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CONVERTIBLE NOTES
 12 Months Ended
Dec. 31, 2018
Long-term Debt, Unclassified [Abstract]  
CONVERTIBLE NOTES

22. CONVERTIBLE NOTES

 

Convertible Notes Payable at December 31, 2018 and 2017, are comprised of the following:

 

    2018     2017  
10% Convertible secured notes (a)   $ 7,997,126     $ —  
5% Convertible secured notes (b)     —       550,000  
12% Convertible secured note (c) (d) (e)     —       202,000  
Total convertible notes payable     7,997,126       752,000  
Less:                
Unamortized debt discounts     (1,189,276 )     (351,573 )
Unamortized financing cost     (65,356 )     (2,549 )
Total convertible notes payable, net of financing cost   $ 6,742,494     $ 397,878  

  

  (a) On May 15, 2018, the Company entered into a securities purchase agreement to sell (i) a 10% convertible note (the “10% Convertible Note”), (ii) a five-year warrant to purchase 55,556 shares of the Company’s common stock at an exercise price of $27.00 per share; (iii) a five-year warrant to purchase 86,207 shares of the Company’s Class A common stock at an exercise price of $17.40 per share; and (iv) 17,241 shares of the Company’s common stock to an institutional investor. Initially, the 10% Convertible Note was convertible into the Company’s common stock at $15.00 per share, but could only be converted if an event of default thereunder had occurred and not been cured on a timely basis. On September 25, 2018, the Company entered into an agreement to amend the maturity date on the 10% Convertible Note, pursuant to which amendment the amortization schedule of the 10% Convertible Note provides for 13 monthly payments in the amount of $309,193, and for the fourteenth payment to be in the amount of $1,011,427, plus accrued and unpaid interest. Each such amortization payment shall be made in cash or Bitcoin.

   

The 10% Convertible Note is in the principal amount of $6,000,000 and bears interest at 10% simple interest on the principal amount with 50% of the total interest due on the principal payable at the closing and the remaining 50% payable over the term of the 10% Convertible Note. In connection with the financing, the Company agreed to pay the placement agent, Alliance Global Partners, a cash fee of $300,000 and a warrant to purchase 7,500 shares of the Company’s common stock with an exercise price of $20.00 per share.

 

The Company computed the fair value of the warrants using the Black-Scholes option pricing model and, as a result of this calculation, recorded debt discount in the amount of $1,397,389 based on the estimated fair value of the warrants. The Company estimated that the grant date fair value of the shares of common stock was $405,024, which was determined from the closing price of the Company’s common stock on the dates of issuance. In aggregate, the Company recorded debt discount in the amount of $2,169,613 based on the relative fair values of the warrants, common stock and debt issuance costs of $367,200. During the year ended December 31, 2018, non-cash interest expense of $2,169,613 was recorded from the amortization of debt discounts. The fair value of the warrants was estimated using the Black-Scholes option-pricing method. The risk-free rate of 2.94% was derived from the U.S. Treasury yield curve, matching the term of the warrant, in effect at the measurement date. The volatility factor of 127.9% was determined based on the Company’s historical stock prices.

 

On July 2, 2018, the Company entered into a securities purchase agreement with the institutional investor providing for the issuance of (i) a second 10% convertible note (the “Second 10% Convertible Note”) with a principal face amount of $1,000,000 which Second 10% Convertible Note was convertible into the Company’s common stock at $15.00 per share and (ii) an additional 20,000 of the Company’s common stock to be issued in connection with the 10% Convertible Note. The Second 10% Convertible Note, as amended, matures on February 15, 2019, as to fifty percent (50%) of the amount due thereunder, and the remaining fifty percent (50%) due thereunder to May 15, 2019.

 

On August 31, 2018, the Company entered into a securities purchase agreement with the institutional investor providing for the issuance of a third 10% convertible note (the “Third 10% Convertible Note” and with the 10% Convertible Note and the Second 10% Convertible Note, the “10% Convertible Notes”) with a principal face amount of $2,000,000, which Third Convertible Note is convertible into 250,000 shares of the Company’s common stock at $8.00 per share and (ii) an additional 31,000 of the Company’s common stock. The shares of common stock issuable pursuant to the Third 10% Convertible Note have not been issued to the institutional investor. The Third 10% Convertible Note, as amended, matures on February 15, 2019, as to fifty percent (50%) of the amount due thereunder, and the remaining fifty percent (50%) due thereunder to May 15, 2019.

