds to the Company of $75. The principal and OID on this note were due and payable on August 20, 2018. This promissory note was paid on July 25, 2018. During the three and nine months ended September 30, 2018, the Company recognized $3 and $6, respectively, from the amortization of OID on this promissory note.

(v) On May 23, 2018, the Company issued a promissory note in the aggregate principal face amount of $360 to an accredited investor. The promissory note included an aggregate OID of $60 resulting in net proceeds to the Company of $300. The principal and OID on this note were due and payable on June 22, 2018. The outstanding balance on this note was paid on July 2, 2018. During the three and nine months ended September 30, 2018, the Company recognized nil and $60, respectively, from the amortization of OID on this promissory note.

(vi) On June 5, 2018, the Company received loans in the aggregate amount of $75 from accredited investors. The principal and interest on these loans was paid on July 16, 2018.

(vii) On June 8, 2018, the Company issued a promissory note in the aggregate principal face amount of $512 to an accredited investor. The promissory note included an aggregate OID of $67 resulting in net proceeds to the Company of $445. The principal and OID on this note were due and payable on July 9, 2018. At September 30, 2018, the outstanding balance on this note was $137. Since payment was not made on the specified maturity date this unsecured promissory note is currently in default. During the three and nine months ended September 30, 2018, the Company recognized $19 and $67, respectively, from the amortization of OID on this promissory note. On August 3, 2018, the Company and lender of the June 8, 2018 promissory note in the principal amount of $512 entered into an agreement to extend the maturity date from July 9, 2018 to August 31, 2018. The Company agreed to pay the lender an extension fee of 100,000 shares of common stock.

(viii) On August 10, 2018, DP Lending issued a 12% promissory note in the principal amount of $550 to an accredited investor. This promissory note included an OID of $50 resulting in net proceeds of $500. The principal and accrued interest on this note is due and payable on August 10, 2019.

(ix) On August 23, 2018, DP Lending issued a promissory note in the principal amount of $85 to an accredited investor. This promissory note included an OID of $10 resulting in net proceeds of $75. The principal and accrued interest on this note was due and payable on September 24, 2018, subject to a 28-day extension available to DP Lending. However, since payment was not made on the specified maturity date this unsecured promissory note is currently in default.

(x) On August 28, 2018, DP Lending issued a promissory note in the principal amount of $115 to an accredited investor. This promissory note included an OID of $15 resulting in net proceeds of $100. The principal and accrued interest on this note was due and payable on September 14, 2018, subject to a 10-business day cure period available to DP Lending. This promissory note was paid on September 21, 2018.

(d) At September 30, 2018, Microphase had guaranteed the repayment of two equity lines of credit in the aggregate amount of $300 with Wells Fargo Bank, NA (“Wells Fargo”) (collectively, the “Wells Fargo Notes”). These loans originated prior to the Company’s acquisition of Microphase and Microphase was the recipient of the actual proceeds from the loans. Microphase had previously guaranteed the payment under the first Wells Fargo equity line during 2008, the proceeds of which Microphase had received from a concurrent loan from Edson Realty Inc., a related party owned real estate holding company. As of September 30, 2018, the first line of credit, which is secured by residential real estate owned by a former officer, had an outstanding balance of $212, with an annual interest rate of 4.00%. Microphase had guaranteed the payment under the second Wells Fargo equity line in 2014. Microphase had received working capital loans from the former CEO from funds that were drawn against the second Wells Fargo equity line. As of September 30, 2018, the second line of credit, secured by the former CEO’s principal residence, had an outstanding balance of $83, with an annual interest rate of 3.00%. During the three and nine months ended September 30, 2018, Microphase incurred $3 and $15, respectively, of interest on the Wells Fargo Notes.

(e) In August 2016, Microphase received a $300 loan, of which $35 has been repaid, pursuant to the State of Connecticut Small Business Express Job Creation Incentive Program which is administered through the Department of Economic and Community Development (“DECD”) (the “DECD Note”). The DECD Note bears interest at a rate of 3% per annum and is due in August 2026. Payment of principal and interest was deferred during the initial year and commencing in September 2017, payable in equal monthly installments over the remaining term. During the three and nine months ended September 30, 2018, Microphase incurred $3 and $8 of interest on the DECD Note. In conjunction with the DECD Note, Microphase was awarded and received a Small Business Express Matching Grant of $100 by the State of Connecticut. State grant funding requires Microphase to spend an equal amount of cash on eligible expense. The Company has utilized $18 of the grant and the balance of $82 is reported within deferred revenue and classified in accounts payable and accrued in the accompanying consolidated balance sheet at September 30, 2018.