 

At the time of issuance of the Third 10% Convertible Note, the closing price of the Company’s common stock was in excess of the conversion price, resulting in a beneficial conversion feature (“BCF”). The BCF embedded in the Third 10% Convertible Note is accounted for under ASC No. 470, Debt (“ASC 470”). At issuance, the intrinsic value of the BCF totaled $910,419, based on the difference between the effective conversion price and the fair value of the Company’s common stock at the commitment date of the transaction, and the relative fair value of the 31,000 shares of common stock was $259,919. Initially, the Company was prohibited from issuing the 31,000 shares of common stock or the shares of common stock issuable pursuant to the Third 10% Convertible Note until stockholder approval of such issuance of securities is obtained as required by applicable NYSE American listing rules, which was received on December 28, 2018.

 

The Company recorded debt issuance costs of $200,500 from the Third 10% Convertible Note. The debt issuance costs are being amortized as non-cash interest expense over the term of the debt. During the year ended December 31, 2018, non-cash interest expense of $135,144 was recorded from the amortization of the debt issuance costs.

 

Pursuant to an amendment dated as of August 31, 2018 to the 10% Convertible Note and the Second 10% Convertible Note, the Company reduced the conversion price to $8.00 from $15.00. The amendment to the embedded conversion options of the 10% Convertible Note and the Second 10% Convertible Note caused a material change in the fair value of the embedded conversion options on these two notes and resulted in a loss on extinguishment of $665,346. At the time of the amendment, the closing price of the Company’s common stock was in excess of the conversion price, resulting in a BCF. The intrinsic value of the BCF was $1,131,960 on the 10% Convertible Note and $225,000 on the Second 10% Convertible Note based on the difference between the effective conversion price and the fair value of the Company’s common stock. During the year ended December 31, 2018, non-cash interest expense of $1,356,960 was recorded from the amortization of debt discounts attributed to the August 31, 2018 amendment of to the 10% Convertible Note and the Second 10% Convertible Note.

 

Pursuant to the terms of an amendment dated December 7, 2018, the Company agreed that if the investor elects to convert three monthly payments in the principal amount of $309,193 into shares of the Company’s common stock at the stated conversion price of $8.00 and the proceeds from the sale of the shares did not result in net proceeds to the investor of 103% of the principal, interest and penalties due, then the Company would pay the investor the difference in cash (the “True-Up Payment). During December 2018, the Company issued to the investor 109,724 shares of its common stock at $8.00 per share upon the conversion of $877,793 in principal, accrued interest and penalties. During December 2018, the investor received $304,608 from the sale of the shares of common stock, which approximated the value of the shares of common stock on the date of issuance, resulting in a True-Up Payment due to the investor of $599,519.

 

  (b) On December 4, 2017, the Company entered into a securities purchase agreement to sell a 5% Convertible Note (the “5% Convertible Note”) and 7,500 shares of restricted common stock to an institutional investor. The principal of the 5% Convertible Note and interest thereon was convertible into shares of common stock at $12.00 per share of common stock, subject to adjustments for lower priced issuances, stock splits, stock dividends, combinations or similar events. The 5% Convertible Note was in the principal amount of $550,000, included an OID of $50,000 resulting in net proceeds to the Company of $500,000, accrued interest at 5% simple interest on the principal amount, and was due on August 13, 2018. Interest only payments were due on a quarterly basis and the principal was due on June 3, 2018.

 

At the time of issuance of the 5% Convertible Note, the closing price of the Company’s common stock was in excess of the conversion price, resulting in a BCF accounted for under ASC 470. At issuance, the intrinsic value of the BCF totaled $244,260 based on the difference between the effective conversion price and the fair value of the Company’s common stock at the commitment date of the transaction. The intrinsic value of the BCF exceeded the proceeds allocated to the relative fair value of the 5% Convertible Note. The BCF was amortized to interest expense over the term of the 5% Convertible Note using the effective interest method. The valuation of the BCF was calculated based on the effective conversion price compared with the market price of the Company’s common stock on the date of issuance of the 5% Convertible Note.

 

In the aggregate, the Company recorded debt discount in the amount of $550,000 based on the relative fair values of the 7,500 shares of common stock of $25,740, BCF of $244,260 and OID of $50,000. The debt discount is being amortized as non-cash interest expense over the term of the debt. During the year ended December 31, 2017, non-cash interest expense of $380,769 was recorded from the amortization of debt discounts. In January 2018, the 5% Convertible Note was converted into 46,082 shares of the Company’s common stock based upon the contractual rights included in the 5% Convertible Note (See Note 24).

 

  (c) On August 3, 2017, the Company entered into a securities purchase agreement to sell a 12% Convertible Note (the “12% Convertible Note”) and a warrant to purchase 33,333 shares of common stock to an accredited investor. The principal of the 12% Convertible Note may be converted into shares of common stock at $11.00 per share and under the terms of the Warrant, up to 33,333 shares of common stock may be purchased at an exercise price of $14.00 per share.

 

The 12% Convertible Note was in the principal amount of $400,000, included an OID of $40,000 resulting in net proceeds to the Company of $360,000, accrued interest at 12% simple interest on the principal amount, and was due on August 13, 2018. Interest only payments were due on a quarterly basis and the principal was due on August 3, 2018. The principal may be converted into shares of the Company’s common stock at $11.00 per share.  

 

The Company computed the fair value of the 33,333 warrants using the Black-Scholes option pricing model and, as a result of this calculation, recorded debt discount in the amount of $167,203 based on the estimated fair value of the 33,333 warrants.

 

The BCF embedded in the 12% Convertible Note is accounted for under ASC 470. At issuance, the intrinsic value of the BCF totaled $186,797. The Company, however, was prohibited from issuing shares of common stock pursuant to the 12% Convertible Note until stockholder approval of such issuance of securities was obtained as required by applicable NYSE American listing rules. The Company received stockholder approval for the share issuances on December 28, 2017. The intrinsic value of the BCF was amortized to interest expense over the term of the 12% Convertible Note using the effective interest method. The valuation of the BCF was calculated based on the effective conversion price compared with the market price of the Company’s common stock on the date of issuance of the 12% Convertible Note. In aggregate, the Company recorded debt discount in the amount of $394,000 based on the relative fair values of the 33,333 warrants, BCF and OID of $40,000. During the year ended December 31, 2017, non-cash interest expense of $211,658 was recorded from the amortization of debt discounts.

 

On December 28, 2017, principal and accrued interest of $198,000 and $4,818, respectively, on the 12% Convertible Note was satisfied through the issuance of 18,438 shares of the Company’s common stock and the remaining balance of $202,000 was converted into 18,884 shares of the Company’s common stock on January 10, 2018 (See Note 24). The fair value of the warrants was estimated using the Black-Scholes option-pricing method. The risk-free rate of 1.79% was derived from the U.S. Treasury yield curve, matching the term of the warrant, in effect at the measurement date. The volatility factor of 107.3% was determined based on the Company’s historical stock prices.

 

  (d) On April 16, 2018, the Company entered into securities purchase agreements to sell (i) a 12% convertible note (the “12% April 2018 Convertible Note”), (ii) a five-year warrant to purchase 49,679 shares of the Company’s common stock at an exercise price of $26.00 per share; and (iii) 10,046 shares of the Company’s common stock to three institutional investors. The 12% April 2018 Convertible Note is convertible into common stock at $14.00 per share, but may only be converted if an event of default thereunder has occurred and not been cured on a timely basis.

 

The 12% April 2018 Convertible Note is in the principal amount of $1,722,222, included an OID of $172,222 resulting in net proceeds to the Company of $1,550,000 and bears interest at 12% simple interest on the principal amount. The Company is required to make monthly principal and interest payments until the 12% April 2018 Convertible Note is satisfied in full on October 16, 2018.

 

The Company computed the fair value of the warrants using the Black-Scholes option pricing model and, as a result of this calculation, recorded debt discount in the amount of $539,360 based on the estimated fair value of the warrants. The Company estimated that the grant date fair value of the shares of common stock was $128,524, which was determined from the closing price of the Company’s common stock on the date of issuance.