(f) At December 31, 2017, Power-Plus had guaranteed the repayment of two lines of credit in the aggregate amount of $169 with Bank of America NA and Wells Fargo (collectively, the “Power-Plus Lines”). During the three months ended June 30, 2018, the Power-Plus Lines had been paid.

(g) Pursuant to the terms of the Purchase Agreement with Power-Plus, the Company entered into a two-year promissory note in the amount of $255 payable to the former owner as part of the purchase consideration. The $255 note is payable in 24 equal monthly installments. On October 18, 2017, for cancellation of debt, the Company entered into a subscription agreement with the former owner under which the Company sold 138,806 shares of common stock at $0.67 per share for an aggregate purchase price of $93. During the three and nine months ended September 30, 2018, the Company paid $32 and $96, respectively, in principal payments.

(h) In December 2016, Microphase utilized a $20 overdraft credit line at People’s United Bank with an annual interest rate of 15%. As of September 30, 2018, the balance of that overdraft credit line was $18.

(i) On August 16, 2018, the Company entered into a securities purchase agreement with certain institutional investors providing for the issuance of (i) secured promissory notes (the “Notes”) in the aggregate principal face amount of $1,212 due February 15, 2019, at an interest rate of eight percent (8%) per annum for which the Company received an aggregate of $1,010, and (ii) an aggregate of 400,000 shares of common stock to be issued by the Company, subject to approval of the NYSE American.

(j) During September 2018, we issued to institutional investors 12% term promissory notes in the principal face amount of $789, with an interest rate of 12% for a purchase price of $750. The outstanding principal face amount, plus any accrued and unpaid interest, is due by December 31, 2018, or as otherwise provided in accordance with the terms set forth therein. In accordance with the notes, we also agreed to issue 450,000 shares of our common stock to the investors. The note contain standard and customary events of default.

(k) In December 2016, Microphase issued $705 in 10% short-term promissory notes to nineteen accredited investors which, after deducting $71 of placement fees to its selling agent, Spartan Capital Securities, LLC (“Spartan”), resulted in $634 in net proceeds to Microphase (the “10% Short-Term Notes”). The 10% Short-Term Notes were due one year from the date of issuance. The amount due pursuant to the 10% Short-Term Notes is equal to the entire original principal amount multiplied by 125% (the “Loan Premium”) plus accrued interest. On December 5, 2017, in exchange for the cancellation of $690 of outstanding principal and $250 of accrued interest owed to the investors by Microphase Corporation, the Company entered into an Exchange Agreement pursuant to which the Company issued an aggregate of 1,523,852 shares of common stock and warrants to purchase 380,466 shares of common stock with an exercise price of $1.10 per share of common stock. During the three months ended March 31, 2018, the Company paid the remaining balance of principal and accrued interest of $15 and $6, respectively.

(l) On January 25, 2018, the Company issued two 5% promissory notes, each in the principal face amount of $2,500, for an aggregate debt of $5,000 to two institutional investors.  The entire unpaid balance of the principal and accrued interest on each of the 5% promissory notes was due and payable on February 23, 2018, subject to a 30-day extension available to the Company. The proceeds from these two 5% promissory notes were used to purchase 1,000 Antminer S9s manufactured by Bitmain Technologies, Inc. in connection with our crypto mining operations. Between March 23 and March 27, 2018, the Company paid the entire outstanding principal and accrued interest on the 5% promissory notes of $5,101.

At September 30, 2018, Enertec had short term bank credit of $1,800 that bears interest of prime plus 0.7% through 3.85% paid either on a monthly or weekly basis. Further, the Company has committed to certain covenants under its bank loan. During the three and nine months ended September 30, 2018, the Company recorded interest expense of $21 and $31, respectively, from Enertec’s short term bank credit.