 

In aggregate, the Company recorded debt discount in the amount of $885,106 based on the relative fair values of the warrants, common stock, OID and debt issuance costs of $45,000. During the year ended December 31, 2018, non-cash interest expense of $885,106 was recorded from the amortization of debt discounts. The fair value of the warrants was estimated using the Black-Scholes option-pricing method. The risk-free rate of 2.94% was derived from the U.S. Treasury yield curve, matching the term of the warrant, in effect at the measurement date. The volatility factor of 127.9% was determined based on the Company’s historical stock prices. Beginning on May 16, 2018, the Company was required to make six monthly cash payments in the aggregate amount of $304,259. On August 31, 2018, the Company made its final payment and in aggregate paid principal and accrued interest of $1,722,222 and $103,333, respectively, on the 12% April 2018 Convertible Note.

 

  (e) On January 23, 2018, we entered into a securities purchase agreement with an institutional investor to sell, for an aggregate purchase price of $1,000,000, a 10% senior convertible promissory note (the “January 2018 10% Convertible Note”) with an aggregate principal face amount of $1,250,000, a warrant to purchase an aggregate of 31,250 shares of our common stock and 27,174 shares of our common stock. The transactions contemplated by the securities purchase agreement closed on February 8, 2018.  The January 2018 10% Convertible Note was convertible into 31,250 shares of the Company’s common stock, a conversion price of $40.00 per share. The exercise price of the warrant to purchase 31,250 shares of the Company’s common stock is $44.00 per share. On February 9, 2018, in addition to the 27,174 shares of common stock provided for pursuant to the securities purchase agreement, the Company issued to the investor an aggregate of 34,597 shares of the Company’s common stock upon the conversion of the entire outstanding principal and accrued interest on the January 2018 10% Convertible Note of $1,383,884 (See Note 24).

 

Convertible Notes Converted into Common Stock during 2017

 

  (f) On November 2, 2017, the Company entered into a securities purchase agreement to sell a 5% Convertible Note (the “November 5% Convertible Note”) and 15,000 shares of restricted common stock to an institutional investor. The principal of the November 5% Convertible Note and interest thereon was convertible into shares of common stock at $12.00 per share of common stock, subject to adjustments for lower priced issuances, stock splits, stock dividends, combinations or similar events. The November 5% Convertible Note was in the principal amount of $1,111,000 and included an original issue discount (“OID”) of $101,000 and debt issuance costs of $105,800, resulting in net proceeds to the Company of $904,200. The November 5% Convertible Note provided for 5% simple interest on the principal amount.

  

In connection with the November 5% Convertible Note, the Company paid to Aegis Capital Corp. (“Aegis”), its financial advisor, a cash fee of $80,800 and issued to Aegis a warrant to purchase up to 7,407 shares of common stock with an exercise price of $13.20 per share, subject to adjustment for stock splits, stock dividends, combinations or similar events. The warrant is exercisable at any time commencing six months from the date of issuance through five years from the date of issuance and may be exercised for cash or on a “cashless” basis if there is no effective registration statement registering, or no current prospectus available for the resale of, all of the shares of common stock underlying the warrant.

 

The debt conversion features embedded in the November 5% Convertible Note is accounted for under ASC No. 470, Debt. At the time of issuance, the intrinsic value of the debt conversion features utilizing the Black Scholes option pricing model totaled $423,593. The intrinsic value of the debt conversion feature combined with the amount of the original issue discount and the relative value of the 15,000 shares of common stock and warrants to purchase 7,407 shares of common stock exceeded the proceeds allocated to the relative fair value of the November 5% Convertible Note and resulted in aggregate debt discount of $722,868. The respective debt discount of $722,868 was amortized to interest expense over the term of the November 5% Convertible Note using the effective interest method. In addition, the Company incurred $105,800 of debt issuance costs which are also being amortized as non-cash interest expense over the term of the debt.

 

On December 13, 2017 and December 14, 2017, the entire $1,111,000 of principal on the November 5% Convertible Note was satisfied through the issuance of 92,583 shares of the Company’s common stock based upon the contractual rights provided for in the November 5% Convertible Note (See Note 14).

 

During the year ended December 31, 2017, non-cash interest expense of $828,668 was recorded from the amortization of debt discounts and debt financing cost.

 

  (g) On August 10, 2017, the Company, entered into securities purchase agreements with five institutional investors to sell for an aggregate purchase price of $800,000, 10% Senior Convertible Promissory Notes (the “10% Convertible Notes”) with an aggregate principal face amount of $880,000 and warrants to purchase an aggregate of 73,750 shares of common stock. The principal of the 10% Convertible Notes and interest earned thereon may be converted into shares of common stock at $12.00 per share and under the terms of the Warrant, up to 73,750 shares of common stock may be purchased at an exercise price of $13.20 per share.

 

The 10% Convertible Notes are in the aggregate principal amount of $880,000, included an OID of $80,000 resulting in net proceeds to the Company of $800,000, bear simple interest at 10% on the principal amount, and principal and interest are due on February 10, 2018. Subject to certain beneficial ownership limitations, each investor may convert the principal amount of the 10% Convertible Notes and accrued interest earned thereon at any time into shares of common stock at $12.00 per share. The conversion price of the 10% Convertible Notes is subject to adjustment for customary stock splits, stock dividends, combinations or similar events.

 

The Company computed the fair value of the 73,750 warrants using the Black-Scholes option pricing model and, as a result of this calculation, recorded debt discount in the amount of $356,691 based on the estimated intrinsic value of the 73,750 warrants. The intrinsic value of the warrants was estimated using the Black-Scholes option-pricing method. The risk-free rate of 1.78% was derived from the U.S. Treasury yield curve, matching the term of the warrant, in effect at the measurement date. The volatility factor of 107.3% was determined based on the Company’s historical stock prices. 

 

The BCF embedded in the 10% Convertible Notes is accounted for under ASC No. 470, Debt. At issuance, the estimated fair value of the BCF totaled $326,809. The fair value of the BCF was allocated from the net proceeds of the 10% Convertible Notes and was amortized to interest expense over the term of the 10% Convertible Notes using the effective interest method. The valuation of the BCF was calculated based on the effective conversion price compared with the market price of the Company’s common stock on the date of issuance of the 10% Convertible Notes. In aggregate, the Company recorded debt discount in the amount of $763,500 based on the relative fair values of the 73,750 warrants of $356,961, BCF of $326,809 and OID of $80,000. During the years ended December 31, 2017, non-cash interest expense of $763,500 was recorded from the amortization of debt discounts.

 

During December 2017, the entire principal and accrued interest of $880,000 and $54,450, respectively, on the 10% Convertible Notes was satisfied through the issuance of 77,871 shares of the Company’s common stock based upon the contractual rights provided for in the 10% Convertible Note (See Note 14).

 

Other Convertible Notes Payable

 

  (h) On April 17, 2017, the Company entered into two 7% convertible notes (the “7% Convertible Notes”) each in the aggregate principal amount of $125,000 for a total of $250,000. The 7% Convertible Notes accrued interest at 7% simple interest on the principal amount and were due on June 2, 2017. The principal was convertible into shares of the Company’s common stock at $15.00 per share. The noteholder could convert the principal amount of the 7% Convertible Notes at any time into common stock. The 7% Convertible Notes contained standard and customary events of default including, but not limited to, failure to make payments when due under the 7% Convertible Note agreements and bankruptcy or insolvency of the Company. The Company had the right to prepay the 7% Convertible Notes. The 7% Convertible Notes were repaid during July 2017.

 

As additional consideration, the investors received five and a half year warrants to purchase 8,333 shares of common stock at an exercise price of $18.00 per share (collectively the “7% Convertible Note Warrants”). The 7% Convertible Note Warrants are exercisable commencing six months after the issuance date. The exercise price of the 7% Convertible Note Warrants is subject to adjustment for customary stock splits, stock dividends, combinations and other standard anti-dilution events. The 7% Convertible Note Warrants may be exercised for cash or on a cashless basis. The Company computed the fair value of the 7% Convertible Note Warrants using the Black-Scholes option pricing model and, as a result of this calculation, recorded debt discount in the amount of $61,304 based on the estimated fair value of the 7% Convertible Note Warrants.

 

The BCF embedded in the 7% Convertible Notes is accounted for under ASC No. 470, Debt. At issuance, the estimated fair value of the BCF totaled $31,304. The fair value of the BCF was allocated from the net proceeds of the 7% Convertible Note and was amortized to interest expense over the term of the 7% Convertible Notes using the effective interest method. The valuation of the BCF was calculated based on the effective conversion price compared with the market price of the Company’s common stock on the date of issuance of the Convertible Note. In aggregate, the Company recorded debt discount in the amount of $93,607 based on the relative fair values of the 7% Convertible Note Warrants of $61,304 and BCF of $31,304. During the three months ended June 30, 2017, the entire non-cash interest expense of $92,607 was recorded from the amortization of debt discounts.

 

On July 25, 2017, the Company repaid one of the 7% Convertible Notes. Due to the event of default, the Company agreed to reduce the exercise price of warrants to purchase 83,334 shares of common stock from $18.00 per share to $11.00 per share and made a payment of $144,000. As a result of this transaction, the Company recorded additional interest expense of $17,226 and recorded an additional $2,641 in non-cash interest expense based upon the change in the fair value of the warrants due to the adjustment to the exercise price. 

 

On July 28, 2017, the Company entered into an exchange agreement related to the second 7% Convertible Note. Under the terms of the exchange agreement, the Company exchanged the 7% Convertible Note for three new promissory notes in the principal amounts of $110,000 due August 1, 2017; $35,000 due August 1, 2017; and $34,000 due August 8, 2017 (individually an Exchange Note and collectively the Exchange Notes) and issued a new warrant to purchase 4,167 shares of common stock at $11.00 per share and cancelled the prior warrant to purchase 4,167 shares of common stock at $18.00 per share. The Company recorded a $54,583 extinguishment charge as a result of this transaction.

 

Concurrent with entering into the exchange agreement, the investor entered into a subscription agreement under which the Company issued and sold in a registered direct offering 10,000 shares of common stock at $11.00 per share for an aggregate purchase price of $110,000. The 10,000 shares of common stock were purchased through the cancellation of the Exchange Note in the principal amount of $110,000. In addition, in a concurrent private placement, the investor entered into a separate securities purchase agreement under which the Company issued and sold 3,180 shares of common stock at $11.00 per share for an aggregate of purchase price of $35,000. The 3,180 shares of common stock were purchased through the cancellation of the Exchange Note in the principal amount of $35,000. Further, the Company issued a warrant to purchase 6,000 shares of common stock at $11.00 per share. The final Exchange Note in the principal amount of $34,000 was repaid. In aggregate, and including the $54,583 extinguishment charge above, the Company recorded an additional non-cash interest expense of $110,421 as a result of the extinguishment of the $125,000 7% Convertible Note based on the difference of the carrying amount of the 7% Convertible Note and the fair value of the consideration transferred, which was determined from the closing price of the Company’s common stock on the date of extinguishment and based upon (i) the change in the fair value of the warrants due to the exchange of the warrant with an exercise price of $18.00 per share with a new warrant with an exercise price of $11.00 per share, (ii) the fair value of the warrant to purchase 6,000 shares of common stock and (iii) the value of the shares of cash and common stock in excess of the amount owed pursuant to the 7% Convertible Note.

 

  (i) On April 26, 2017, the Company entered into a 7% convertible note in the aggregate principal amount of $104,000. On June 28, 2017, the noteholder converted the outstanding balance into 9,455 shares of the Company’s common stock. The Company did not record any additional interest expense as a result of the extinguishment since the carrying amount of the convertible notes was equivalent to the fair value of the consideration transferred, which was determined from the closing price of the Company’s equity securities on the date of extinguishment.

 

As additional consideration, the investor received a five-year warrant to purchase 8,000 shares of common stock at an exercise price of $16.00 per share. The warrants are exercisable commencing six months after the issuance date. The exercise price of the 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 computed the fair value of these warrants using the Black-Scholes option pricing model and, as a result of this calculation, recorded debt discount in the amount of $24,912 based on the estimated fair value of the warrants.

 

The BCF embedded in this convertible note is accounted for under ASC No. 470, Debt. At issuance, the estimated fair value of the BCF totaled $26,512. The fair value of the BCF was allocated from the net proceeds of the convertible note and was amortized to interest expense over the term of the convertible note using the effective interest method. The valuation of the BCF was calculated based on the effective conversion price compared with the market price of the Company’s common stock on the date of issuance of the convertible note. In aggregate, the Company recorded debt discount in the amount of $51,424 based on the relative fair values of the warrants of $24,912 and BCF of $26,512. During 2017, non-cash interest expense of $51,424 was recorded from the amortization of debt discounts. The intrinsic value of the warrants was estimated using the Black-Scholes option-pricing method. The risk-free rate of 1.84% was derived from the U.S. Treasury yield curve, matching the term of the warrant, in effect at the measurement date. The volatility factor of 104.7% was determined based on the Company’s historical stock prices.